Investigate the FCC’s Investor & Public Harms from Manipulated 5G Market Research.
This is the opening paragraph to the “FCC Proposes a $9 Billion Dollar 5G Fund for Rural America” proceeding and it is designed to claim that America’s future is 5G, small cell wireless, and to have America conclude that the FCC needs to help by giving government subsidies, especially for rural areas, for 5G.
“INTRODUCTION 1. 5G mobile wireless networks promise to be the next leap in broadband technology, offering significantly increased speeds, reduced latency, and better security than 4G LTE networks can offer. 5G mobile wireless broadband service is expected to create as many as three million new jobs, generate $275 billion in private investment, and add $500 billion in new economic growth. We anticipate that the progression to 5G service will be swift.”
Almost None of this is True.
- FIND: These projections are from a research report by Accenture, a consulting firm. It was written in 2016, before 5G was rolled out.
- FIND: The Report was funded by the CTIA, the wireless association, a fact that is never mentioned in the footnotes of the proceeding or in the report.
- FIND: The Report and these projections are not about rural broadband.
- FIND: The Accenture Report is dependent on research from 2007 and 2009, and some of it appears to date back to 2001–19 years ago.
- FIND: The $500 billion in economic growth from 5G has been made up.
- FIND: The amount, $500 billion in economic growth, appears to be part of a 2001 report that was for wireline, not wireless, broadband and funded by Verizon.
- FIND: Authors of the 2007 and 2009 research worked for AT&T and other telcos.
- FIND: 50,120 staff were cut from AT&T and Verizon since 2017; yet the report estimated there would be 200,000 new construction jobs added by now.
- FIND: AT&T capital investments have been in decline.
- FIND: Much of the wireless investments by Verizon and AT&T have been cross-subsidized by the wireline state utilities, not investors.
- FIND: In most states, much of these expenses end up being charged to the local phone customers.
- FIND: These cross-subsidies were created by the manipulation of the FCC’s cost accounting formulas that have been applied to the state utility expenses.
- FIND: The FCC formulas are in use today and they now put the majority of expenses into the wired networks, making Local Service appear unprofitable.
- SEE: IRREGULATORS v FCC.
- FIND: Pandemic Missing: The FCC never adjusted the findings in the opening paragraph to reflect that there is a pandemic underway in 2020.
- FIND: The pandemic has exposed that the Digital Divide is much larger than previously acknowledged, and that there are massive holes in the FCC’s data.
- FIND: 5G is just a bait and switch, and almost all of this market research is a non sequitur — In this case, they just cut and pasted some other study’s finding.
We Ask: Is there an unknown plan to have a government agency in charge of telecommunications put out misleading and downright atrocious market research that was funded by the wireless association, CTIA, to push the wireless 5G agenda and manipulate public policy, helping AT&T and Verizon, not to mention pushing investors to make questionable investments?
Out of the Question? This FCC is an prime example of “regulatory capture”. FCC Chairman Ajit Pai was previously a senior attorney at Verizon, while Commissioner Brendan Carr also worked for Verizon, as well as for the CTIA in a case against the City of San Francisco over wireless issues. Moreover, the FCC’s 5G plan has been based on ‘model legislation’ created by ALEC, the American Legislative Exchange Council, which has traditionally been funded via AT&T et al.
When the FCC fails to mention that the primary research quoted was paid for by the wireless association, CTIA, and that none of the numbers are remotely based in reality, and that many of these actions benefit a few very large corporations, Verizon and AT&T, that are also the largest wireless carriers, who also control most of the wired ‘Business Data Services’ (“BDS”), known as “backhaul”, which include the wires to the cell sites…
We ask: How does this benefit the public interest, which is the FCC’s first priority?
RCR Wireless, in 2017, pointed out the self-interest of this research when it was first released.
“The CTIA-commissioned report from Accenture targets local communities in touting workforce and economy boost from 5G deployments.
“Nothing boosts an argument for investing billions of dollars into a technology like throwing some large numbers behind that argument tied to job creation and a positive financial impact on the economy.
“And thus, wireless telecommunications trade group CTIA released details of a report it commissioned from Accenture showing the deployment of “5G” wireless networks could create up to 3 million jobs and add approximately $500 billion to the U.S. gross domestic product “through direct and indirect potential benefits.”
Why does this matter?
Using this pandemic, the FCC and others relying on the FCC’s data, have put forward plans to solve the Digital Divide claiming that the deployment of small cell wireless, known a 5G, will fix everything. The FCC announced that the Agency will be giving billions to these companies over time; over $9 billion and other perks and government subsidies to make this happen.
