Sacramento's 5G Broadband Bet

Sacramento Mayor Darrell Steinberg began talks with Verizon to bring fifth-generation wireless to the city shortly after his 2016 election, finalizing a deal in June that some broadband experts view as more of a gamble.

Steinberg’s administration didn’t want to simply demonstrate a new technology but establish a long-term partnership installing sustainable, 5G infrastructure throughout California’s capital city.

Sacramento’s aggressive negotiation timeline ensured the city will be one of 5G broadband’s first adopters while, at heart, the public-private partnership brings another major service provider to town in exchange for up to $2 million in deferred lease revenue on 101 small cell sites over the next decade.

“We’re willing to take a reasonable amount of risk to do something really great for our community and shake it up in a significant way,” Maria MacGunigal, Sacramento’s chief information officer, told Route Fifty in a phone interview. “Hopefully this will generate excitement from other carriers to want to invest.”

The deal obligates Verizon to offer between five and 20 high school internships—as well as host at least one science, technology, engineering and math workshop for K-12 students—every year for the next five years. But there’s no guarantee those will translate into permanent positions.

Verizon also agreed to provide municipal and stand-alone Wi-Fi to 27 municipal parks at 10 megabits per second and around 15 digital kiosks at gigabit speeds for five years, with a 10-year extension possible for the kiosks.

The city will have access to Verizon’s Internet of Things development platform in conjunction with an intelligent traffic solution strategically placed at 15 intersections supporting Sacramento’s Vision Zero traffic safety program. Collection of congestion open data for analysis will occur at 12 of those intersections, and 10 will be outfitted with a video analytics solution.

But all these things, including the buildout of hundreds of miles of dark fiber, are minor pieces compared to attracting a new broadband competitor offering 5G for $2 million in foregone revenue, Christopher Mitchell, the director of community broadband networks for the Institute for Local Self-Reliance, told Route Fifty in a phone interview.

“The city has made a bet. I wouldn't call it a giveaway,” Mitchell said. “I think in three to four years if they have a dense network, depending on what the technology looks like, it may seem $2 million was a low cost to get more high-quality access for tech operations and middle-class folks.”

While it’s unlikely to happen in California, Mitchell added, a bill capping how much local governments could charge mobile carriers for leases did make it to the governor’s desk last year before being vetoed—one possible concern for cities like Sacramento.

Cities its size often pay far more than $2 million to court big players like Google, and while the Sacramento Municipal Utility District could theoretically try to build its own network, the Wi-Fi it’s getting is valued at more than $100 million in investment. The fiber alone is worth $20 million, MacGunigal said, but that’s primarily for Verizon’s use outside of the connected intersections.

Verizon may use municipal conduit when feasible on a 20-year lease, in addition to the city agreeing to a significantly lower California Public Utilities Commission formulaic rate for 5G small cell attachments. Sacramento agreed to streamlined permitting, while the company has 18 months from the time of availability to deploy the small cells and pay the $200 administrative charge per cell.

“One thing you should know about 5G: It doesn’t exist; it’s a fiction right now,” said Richard Bernhardt, Wireless Internet Service Providers Association national spectrum adviser and Wireless Innovation Forum CBRS Operations chair, by phone. "Anybody contracting for 5G is doing so without the protocols in place, which is a problem to begin with.”

Therein lies Sacramento’s real gamble.

“We’ve already been trialing it with real customers, and based on those trials we’re launching commercially,” Verizon spokesman Chris McCann said in a phone interview. “We’ll answer those sceptics with launching a network.”

Another potential issue for the city is Verizon isn’t much different from other major service providers with their penchant for “nickel-and-diming their customers,” Mitchell said.

“They’re better off with a third option,” he said. “But it would be better if that option was almost anyone else.”

So even if 5G turns out to be everything the wireless industry is pitching, Verizon will likely be offering it as a high-end service with a high-end price tag for the people willing to pay—not exactly an equity gamechanger.

MacGunigal said Verizon’s currently ongoing fiber buildout “includes all of our underserved communities” and hoped it would “really move the needle on cost of access to high-speed internet connectivity.” That could prove true if, as she expects, Verizon’s first 5G delivery is to homes and small businesses rather than mobile devices, which currently lack the capacity to make use of such an advancement. But there’s nothing in the deal’s language ensuring low-cost service to low-income households.

“We haven’t announced anything around prices,” McCann said. “I imagine we’ll give those details closer to when we launch the service.”

Should the nonexclusive deal lead to more deals with other service providers, the additional competition—particularly in the aftermath of the Federal Communications Commission’s recent vote to end of net neutrality—could mitigate their overreach and drive down costs as well.

MacGunigal doesn’t anticipate right-of-way disputes, at least with small cells, given Sacramento owns about 13,000 utility poles, and Verizon will only be occupying 101 of them.

Within the new network, fiber will provide the base layer followed by small cells and then smart cities solutions like cameras and sensors at intersections. Those solutions sit on top of the network and could change a number of times in the next decade, MacGunigal said, but the underlying infrastructure will remain the same and allow for that greater flexibility.

“I’ve seen a lot of wireless technology hyped up before it’s been delivered, and if in the next three to four years this turns out not to be a good deal then the city might miss that lost revenue,” Mitchell said. “Still, this seems like a reasonable bet for the city of Sacramento to make.”