Tag Archives: 5G

THE BEST LAID PLANS FOR FREE WI-FI (Part 3 of 3)

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THE ELECTRONS HIT THE FAN.

CityBridge amended its privacy policy to enable it to collect the MAI on a unilateral basis over 4th of July weekend of 2017. A bad move both politically and legally. A cease and desist letter was sent to CityBridge by the City and CityBridge reversed itself. If the relationship between the City and CityBridge had not already been sufficiently soured, the unilateral change in the privacy policy was something of a last straw. At that point, while CityBridge was not meeting its deployment targets, it had put out LinkNYC kiosks at most of the high value Manhattan locations. They had told me that there was no increased revenue to be gained for them by putting out more kiosks. The kiosks their advertisers required had been built. 

Coincidentally, CityBridge began to argue that, notwithstanding the Second Amendment, and the assurances of viability attached to it, that without the collection of the MAI there was no way the franchise could be financially successful. Without a further change in the structure of the program, they claimed, they would go out business.  In August of 2017 they stopped building new kiosks, in part blaming delays on Con Ed’s lack of responsiveness and arbitrary imposition of hundreds of thousands of dollars in additional charges (which were at least partially caused by CityBridge’s arrogance and high-handedness in dealing with Con Ed).  Later in the year, claiming financial disaster, they stopped paying the minimum monthly guaranteed payment. The City entered into a series of monthly “forbearance agreements” saying that it would not default CityBridge while negotiations took place to resolve the outstanding issues. But CityBridge was in an excellent position. They had the kiosks in the locations they needed and had stopped spending money installing additional ones, they had stopped paying rent, and they continued to sell ads on the kiosks. What could have been better for them? 

An incidental result of this delay was the failure to remove the payphone kiosks on the timeline set out in the franchise agreement, another default under the agreement. Not only were the payphones a technology that had been superseded by mobile phones, but they were also an unsupported technology. Replacement parts were impossible to source. The copper wire system that they relied on was entirely degraded and non-functioning. As a result, all were eventually converted to battery operated wireless service. The batteries frequently went dead. There were per diem liquated damage provisions for non-deployment of kiosks and penalties for the failure to maintain the phones. DoITT had a half dozen individuals who had been inspecting the phones and writing violations against them for decades. The liquidated damage amounts built up into the high six figures and became yet an additional issue in negotiations of the default and discussions of a possible third amendment (Ultimately, the City waived the accumulated liquidated damages in the third amendment).

In 2022 there was a blizzard of publicity about the removal of the “last phone booths” with panegyrics to a lost age. This was not entirely accurate. First, because none of the stories noted that CityBridge was supposed to have removed them all six years prior and second, because there were still plenty of phone kiosks around if you just looked. This is not to mention that there were hundreds of places where phones had been pulled and the sidewalks had not been properly restored, a not insignificant ongoing failure by CityBridge. 

With respect to CityBridge’s claims of financial distress, my view was that first, in my judgement CityBridge had done a poor job in selling the ad panels – and based on my twenty years of experience with the outdoor advertising industry (beginning with the very lucrative and novel sale of panels on the Bryant Park newsstands in the late 90’s), I couldn’t understand why they weren’t doing better. There was something wrong with their sales program, in my view, probably having to do with their attempting to sell only to national accounts. Just for example, I thought that if they made a deal with Miller Beer to blanket Manhattan with ads from four to six PM on weekdays that might say “It’s Miller Time” on the ad panels, it would be easy to determine how many additional six packs of beers were moved as a result of the campaign, and put a value on that (although this is a bad example because ads for alcohol were prohibited from the program).  But they weren’t doing anything creative like this (that were the signature of TDI, the out-of-home advertising firm which had the subway system franchise for many years – for example the wrapping of entire subway cars for single advertisers). 

Second, it wasn’t the City’s business to get involved int CityBridge/Intersection/Sidewalk Labs bottom line or their cost structure. The City and CityBridge had a franchise agreement that was hard negotiated over, and approved by the Law Department, OMB and the FCRC through a highly public and formal process. The franchise agreement had a complete panoply of potentially effective remedies in the event of default, including the $100 million in security. The City had the capacity to strictly enforce the provisions of the agreement; including, exercising the City’s rights to the $100 million dollars in security to pay outstanding franchise fees and build the required number of kiosks. It was our job under the City Charter to enforce the contract. We didn’t have the right to change terms and to do so wasn’t good public policy. In addition, the failed bidders for the original franchise, as well as the holder of the City’s other outdoor advertising franchise for bus shelters and newsstands (a competitor to the Link program, which also claimed to be losing money under its deal), would have a legal right to complain about any such changes. 