At the same time, this proposal has been joined by the FCC’s “2020 Broadband Report”, (an annual report that is supposed to determine whether broadband is being rolled out in a “timely fashion”). And it, too, is filled with massive holes in analysis and data.
But that doesn’t stop FCC Chairman Ajit Pai from claiming victory:
“New FCC Report Shows Digital Divide Continuing To Close”
“Under my leadership, the FCC’s top priority is to close the digital divide, and I’m proud of the progress that we have made.”
No Impacts of Covid-19 Mentioned
To add to this twisted tale, when we say there are ‘massive holes’ — the FCC’s proposal and new report never address the Covid-19 pandemic that is underway. And, it has exposed that America’s networks were never properly deployed and the problems of the Digital Divide are way worse that the FCC has claimed.
Communications Workers of America, “CWA”, the main union for AT&T et al., found the same issues:
“Against the recommendation of CWA and public interest groups, the FCC’s annual broadband deployment report relied on unreliable data to find that broadband is ‘being deployed to all Americans in a reasonable and timely fashion’.”
“According to the FCC’s own data, 18.3 million people in the US still lacked access to fixed broadband speeds of 25/3 Mbps in 2018. Unfortunately, the FCC’s data likely understates the problem. By the FCC’s measurement method, if one subscriber in an area has broadband service, the entire area is considered covered. For example, FCC data showed 100 percent broadband access in Ferry County, WA. However, Microsoft estimates that same county’s coverage at 2 percent.”
We’ve been documenting the inaccuracies of the FCC broadband data since 2011 when the FCC released its original maps and database.
“Moreover, the report ignored the current COVID-19 and economic crises, which make clearer than ever the importance of universal access to broadband.”
NOTE: CWA and the other public interest groups did not focus on the market research presented — i.e., the opening paragraph of this $9 billion 5G proposed giveaway.
Financial Impacts; Influencing Investors
Unfortunately, many groups and publications are quoting the FCC and CTIA statistics.
Here are just a few references from Google, May 10th, 2020.
- America’s wireless companies stand ready to invest $275 billion into building next-gen … This will create 3 million new jobs and add $500 billion to the economy.
- 5G Rollout To Create 3 Million New Jobs, Adding $500 Billion …
- Economic Impact From Convergence of 5G & IoT. 5G is the next generation of wireless technology. It will create 3 million US jobs adding $500 billion to the US …
- May 22, 2019–5G is a faster wireless network, but it’s much more than just that — it will … creating 3 million American jobs quickly, and adding $500 billion to …
Nov 26, 2019 — “5G,” as you’ve probably heard, is short for fifth generation wireless network. This new technology will let phones and computers communicate …
How Atrocious are these Statistics?
The Accenture report claims that there will be 3 million new jobs, and many will be new construction jobs; a subset of the total job creation.
“Deploying the infrastructure required for 5G will also create jobs. We estimate that approximately 50,000 new construction jobs will be created each year over the 7-year buildout period.”
The report was based on 2017 as the first year, so clearly, we should have seen 4 years of growth, i.e. — 200,000 new jobs.
50,120 Job Cuts Since 2017 Due to 5G?
We went to the Verizon and AT&T annual and quarterly reports. There have been over 50,120 staff cuts since 2017 for just these two companies.
Some of this is tied to the media, entertainment and other companies Verizon and AT&T purchased, from Yahoo and AOL, to Warner Brothers and Direct TV, but they would be part of the ‘overall’ job growth quoted in the report.
So, instead of going up 200,00 we had a cut of over 50,000.
Ars Technica reported not only about the AT&T staff cuts, but also about a dramatic reduction in capital investments.
“AT&T slashed capital expenditures by more than $1.6 billion in 2019 and projects a capital-investment cut of more than $3 billion in 2020.
“AT&T also reduced its employee count from 268,220 to 247,800 in 2019, despite promising to use a tax cut to create new jobs.”
But it gets so much worse.
Discussion: The Falsification of Basic Market Data
Step-by-Step, By-the-Numbers (and the Footnotes).
As they say, no one ever reads the footnotes. In this case, the devil is in the details.
1) The opening paragraph’s findings are tied to a footnote for a report from 2016.
To start, this footnote gives us the opening to the cave. Please turn on your lanterns.
The statistics come from this Accenture report, written in 2016 and released 2017 (as told by the info in the document). This footnote shows that the report was last visited by the FCC on April 21, 2020.
