Editor’s Corner—How the city of Sacramento got to 5G, and what it means for the rest of the U.S.

Verizon plans to launch its fixed 5G service in Sacramento later this year. In fact, Sacramento is the only city that Verizon has identified by name as one of the three to five locations where it plans to launch 5G in 2018. So how did Sacramento get onto Verizon’s 5G short list, and what is the city doing about the rest of the nation’s wireless network operators and their respective efforts to launch 5G services?

More importantly, what can Sacramento’s journey toward 5G reveal about the challenges and opportunities for cities looking to both boost revenues and obtain high-speed telecommunications services? And what lessons should wireless players take away from Sacramento as they work to densify their networks with fiber-connected small cells for 4G and 5G?

Indeed, that last question is an absolutely critical one for the wireless industry, considering that the FCC estimates that up to 80% of future wireless network deployments—whether it’s 5G or densification for 4G—are going to be small cells.

Sacramento’s small cell troubles, and solutions

In the early part of the decade, Sacramento officials began getting requests from wireless network operators to install small cells on city-owned infrastructure like buildings and light poles. Carriers wanted to deploy these mini base stations—roughly the size of a pizza box—to handle more network traffic and provide faster speeds. And they wanted to install those small cells on city infrastructure because the city owns the rights to many of the spaces in the downtown locations where carriers generally need additional network capacity the most.

“There was a definite need to build out more capacity” in the city, said Darin Arcolino, Sacramento’s IT operations manager.

The process though was difficult. Each carrier had slightly different requirements, forcing the city to consider hundreds of different small cell locations, scenarios and business models. Eventually Sacramento officials in 2015 turned to a startup called 5 Bars (now called XG Communities) to help it write a “master plan” for wireless networks so it could at least have some guidelines for how to go about handling small cell deployments.

But the master plan was just the start. Sacramento next decided it needed someone to handle the full small cell process, from identifying suitable locations for the devices with electricity and backhaul, to handling hundreds of deployment applications from carriers.

“We decided that we would get in front of it,” Sacramento’s Arcolino said. The city issued a public Request for Qualifications in 2016 and (after evaluating submissions from three providers) Sacramento chose to outsource its small cell operations to the author of its wireless master plan, XG.

The contract between the city and XG (available here) calls for the startup to “assist the city in addressing both long and short term wireless broadband infrastructure needs” as well as acting on Sacramento’s behalf in negotiations with wireless operators and other telecom providers. It also calls on XG to implement Sacramento’s small cell design requirements: For example, small cell antennas in the city must be mounted in a concealed canister, and small cell equipment should be flush with the pole it’s attached to. Arcolino explained that Sacramento wanted to prevent operators from deploying potentially unsightly equipment in crowded downtown areas.

Importantly, Sacramento isn’t paying XG directly. Instead, XG “will receive 35% of the revenue for all new leases and 25% for leases on existing towers that they implement on the city’s behalf. This is the best revenue split that we are aware of in the industry. The contract is for an initial five-year period with four five-year renewals for a potential total contract term of 25 years.”

“Our work is to get the city organized, identify the assets that are available, put the process in place with the city, and work with the city and the carrier to match up those two things: what the carrier wants and what the city has available and has the process to approve,” explained XG’s Karen Sessions. She said XG now counts exclusive, small cell-management agreements with 27 different cities, mostly in California (XG just announced a deal with Portland), that in total cover 250,000 “assets.” Those assets are basically city-owned locations that have the height, power and backhaul necessary to support a small cell deployment. “We are an advocate for the city,” Sessions said.

Sessions explained that operators like Verizon are able to log into a website from XG that shows all 250,000 of its available small cell “assets” and can then apply to install a small cell on one of those assets. Sacramento’s Arcolino said the city charges $150 per month per location for operators to deploy their small cells.

And, according to Sessions and Arcolino, the system is working. XG recently announced that “multiple” carriers have received permit approvals to build small cells in downtown Sacramento through XG’s system, and that small cell construction company Mobilitie has already switched some small cells on.

Arcolino said that he expects more than 100 small cells to be approved through XG’s process in the next couple of months, and up to 230 should be turned on in the next year or so.

Verizon’s public-private partnership

XG’s Sessions confirmed that Verizon is indeed one of the carriers that’s using XG’s system in Sacramento for small cells. But Sacramento’s proactive approach to wireless network densification via XG is probably just a small part of why Verizon named the city as one of its first 5G deployment locations.

In June of last year—roughly a year after Sacramento inked its agreement with XG for small cell management—the Sacramento City Council voted unanimously to approve a public-private partnership with Verizon. “This partnership will serve as a critical step in upgrading our city’s infrastructure to support the newest and best technology and the economic growth that comes with that technology,” Sacramento Mayor Darrell Steinberg said in a release at the time announcing the deal. “It will also ensure that everyone who lives here or spends time here can experience the benefits of a safer, more mobile and more sustainable city.

The contract (available here) calls for Verizon to:

  • provide free, 10 Mbps Wi-Fi access across 27 public parks in Sacramento, alongside 15 “digital kiosks” offering 1 Gbps Wi-Fi (and advertisements).
  • sponsor up to 20 high school interns per year, and host at least one Science Technology Engineering and Math (STEM) workshop per year, over the next five years.
  • install 15 “Intelligent Traffic solutions” at select intersections in Sacramento. As Verizon’s partner Nvidia recently disclosed, that effort involves installing LED street lights that contain a video camera that can connect to Verizon’s network. The cameras record what’s going on and can analyze the data via Verizon’s Internet of Things analytics platform.
  • deploy “hundreds” of miles of fiber throughout Sacramento.