Finally, based on my thirty years of business experience, with particular involvement with out of home advertising and street furniture (which is why they recruited me for the job in the first place), I was sure that CityBridge, Intersection and Google were bluffing. They wanted to get a better deal, and because of the extensive knowledge within Sidewalk Labs of how the City operated, they knew that the City tended not to enforce the terms of its contracts, to fold in negotiations, and to lose in litigation. I argued internally that once the City exercised its right to cash the letter of credit (which involved faxing a letter to the bank issuing the letter), CityBridge would move quickly to pay its arrears and remedy its deployment breaches. The franchise was just too valuable to lose and consortium members would sacrifice a great deal of money in the event of a termination. I also came to understand that the letter of credit was personally guaranteed to the bank issuing it by the principal of the venture capital investor member of the consortium. He would have moved heaven and earth not to have the LC, which was essentially a cash deposit, drawn on. We transmit the fax, the City gets the money, the bank sucks the money out of the VC investor’s account. End of story. The unsigned letter drawing on the $25 million LC sat on the top of my desk for months, with CityBridge at one point in default to the City in an amount that was twice that. 

Another interesting aspect of the capital structure of CityBridge was that they had a line of credit with a bank, and a more than $150 million in a loan from what are called EB-5 investors. The EB-5 investors were a group of foreign nationals, recruited by local financial brokers, who were promised by the Federal government green cards in exchange for significant investments in US projects in distressed communities. If the City called a default under the franchise agreement, that would have also caused a default under the terms of the bank and the EB-5 loans. The EB-5 investors would lose their right to green cards. The bank lenders would likely lose their jobs (or at least their annual bonuses). Both groups would also be highly motivated to take over CityBridge (as they were entitled to do under the terms of the franchise agreement) and cure any default.

[It’s worth noting that there came a time when I enquired at the City’s Law Department about who was the City’s letter of credit law expert. I got a call back from someone senior at the Law Department asking me how much prior experience I had with letters of credit. I explained that I had routinely dealt with them in my law practice and real estate finance transactions, but that I was by no means an expert in this highly technical area of the law. The person on the phone said to me “Good, you are now the City’s LC expert.”]

But no one was interested in my opinion. It is interesting to note that between me and the Mayor, who was the ultimate decision maker on the issue, were at least four layers of bureaucracy – my boss the General Counsel of DoITT, the DoITT Commissioner, the Deputy Mayor for Operations, the First Deputy Mayor and the Mayor’s Chief of Staff. There is an argument to be made that given the relative lack of importance of the Link program in the grand scheme of city things, the issue shouldn’t even have risen to the Mayor’s level. But anything that had the potential for a bad story in the newspapers, was deemed worthy of Mayoral attention. Any information I was sending up the pike, was going through several layers of edits before it got to Mayor De Blasio. My staff and I, who had the firsthand sense of what was happening with the LinkNYC program, never met with anyone more senior than the General Counsel of DoITT to discuss strategy or our evaluation of the various probabilities of possible outcomes.

This is not to dismiss City Hall’s desire to negotiate with CityBridge out of hand. The Administration did not want to get involved in “protracted litigation with CityBridge” and most particularly did not want to take the risk of CityBridge’s shutting down this high-profile system. By coming to some kind of agreement with CityBridge City Hall could be certain that neither outcome would eventuate. This was their reasoning. The senior officials at Sidewalk Labs, who were now publicly saying that they had very little to do with the Link program, and were knowledgeable former senior city office holders, were lobbying City Hall hard to come to an accommodation. [This would be an appropriate place for me to point out that no one has ever elected me to anything, that no one would ever elect me to even the lowest elected office one might care to suggest, and that in an unlikely and bizarre set of circumstances were I to be elected to anything, it would be an impossibility that I might be reelected.] 

At the same time, the Franchise Administration Unit at DoITT was being audited by both the City and State Comptroller on the LinkNYC franchise. The City Comptroller was auditing the operation of the kiosks (which by any reasonable measure was excellent). The State Comptroller was auditing DoITT’s compliance management with the franchise agreement. The City Comptroller’s methodology was unsound. The State Comptroller’s staff were Javert like in their pursuit of what they thought was perfidy – particularly with respect to the alleged (mis)-calculation of a very small amount of owed franchise fees (about which they were incorrect). Neither, though, blew the whistle on CityBridge’s failure to make good on its financial or deployment obligations and the City’s failure to exercise its extensive set of rights in the event of defaults under the franchise agreement while they were performing their audits. The State audit went on for months and continued through the COVID pandemic via teleconference. Their not calling out the City’s failure to exercise its contractual remedies and more importantly, CityBridge’s material defaults, seemed to me evidence of the lack of efficacy of Comptroller audits. 