“See: ‘Accenture Strategy, Smart Cities How 5G Can Help Municipalities Become Vibrant Smart Cities’,
https://newsroom.accenture.com/content/1101/files/Accenture_5G-Municipalities-Become-Smart-Cities.pdf (last visited Apr. 21, 2020).”
2) This report was commissioned by CTIA, the wireless association.
There is no mention of this fact in the Accenture report, the FCC proceeding or the footnote. Yet, as we previously highlighted, RCR Wireless, in 2017, stated:
“The CTIA-commissioned report from Accenture targets local communities in touting workforce and economy boost from 5G deployments.”
3) The Accenture Report has Nothing to Do with Rural Areas.
The data for the opening quote from the Accenture report clearly details that it is about 5G for ‘smart cities’ covering municipalities nationwide, and NOT 5G in rural areas.
“The estimates of long-term jobs created through adoption of 5G technology for different city sizes assumes the jobs are evenly distributed across city sizes based on population since the technology has benefits for people in all sizes of cities. This is assumed to be the case for broadband access as well: while households which do not have broadband internet access are predominantly in rural areas, the estimates of total jobs created by city size are distributed evenly across different city sizes based on population since there will be an indirect and induced impact affecting others beyond those who gain access to broadband connectivity.”
And it goes on.
“Another of 5G’s contributions to generating jobs and economic growth will be providing the benefits of high-speed broadband to the 5% of Americans who currently do not have access… If localities embrace 5G, and citizens who are not already online become adopters, we could see an additional $90 billion in GDP, and 870,000 in job growth.”
The previous quote from CWA detailed that the FCC’s data claims that 18 million Americans do not have high speed broadband in America; that’s about 5.5% of the population.
But, as we’ve discussed, the FCC statistics on broadband coverage are in serious dispute. Microsoft claims that there could be “over 163 million without the standard 25Mbps download and at least 3Mbps upload” speeds in the US. Meanwhile, in New York City, according to the NYC Comptroller’s office “44 percent of New Yorkers in poverty lack broadband internet access, as opposed to 22 percent above the poverty line.”
4) The Accenture plan was to start in 2017 and was based on the incumbents spending $93 billion in fiber optic construction in municipalities throughout the US; it had nothing to do with rural areas.
“As telecom operators build out their networks, they are expected to invest across the country. Our analysis indicates that U.S. telecom operators could invest approximately $275 billion over seven years to deploy next-generation wireless technology, with trials beginning as early as 2017 in select cities. Of that $275 billion, $93 billion is expected to be spent on construction, with the remainder being allocated for network equipment, engineering, and planning.”
There is no mention of this $93 billion in this FCC $9 billion dollar 5G plan. And, as we’ve seen, AT&T has had cut backs on its broadband construction expenditures.
So, if the job creation number is fact-less, and the size of the problem of the number of people who are not online or live in rural areas is based on gibberish tied to creative accounting, then how do we deal with the economic development this plan is supposed to bring with 5G?
Answer: In this case, you just cut and paste some other study’s finding.
5) $500 Billion Dollar BullSheet.
We’ve been tracking broadband deployments and expenditures for the last 3 decades, and knew something was wrong with the FCC’s financial analysis immediately.
Digging deeper into the Accenture report, besides a paucity of actual data, when tracking the original sources we were flabbergasted to find that the $500 billion dollar economic growth statistic was most likely based on a report from 2001, and updated in 2007.
First, we put in the keywords to look for “500 billion” or even “$500” mentioned in the report. All that appears are charts with no actual financial discussion of the massive expected GDP growth.
6) In the “caveats” section, we find that the analysis is based on reports from 2007 and 2009
Dig deeper and we find that the analysis has a series of footnotes and this information is part of “Appendix — Methodology, Assumptions and Caveats Around Estimated Economic and Other Impacts”.
It states that the employment (and growth of jobs) and the economic growth were not created by Accenture but the company relied on previous studies — footnotes 22 and 23.
“Estimates of the economic impact are based on previous studies of the economic benefits of broadband covering employment footnote 22 and GDP footnote 23.”
7) Keep Digging: Accenture’s report used previous reports from 2007 and 2009.
Following the footnotes we find that there are 2 reports; one from 2007 and the other from 2009, which, as you can see, were “accessed” by Accenture, Dec. 1, 2016.
“22 Litan, Robert; Crandall, Robert; and Lehr, William, “The Effects of Broadband Deployment on Output and Employment: A cross-sectional Analysis of U.S. Data”, Brookings Institution, June 1, 2007” Accessed December 1, 2016”
“23 Czernich, Nina; Falck, Oliver; Kretschmer, Tobias; Woessmann, Ludger, “Broadband Infrastructure and Economic Growth”, July 9, 2009, Accessed December 1, 2016”
This second paper is not even about the US markets or 5G, which didn’t exist, and was paid for by the German telephone company Deutche Telecom (which owns T-Mobile).
