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Conservative Leaders Press FCC to Block Chinese, Foreign Influence in 5G Spectrum Market

People walk by a 5G stand at the Mobile World Congress (MWC), the world's biggest mobile fair, on February 26, 2018 in Barcelona. JOSEP LAGO/AFP/Getty Images
JOSEP LAGO/AFP/Getty Images
MATTHEW BOYLE
Washington, D.C.

A group of conservative leaders are pressing the Federal Communications Commission (FCC) to block efforts by a group of satellite operators seeking to sell spectrum space critical to the operation of forthcoming 5G technology.

A consortium of conservative groups wrote to the FCC chairman Ajit Pai and the FCC’s various commissioners on Wednesday morning:

The undersigned taxpayer and free market groups applaud your efforts to free up the 3.7 to 4.2 GHz Band (mid-band, or ‘C-band’) for internet services. Repurposing C-band spectrum for mobile broadband deployment will help America win the race to 5G, as other countries study repurposing their own mid-band spectrum for internet use. A number of groups, including the C-band Alliance (CBA), claim that the FCC should allow for a ‘private-sale’ of this critical segment of spectrum, instead of having the FCC repurpose the spectrum to help close the digital divide.

Conservative leaders signing the letter to Pai and the FCC’s commissioners include David Williams of the Taxpayers Protection Alliance, Tim Andrews of the Taxpayers Protection Alliance Foundation, Steve Pociask of the American Conservative Institute, Grover Norquist of Americans for Tax Reform, Tom Schatz of Citizens Against Government Waste, Jeff Mazzella of the Center for Individual Freedom, Andrew F. Quinlan of the Center for Freedom and Prosperity, Matthew Kandrach of Consumer Action for a Strong Economy, Katie McAuliffe of Digital Liberty, Andrew Langer of the Institute for Liberty, Charles Sauer of the Market Institute, Karen Kerrigan of the Small Business & Entrepreneurship Council, and both James L. Martin and Saul Anuzis of the 60 Plus Association.

Notably, these are mostly free market groups that rarely engage on national security issues. So the fact that they are weighing in here, in what is an argument against a consortium of companies pushing what these conservatives say is a falsified free market argument to profit off of foreign sales of a U.S. strategic resource, is significant.

The so-called C-band Alliance, or CBA, describes itself on its website as “formed by the four satellite operators that provide the vast majority of C-band satellite services in the U.S.”

“This same group of satellite operators proposed to the FCC a breakthrough market-based proposal to clear portions of this C-band spectrum to support the introduction of 5G services in the U.S.,” the group says on its website. “Critically, this proposal also protects the valuable satellite-delivered services provided by C-band.”

C-band spectrum is the space on the air in which 5G technology will operate when implemented across the United States and around the world. Much like radio frequency space on an AM or FM dial, spectrum on the C-band is limited–but the U.S. government previously gave control of most of it in the United States to four different companies. Those companies are Intelsat, Eutelsat, SES, and Telesat.

Their hope is that this spectrum will be allowed by the FCC to be sold privately by these companies to buyers of their choice. The problem, according to these conservative organizations raising the alarm in the letter to Pai and his fellow FCC commissioners Jessica Rosenworcel, Michael O’Rielly, Geoffrey Starks, and Brendan Carr, is that none of these four companies that stand to benefit significantly from this move that could significantly impact national security are American-owned–and it is unclear if this would then allow the Chinese or other U.S. competitors to influence the sales and purchasing of critical spectrum space.