After almost two years (much of it during the pandemic) of negotiations, the City proposed a third amendment to the franchise agreement essentially releasing CityBridge from about $200 million of its minimum annual guaranteed payments, waiving the accrued liquated damages, lowering the minimum number of kiosks from 7,500 to 4,000, and most importantly essentially transforming the franchise from one focused on providing fee Wi-Fi service in public spaces, to one empowering CityBridge and a new partner, ZenFi, to turn the kiosks into 30 foot high hosts for multiple mobile telecommunications small cell transmitters. The City got no increased value from the contract in return. 

Another, better, kiosk solution. Look on the right.

During the pandemic, the Partnership for New York City, lobbied the De Blasio administration hard that New York City was falling behind in the deployment of 5G transmitters, something I discussed at length here: https://www.theplacemaster.com/2022/08/18/online-porn-gambling-and-5g/. The Administration put on a full court press to attempt to accelerate the deployment of small cells on light poles around the city, to remove obstacles to building macro transmitters on building roofs (created by Buildings Department and Fire Department safety regulations) and to convert the CityBridge Wi-Fi kiosks to mobile telecom transmitter stations. The amendment to the CityBridge franchise agreement to convert it to a mobile telecommunications station, and the approval for a design for a new Link kiosk design which could host the small cells of multiple companies became a high priority, rush project.

While at all times as a city employee I tried to be a loyal soldier, advancing the Administration’s goals and priorities to the best of my abilities, I regarded then and continue to regard the third amendment to the franchise agreement as a bad deal for the city, with particular respect to its financial terms, which was essentially a gift to a private entity of hundreds of millions of dollars to which it was contractually obligated. That being said, after lots of questions being asked and objections raised by the City’s Office of Management and Budget and the Law Department, both signed off on the substance and form of the amendment. The amendment then, as required, went to the Franchise and Concession Review Board for approval – which it duly received. Only the Staten Island Borough President identified the problems with the deal and voted against it at the FCRC. The New York City Comptroller and the four other Borough President, having been fully briefed and informed, all voted in favor of handing over hundreds of millions of dollars to CityBridge essentially because they claimed they were bad at their business. To give credit where it is due, the free public Wi-Fi system has continued to operate without interruption. After the approval of the amendment, CityBridge paid a portion of its arrears (as of March 2021) and resumed paying (reduced) minimum guaranteed monthly payments. 

The best telecommunications infrastructure solution.

Similarly, while raising a number of concerns, the New York City Public Design Commission approved the design of the ZenFi kiosk, which is industrial looking, utilitarian and unimaginative. Not at all the signature purpose built multi-use telecommunications street furniture about which I have previously written. But to reiterate – every aspect of this transformed telecommunications franchise has been properly approved by the requisite authorities. There is nothing illegal or untoward here – just, in my view, a bad policy outcome leaving the City hundreds of millions of dollars poorer, with a badly designed poorly located 32 foot high tower, that fails to address the needs of an equitable 21sttelecommunications system. I was recently told that CityBridge has missed the revised deployment targets of the third amendment. But, as I say, no one ever elected me to anything. 

ONLINE PORN, GAMBLING AND 5G      

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To put the recent hyperbole regarding the fifth generation of mobile phone technology (5G) in context, a rough estimate puts porn and gaming at 40% of internet data. So, increasing the speed and capacity of internet infrastructure will largely go to improving the experience of those uses. My flip evaluation of the utility of 5G technology has been that it is great if you want to do robotic surgery or download all of Game of Thrones on a street corner. 

5G is the latest iteration of mobile phone and data transmission technology that is now being rolled out around the country and the world. In fact, one often reads ominously that the US is “falling behind” on the implementation of 5G. The value of the new technology is essentially that more information can be pushed through fiber optic lines and wireless transmission at higher speeds as a result of how the packages of electrons carrying digital data are bundled. The result is a higher capacity for traffic, significantly faster speeds and importantly, less latency in the transmission. Latency is the time between a user pushing the “enter” key and the time the information being requested fully loads on a screen.

The reduction in latency is not only important because it keeps people from throwing their mobile devices against walls out of frustration, but more critically, it enables a whole range of new internet applications that demand effectively simultaneous real time responses in order to be effective – like self-driving cars (which also aren’t coming any time soon). A graphic example of the problems arising out of latency delay is the inability of musicians to play together using zoom. Because of latency, using existing technology, it is impossible for participants to play music together over the internet (without additional compensating software). Low latency would also, for example, make possible robotic surgery, because the visual and vital sign information being conveyed to the surgeon on one end would be instant with a doctor’s surgical procedures on the other. 

This brings to the fore an important fact about 5G transmission – many of the most useful aspects of its increased speed having nothing to do with mobile phone transmission – as they would be used inside – like surgery or improved efficiency in warehouse operations. A lot of the claims being made about the commercial value of 5G have nothing to do with mobile phone service in public spaces.