You got to be kidding me.
8) The authors of the 2007 Report all happen to have been consultants to AT&T.
“Robert Crandall and Robert Litan are Senior Fellows in the Economic Studies Program at the Brookings Institution. William Lehr is a Research Associate with the Communications Futures Program at MIT.” Crandall, Litan, and Lehr have consulted for AT&T on various matters in the past, and Lehr has also consulted for other telecommunications firms.”
9) How could it get worse: The $500 Billion Dollar Scandal
In our research we tracked broadband deployments and in 2001 a report by Crandall, funded by Verizon, came out claiming that the economic growth of WIRED broadband would be $500 billion. This was almost 20 years ago — before there was broadband or wireless streaming data services.
“Crandall, Robert and Charles Jackson. 2001. “The $500 Billion Opportunity: The Potential Economic Benefit of Widespread Diffusion of Broadband Internet Access,” mimeo, Criterion Economics”
And the kicker is this footnote in this report:
“The authors are grateful to Verizon Communications for its support for this study.”
This next quote is from the 2007 report, claiming that there have been only a few studies about the economic impact of broadband and that in 2001 a report came out that claimed that $500 billion would be generated from “ubiquitous” deployment — meaning all of America got broadband, including the rural areas.
“Because the benefits of broadband — just as with ICT in the early days — will take time to reveal themselves, there have been few studies that have sought to estimate the economic impact of broadband. Lacking data of actual experience, early studies sought to project economic benefits based on well-reasoned analysis of how broadband would be likely to impact future growth. For example, Crandall and Jackson (2001) estimated that ubiquitous deployment of broadband may result in $500 billion worth of economic growth. Using a community-level panel data set, Lehr, Gillett, Sirbu, and Osorio (2005) estimated that communities with broadband experienced faster job and firm growth, and realized higher rental rates than non-broadband communities.”
Is this really the same $500 billion being quoted by the FCC pertaining to the expected GDP growth of 5G wireless in 2020? Or is it just coincidence that the growth of ubiquitous wired broadband in 2001, when broadband didn’t really exist, would be identical to the growth of 5G wireless broadband in 2020, where the US wireless and broadband markets are developed but with gaps?
10) Ghost from Times Passed
In 2004, then President Bush stated that we should have universal broadband — by 2007. The “500 Billion Opportunity” was part of the hype that was being used to manipulate public policy. It worked so well that the companies got the deregulatory benefits while the public never got the upgrades we paid for.
“This country needs a national goal for…the spread of broadband technology. We ought to have…universal, affordable access for broadband technology by the year 2007, and then we ought to make sure as soon as possible thereafter, consumers have got plenty of choices when it comes to [their] broadband carrier.”
“Broadband provides Americans with high-speed Internet access connections that improve the Nation’s economic productivity and offer life-enhancing applications, such as distance learning, remote medical diagnostics, and the ability to work from home more effectively.”
Sound hauntingly familiar? This was 16 years ago. And in this 2004 version at least there was still a call for direct competition. In 2020, this FCC couldn’t care less about competition.
11) $500 Billion Broadband Scandal
As I mentioned, we’ve been tracking how AT&T et al. were able to get state regulators to change laws to charge local phone customers extra for a fiber optic upgrade of the state wired utilities, replacing the existing copper wires with fiber optics.
In 2015 we published The Book of Broken Promises: $400 Billion Broadband Scandal, but this number was low to start with and over the last 5 years we uncovered additional paths for customer overcharging, which include the diversion of the state-based utilities construction budgets to be used for wireless. At $50-$60 billion annually in overcharging, the total is well over $500 billion by 2020.
Conclusion: Congress should step in and have the FCC, the CTIA, ALEC, as well as AT&T and Verizon (who fund and have benefited from all of this) answer four basic questions:
- The FCC should detail and explain the process they used to create this market analysis. Where is the FCC’s actual documentation, besides quoting a report written in 2016 that relies on research from 2001 and has nothing to do with rural areas?
- Why is this not collusion of the FCC, the CTIA, and their members, Verizon and AT&T, to manipulate investors and the American public, using super-hyped, 5G Wireless as the bait?
- How did ALEC model legislation become the FCC’s 5G plans?
- Why hasn’t the FCC examined the massive financial cross-subsidies of the wireless networks — How did the wired state utilities’ construction expenditures end up paying for the wireless fiber optic networks?