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MarketScreener Homepage  >  Equities  >  Nyse  >  Verizon Communications Inc.    VZ

VERIZON COMMUNICATIONS INC.

(VZ)
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Cellphone Carriers Lobby Against Pentagon Plan for National 5G Network -- Update

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10/09/2020 | 06:47pm EDT

By Drew FitzGerald

Two federal agencies are moving forward with conflicting plans to commercialize a valuable chunk of wireless spectrum controlled by the Defense Department, leaving the future of an asset worth tens of billions of dollars in doubt.

The Pentagon is drafting a request for proposals for a new fifth-generation military cellular network that would lease its extra capacity to private-sector users like cellphone carriers, auto makers and factories, according to people familiar with the plan. This RFP includes more specific requirements than a separate request for information released last month and could go public before the Nov. 3 election, the people said.

At the same time, the Federal Communications Commission, the independent agency in charge of licensing airwaves to the private sector, is pursuing a plan to auction some of the same Pentagon-controlled band late next year.

The military currently uses the spectrum for radar and aviation, but the same frequencies are ideal for the ultrafast 5G signals commercial operators are working to deploy.

The dueling proposals have prompted an energetic response from the telecommunications industry. Telecom industry experts say the more aggressive Pentagon proposals could threaten the value of other cellular licenses that companies such as AT&T Inc. and Verizon Communications Inc. paid tens of billions of dollars to amass.

AT&T Chief Executive John Stankey visited the White House on Sept. 30 to argue against proposals that might skirt the regular auction process, according to people familiar with the visit.

"As America's largest infrastructure investor, it was another opportunity for us to visit with policy makers about key topics like 5G, spectrum policy and how the government can help foster expansion of internet access and affordability," AT&T said in a statement. "Competing with China on 5G is about more than just spectrum, it requires considerable investment in fiber broadband and smart regulation."

A Department of Defense spokeswoman declined to comment. A White House spokesman hadn't provided a comment as of late Friday.

Some members of Congress have closed ranks behind the FCC's traditional spectrum plan. A bipartisan group of senators and representatives on Wednesday sponsored legislation that would order the federal government to begin an auction before 2022. The bills, both called the Beat China for 5G Act of 2020, are still at the committee level.

In September, a group of lawmakers including Sen. John Thune (R-S.D.) wrote President Trump to argue against the Pentagon's request, saying it "contradicts the successful free-market strategy you have embraced for 5G."

Rep. Frank Pallone (D., N.J.), chairman of the House Energy and Commerce Committee, on Friday wrote the Commerce Department's telecom administration office seeking information on federal policies the lawmaker called "incoherent and erratic."

The Defense Department "clearly doesn't have the authority to end auction-focused spectrum policies for the nation, let alone act unilaterally towards that goal," Mr. Pallone wrote. The letter also raised concerns about media reports of political operatives close to the president working outside normal channels to promote a "seismic shift in spectrum policy."

The federal government uses wireless licenses to make sure things ranging from airplane radar to mobile phones don't emit signals that interfere with each other. The FCC granted licenses to television and radio stations free of charge until the late 20th century, when cellphone carriers' explosive growth allowed the government to auction new licenses and steer the proceeds to the U.S. Treasury.

Companies including Google owner Alphabet Inc. have argued that new technology allows the latest smartphones to share the airwaves with other devices, reducing the need for expensive licenses. The FCC has also turned over more frequencies for Wi-Fi and other uses that don't require a license, but the commission retained ultimate authority over the process.

The wireless frequencies under Department of Defense review form a broad uninterrupted block that would be particularly well-suited for high-speed 5G networks. Craig Moffett, an analyst for telecom and media research firm MoffettNathanson LLC, estimated the whole spectrum band alone would fetch as much as $100 billion at auction, though the existing supply of spectrum flooding the market could lessen that amount. Sharing the airwaves would allow wireless network operators to lease the spectrum instead of buying it.

It's unclear which route the federal government will pursue. Mr. Moffett said the dispute illustrates a chaotic policy-making process that has left telecom companies unsure of where they stand.

"We constantly field questions about how the country's telecom policy might change under a Biden presidency," Mr. Moffett wrote in a note to clients. "The focus on what might change, however, seemingly ignores the utter incoherence of the status quo."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com

(END) Dow Jones Newswires

10-09-20 1746ET


Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 0.92% 1598.88 Delayed Quote.19.37%
AT&T INC. -1.68% 26.92 Delayed Quote.-31.12%
VERIZON COMMUNICATIONS INC. -0.74% 57.38 Delayed Quote.-6.55%
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Financials (USD)
Sales 2020 128 B - -
Net income 2020 18 183 M - -
Net Debt 2020 107 B - -
P/E ratio 2020 13,0x
Yield 2020 4,33%
Capitalization 237 B 237 B -
EV / Sales 2020 2,68x
EV / Sales 2021 2,60x
Nbr of Employees 133 200
Free-Float 96,4%
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Kyle J. Malady Chief Technology Officer & Executive VP
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Melanie Liddle Healey Independent Director
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