Sacramento’s 5G story dimmed by legal spat involving Verizon, XG

When Sacramento became one of the first cities in the country to gain fixed 5G service last month, it was a major win for the 35th most populated city in the country. The launch was intended to highlight how California’s capital is among some of the most technologically advanced locations in the country.

“This is about creating good jobs for residents of all of our neighborhoods and ensuring that Sacramento is on the forefront of building new industries,” said Sacramento Mayor Darrell Steinberg in a release announcing the launch of Verizon’s 5G Home service in the city.

Instead, the city has come to stand as an example of the complexities involved in actually getting 5G services turned on.

Small cells for 5G

Sacramento’s journey toward 5G started in 2016 with an agreement between the city and a company called XG Communities. The agreement called for XG to identify and organize a database of city assets—namely, street light poles, conduit, fiber and utility circuitry—that could be made available to carriers that wanted to pay for the rights to install small cells on city property. Small cells have been described as a critical element in operators’ efforts to densify their networks and, eventually, to launch 5G.

However, a year later, Sacramento was approached by Verizon to be one of the operator’s first 5G cities, and so it inked a separate $100 million deal with Verizon that went around its agreement with XG Communities. That deal gave Verizon access to city infrastructure in return for free Wi-Fi in public parks and other amenities.

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

As luck would have it, the same day Verizon launched its fixed 5G service in Sacramento last month, a Superior Court judge ruled that several key provisions of the city’s agreement with Verizon violated the city’s contract with XG.

The ruling calls into question the legality of some aspects of Verizon’s network in Sacramento, and a judge has since rendered a final ruling that requires the city to make good on its contract with XG. Verizon did not respond to a request for comment.

“There’s several hundred sites that Verizon is using for their 5G network on poles that were subject to that order,” said XG CEO John Clarey. The judge’s ruling was effectively a reading of the contractual rights between Sacramento and XG, but it stopped short of addressing damages.

XG hopes for Sacramento resolution

XG is contemplating what to do next, but it is hopeful that Sacramento will make right on its agreement and move forward with the work that is already underway, according to Clarey. “Absent this issue, I would consider the Sacramento scenario a big success,” he said. “The challenge was the go-around with this public-private partnership [with Verizon]. I think there are about 98 sites that we have contracted directly with Verizon and then unbeknownst to us at the same time they were negotiating this $100 million agreement with the city.”

Continued Clarey: “The frustrating thing from our standpoint is we’re still doing the work. We’re doing everything, we’re just not getting paid for it,” Clarey said. “We work with the city every day. We’ve got other customers too. … Day to day we're doing what we do with AT&T, Sprint and T-Mobile. All of them have projects up and in queue.”

Specifically, those carriers are working with XG to identify locations where they can install network equipment like small cells, and then XG handles the management and permits for those locations.

XG’s Clarey said that he believes the company’s relationship with Sacramento is repairable, and he is hopeful the city will respond in kind. “They’re going to need to make right on the judge's order, and I assume they will,” he said. “I hope we don’t have to sue them for it.”

Sacramento’s agreement with XG includes all city assets that can be used for wireless telecommunications. Use of those assets is entirely up to the city’s discretion, but it can’t take assets like street lights off XG’s database and sell the rights to somebody else, according to Clarey.

“There’s a lot of better ways they could have done this,” he said. “When you’ve got 25 million street lights in the United States owned by cities, somehow those things need to get sufficiently organized so they can be utilized by the carriers for 5G. One carrier can’t do it. … Cities want somebody on their side. They don’t want one carrier to come in and box out others.”

Beyond Sacramento

Hovering over the legal maneuvering in Sacramento is the wider issue of how cities will work with wireless operators like Verizon to deploy small cells on city-owned infrastructure. XG has been working as an intermediary between cities and operators, and has inked agreements to do so with cities including La Habra Heights, Whittier and Fresno in California. Concurrently, the FCC recently voted on rules aimed at setting standard rates that wireless network operators can pay to cities for access to city infrastructure.

Although most in the wireless industry cheered that ruling, some cities and counties are taking the FCC to court over what they argue is a federal overreach. Indeed, the mayor of San Jose, Sam Liccardo, recently wrote an opinion article in the New York Times calling the FCC’s rules “a triumph of corporate self-interest over principle.”

Meantime, Sprint, AT&T and other wireless network operators reportedly are complaining to a federal court that the FCC’s actions on the topic don’t go far enough, and that they need faster and easier access to city infrastructure.

Regardless, it’s clear that players on both sides are beginning to stake out their positions for a potentially prolonged battle. For example, a new group called “Wireless Infrastructure Now” recently formed to argue that “our communities require major upgrades to our wireless infrastructure to ensure we continue to enjoy the benefits of an interconnected world.” The association is a nonprofit 501c(6) funded mainly by Jim Madaffer of California’s Madaffer Enterprises, a PR firm focusing on emerging technologies and government issues, and which has represented telecom companies in the past. Madaffer confirmed that he is the driving force and primary financier behind the new nonprofit.

Mike Dano contributed to this article.