License Size Matters to Industrial Internet of Things (Corrected)

Daily Report for Executives provides in-depth coverage of unfolding legislative, regulatory, and judicial news from the nation’s capital, the states, and around the world. This daily news service...

By Cheryl Bolen

Substantial private investment in the Industrial Internet of Things is in jeopardy from what appears to be a modest change in the size of key spectrum licenses proposed by the FCC.

The rule change proposed late last year by the Federal Communications Commission would significantly increase the size of spectrum licenses in the 3.5 GHz band, known as the Citizens Broadband Radio Service (CBRS), effectively threatening years of development toward building the Industrial Internet of Things (IIoT), critics of the rule change contend.

The proposed rule, if adopted, would benefit the four national wireless carriers in pursuit of upgrading to 5G and providing faster, improved service to consumers.

But, it would also throw a wrench into plans by industrial leaders like General Electric Co., the American Petroleum Institute, the Utilities Technology Council, Southern Company, the Port of Los Angeles, and Union Pacific Corp., among others.

Economic Impact

There is massive economic value tied to the effective use and sharing of spectrum in the 3.5 GHz band, said several participants on a panel to discuss the potential of CBRS, hosted by GE on Feb. 14.

Accenture, for example, estimates the IIoT is projected to add $6.1 trillion to U.S. gross domestic product in the next 15 years under current conditions. However, by taking additional measures such as improving broadband infrastructure, this figure could grow to $7.1 trillion, it said.

Critical to this potential is the diversity of players that have already invested in developing plans for using the band, which until recently relied on the CBRS rule adopted unanimously by the FCC in 2015.

One of the key features of the 2015 rule was the adoption of census-tract-sized spectrum licenses, which are much more affordable than traditional, regional-sized licenses, and which would allow rural wireless providers to incrementally increase their service areas.

“In addition, those 2015 rules are attracting the widest variety of potential auction applicants the commissioner has ever seen,” said Louis Peraertz, senior legal adviser to FCC Commissioner Mignon Clyburn, at the event.

Optimizing Industry, Safety

GE is playing hard for this spectrum on behalf of its major industrial customers, who would benefit the most from communications devices and systems in its machines, said Michael Fitzpatrick, head of regulatory advocacy, GE Global Law & Policy.

“Our customers are essentially the critical infrastructure sector of the U.S.,” and it is GE’s intention to build TDD-LTE private networks that are high-capacity, resilient, and highly secure, Fitzpatrick said, referring to advanced wireless networks.

The company can, for example, fly drones around flare stacks in oil and gas facilities—rather than have humans risk third-degree burns—doing visual inspections for corrosion or testing emissions, Fitzpatrick said.

Communications devices can inspect offshore oil rig blowout preventers 5,000 feet underwater, or run through a pipeline sending millions of X-ray images to identify defects, he said.

“All of that takes immense amounts of data, and it has to be secure, and it has to be certain,” he said.

Size Is Everything

The current policy is valuable because it provides a tailwind to U.S. leadership in IIoT, Fitzpatrick said.

With no rule change, GE and its customers could secure “appropriate-sized” spectrum licenses that allow for resilient, high-capacity operations for the nation’s critical infrastructure, he said.

Many of the companies interested in these spectrum licenses aren’t small, but still must make the economic case for acquiring licenses, Fitzpatrick said. GE doesn’t want to become a national spectrum owner, he said.

“When you take it to the county level . . . adios, we’re gone. There’s no way that Shell Oil, or Union Pacific, or GE is going to be buying a county, or going to be buying the greater New York metropolitan area. It makes no sense; our shareholders would revolt,” Fitzpatrick said.

Moreover, any compromise that would involve census-tract-sized licenses only in rural areas would miss the many commercial industrial manufacturing operations and critical infrastructure facilities in urban areas, Fitzpatrick said.

(Corrects size of estimated economic impact in sixth paragraph to trillions)

To contact the reporter on this story: Cheryl Bolen in Washington, D.C. at cbolen@bgov.com

To contact the editor responsible for this story: Paul Hendrie at phendrie@bgov.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Try Daily Report for Executives