The conservative groups wrote to the FCC leaders:

While the CBA claims this is a market-based approach, this could not be further from the truth. In reality, the CBA wants the FCC to allow foreign interests to monetize taxpayer-owned C-band spectrum through private sales that won’t benefit taxpayers. Not only would the CBA’s scheme deny billions – perhaps tens of billions of dollars – in proceeds owed to the U.S. Treasury, but it would also inevitably result in years of litigation and endless delays in 5G deployment. We are alarmed by this proposal and unified in our opposition to the CBA’s egregious private sale plan. The C-band spectrum is a public asset of enormous value. On the open market, it would command top dollar and interest from many parties. But the companies that comprise the CBA were given permission to use it free of charge, provided they would do so in the interest of the American public. And now, the CBA is trying to convince the government to abandon this obligation to taxpayers and the public, by allowing the monetization of the publicly-owned C-band spectrum through private sales.

The conservatives’ letter continues by detailing that they believe spectrum to be a national security strategic asset to the United States–and that going through with the CBA plan by the satellite companies could help aid and abet the Chinese government’s efforts to undermine the United States. They wrote to the FCC:

The C-band spectrum is not just a valuable American asset, it is a valuable strategic American asset with national security implications that transcend even its commercial application. Given recent concerns and allegations of spying by the Chinese government via telecommunications equipment, the FCC should be especially careful in its considerations. Finally, the FCC’s recent deregulations and market-based reforms to close the digital divide show that agency leadership is well-aware of the challenges faced by rural American communities. These citizens should not be left behind, and that’s exactly what the CBA’s scheme would do by removing FCC oversight of spectrum allocation. We, as free market organizations, are committed to letting markets and incentives work in this space. Free markets, private investment, and innovation are essential.

What’s more, none of the four satellite companies that comprise the CBA are American-owned–and at least one of them has significant direct investment from one of the Communist Party of China’s investment arms.

China Investment Corporation (CIC), which is directly controlled by the Chinese Communist government in Beijing, purchased approximately seven percent of CBA member and satellite company Eutelsat in 2012. “Spanish infrastructure firm Abertis said on Friday it has sold an additional seven percent stake in Paris-listed European satellite operator Eutelsat to China Investment Corporation (CIC) for 385 million euros ($485 million),” Reuters reported on June 22, 2012.

According to Bloomberg, CIC is directly controlled by the Chinese government. “China Investment Corporation is a sovereign wealth fund of the Government of China,” Bloomberg says. “The firm was established with the issuance of special bonds by the Ministry of Finance. It manages a part of the country’s foreign exchange reserves.”

The Congressional Research Service has done a deep investigation into CIC as well, publishing a 30-page report detailing how the Chinese government launched and controls the investment fund–one of the world’s largest.

It does not appear as though CIC has given up the investment–as a report as recently as 2016 confirmed it still held the approximately seven percent stake in Eutelsat.

CIC’s investment in Eutelsat seems to be part of a bigger picture play by the Chinese Communists in Beijing to buy influence in the Western world. It’s a strategy, called “debt-trap diplomacy”–as detailed in this Quartz report–that the Chinese have employed around the world to great effect as part of their global influence operation. It fits with their bigger Belt and Road Initiative, a euphemism by the Chinese for what amounts to an effort to bring the world under its control.

It’s not just Eutelsat that has foreign ownership; the others do too. Sen. John Kennedy (R-LA), in his own letter to the FCC in mid-March, urging basically the same thing as these conservative groups–that the government should not allow what the CBA wants–he hammered the organization for being foreign-owned satellite companies.\

Kennedy said in a quote accompanying the letter:

Luxembourg shouldn’t reap huge profits at the expense of Louisianans. A multi-billion dollar, closed-door spectrum deal would mostly benefit foreign-owned satellite companies. The C-Band needs to be put up for public auction. Our rural families stand to lose the most when only one or two giant corporations control all of the spectrum access.  Competition is what makes America the great nation that it is today.

It remains to be seen what the FCC will do on this front, but the Chinese have already gained a significant foothold into the 5G market worldwide, seriously harming the United States. “Chinese telecom giant Huawei is poised to claim close to half of the 5G market, nudging the technological center of gravity away from western telecom vendors and sounding alarms about China’s ability to spy on Americans,” a recent Axios report reads.

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