In return, the contract calls for Sacramento will waive up to $2 million in lease payments on Verizon’s 101 small cells on city-owned assets. Verizon also gets “streamlined permit approvals” for both wireless and wireline network deployments, and access to Sacramento’s fiber conduit where available. Sacramento also said that it would accept the attachment rate from the California Public Utilities Commission for Verizon’s future 5G sites, a rate that the city noted is lower than what it currently charges.

“These concessions are given in exchange for extensive fiber optic infrastructure, smart cities solutions, youth development, and public Wi-Fi valued at more than $100 million dollars of investment in the city,” Sacramento wrote in its public-private partnership contract with Verizon. Sacramento added: “It is the intention of Sacramento and Verizon to showcase the innovative capabilities of Sacramento by having the city be one of the first cities to deploy 5G.”

A city, state and federal issue

However, hovering over Sacramento’s small cell and 5G work is the possibility of state or even federal intrusion. Fifteen states around the country have already enacted legislation aimed at making it easier for wireless carriers to deploy small cells.

But not California. At least not yet.

In October of last year, California Gov. Jerry Brown vetoed a bill that essentially would have given wireless companies the same rights as public utilities, rules geared toward speeding small cell deployments. Specifically, the legislation would have enabled carriers and infrastructure vendors to place transmitters in public rights-of-way, the Santa Maria Times reported, and would have capped fees cities could charge to install the devices. “I believe that the interest which localities have in managing rights of way requires a more balanced solution than the one achieved in this bill,” Gov. Brown wrote in a brief statement about the veto.

The veto was a blow to CTIA, the wireless industry’s trade group. “We support statewide bills that provide for reasonable access to rights of way, reasonable costs and fees and streamlined processing of applications,” said CTIA’s Jilane Rodgers Petrie. “Each state’s needs are different, so the industry works closely with state legislators and interested stakeholders to address concerns and create legislation that works for everyone.”

And on a federal level, the FCC just voted on rules to ensure small cells aren’t treated the same as macro cell sites. Specifically, the order in part excludes small wireless facilities deployed on non-Tribal lands from National Historic Preservation Act (NHPA) and National Environmental Policy Act (NEPA) review, arguing that these small cell deployments are not “undertakings” or “major federal actions.”

Beyond that vote, the FCC said it may also look into additional rules in the future that would further pave the way for the rollout of small cells nationwide. And that’s noteworthy considering President Trump, in blocking Broadcom’s acquisition of Qualcomm, essentially argued that U.S. leadership in 5G technology is a matter of national security.

The ‘man in the middle’ question

But at its core, Sacramento’s approach to small cells raises the question of whether cities and other regulators should employ some kind of buffer—like XG—between themselves and wireless operators seeking to deploy small cells, or whether operators should be able to go directly to city officials for their needs, like Verizon did in Sacramento with its public-private partnership.

A number of top executives among the nation’s wireless carriers have argued against the need for a middle man like XG. They generally argue that cities should employ common sense rules around small cells in order to more quickly deliver mobile services to their citizens, and that middle men simply add an unnecessary layer of complexity and cost.

Not surprisingly, XG’s Sessions has a different take. “You can make all the laws that you want, but it still doesn’t mean the city has a process [to handle small cells].” She pointed to the difficulty cities face not only in just identifying small cell deployment locations but in categorizing them and then making them available—and searchable—for network operators.

She added: “We’re a very specific company that’s trying to solve the problem [of deploying small cells]. And I don’t think this problem gets solved by legislation.”

“There is certainly a benefit to having an experienced provider on the city’s side,” acknowledged Christopher Cardinale, an attorney for SteepSteel, which operates a cell tower lease auction and marketplace. “Local governments are historically slow in responding” to new developments like small cells.

Cardinale said he has some concerns with Sacramento’s XG contract—he specifically pointed to what he argued was the overly generous cut XG gets from small cell and cell tower leases—but added that Sacramento in general is “ahead of the game” in the small cell arena.

“We’re leading the way here with small cells and 5G,” agreed Sacramento’s Arcolino.

Sacramento isn’t alone, of course. Other cities across the country are in the process of approving or rolling out additional small cells for 5G services—AT&T, T-Mobile and Sprint have named locations including Dallas, Chicago, Atlanta and elsewhere as locations where they are poised to launch 5G services this year.

Meantime, though, other cities have run into problems on the topic. For example, some cities in Ohio sued over the state’s passage of small cell legislation, and the city of Santa Rosa, California, halted Verizon’s small cell deployments there over resident concerns about radiation and unattractive installations.

Sacramento’s journey toward 5G clearly shows that cities may need to proactively take steps to address small cells if they want to be seen as being on the cutting edge of wireless technology—but that they also need to be aware of how the issue is blossoming on a state, federal and even international level. And for wireless players, Sacramento’s move toward 5G shows the issue remains fraught with politics, diverse business models, competing providers and potentially additional expenses—as well as opportunities. – Mike | @mikeddano

Editor's Corners are opinion columns written by a member of the Fierce editorial team. They are edited for balance and accuracy.