Mobile service hot spots

Right now, as far as I can tell, the most important use of 5G service in New York City is to expand system capacity at high use times and places – where the current transmission system is nearly maxed out. The highest use, densest locations for mobile phones I understand to be in Times Square (42nd Street), at 34th Street and 7th Avenue and at Broad Street and Wall Street. Apparently, the highest use times are during the early afternoon rush hour, particularly on Fridays (“honey, (i) should I pick up a loaf of bread on the way home” and/or (ii) “I’m gonna be late. I’m having a drink with the team after work” or (iii) “my train/bus is late.”). In order for the system to accommodate the increased traffic at those times and places, the pipe needs to be wider, and 5G information bundling creates a wider pipe. 

It’s worth noting that the high visibility of the perceived lack of “technological equity” has added a political dimension to the public discussion of mobile telecom infrastructure. Frankly, given the way in which mobile telephones are used, there isn’t much of an immediate need for additional capacity in New York City outside of the Manhattan core (that’s not to say there won’t be in the future – and any 5G build would likely ultimately need to be city-wide). But because of immediate concerns about “equity,” the industry is going to be required to distribute its equipment across the five boroughs, in order to be given the green light to build the additional transmitters the system really needs in Manhattan. 

A typical New York City mobile telecom installation

Mobile phone signals are transmitted by macro transmitters (those towers you see along highways and on building roofs) and more recently, and more widely via micro transmitters, which in most cities are glommed on to municipal light and signal poles. This is a huge pain for the mobile telecommunications industry, as there are tens of thousands of municipalities across the country, and each of the three national wireless companies has to make their own deals with each of them. You probably haven’t noticed the installations in New York City, because here they have been pretty well designed to blend in. They are painted the same color as the pole to which they are attached. They consist of a rectangular box near the top of the pole and a “whip” antenna sticking up from the top of the pole. Needless to say, the poles weren’t originally designed to carry telecommunications infrastructure, and it not being essential to their mission, the City’s Department of Transportation is less than thrilled with having this stuff attached to their poles and being responsible for their safety. DOT’s job is to keep the lights on at night and the signals working 24/7. In addition, City agencies have their own use for this aerial real estate – particularly DOT and the NYPD. The police use the poles, for example, for surveillance cameras and speed monitors. This is highly contested real estate. Until recently, only one of the three mobile companies’ equipment could be accommodated on each pole. 

As with all telecommunications regulation, the base layer is Federal – and the outdated 1996 Cable Act governs the interaction of municipalities of mobile telecommunications infrastructure in the public way. When one thinks of mobile telecommunications, one thinks of wireless transmission, but for every mobile transmitter there must be a wired connection to the network. There is a mostly separate (from cable, except for Verizon) system of fiber optic cable supporting the mobile phone network under New York streets and hanging from utility poles. Companies providing mobile telecommunications infrastructure (and there are a number of companies who provide this as a service to the Big Three, in addition to the mobile companies themselves) need to have a franchise from the City both to lay their wires under the streets and across utility poles, as well as to place their transmitters on City poles. 

During the Trump administration, the industry friendly Federal Communications Commission adopted rules that constrained the regulation of the deployment of mobile infrastructure in the public way by municipalities, just as it did with cable regulation. In the case of mobile telecom, the FCC limited what local government could charge for the use of its space to essentially the cost of administering the licensing program, and created accelerated maximum timelines for approval of the location of transmitters. The latter was certainly required, as many local governments out of a concern for aesthetics, or bureaucratic lethargy, stood in the way of the mobile telecom deployment. 

However, this was not at all true in New York City, which, about 20 years ago, set up an efficient system for fairly allocating and licensing pole use to the mobile telecom infrastructure companies. The industry saw the City’s system as a national model and were (mostly) happy with how things were, and especially with the City’s experienced and highly responsive team that administered the program. To put this in context, NYC has about 300,000 light and signal poles (although there is no complete inventory of poles), and the last time I looked about fewer than 10,000 were being used as hosts for mobile phone transmitters. But, because of the preemption of Federal law, the City has been cast in the same boat as all other local governments. Of course, the FCC’s newish rules are the subject of continuing litigation. The industry has not sued the City to attempt to make it conform with the new rules, presumably because they are reasonably satisfied with the status quo – and they are in a rush to deploy their transmitters and don’t want to delay the process by initiating a lawsuit here.

This is particularly the case because Verizon, T-Mobile and AT&T, given the publicity they’ve created about the benefits of 5G service, want to deploy 5G transmitters quickly. The companies have each based a good deal of their national advertising to hyping the competitive advantage of each of their 5G systems. Again, those systems aren’t all that useful to consumers yet because mobile customers mostly have access to quite high speeds all over New York City (except at peak locations at peak times) and because not many people have bought phones that have the capacity to process the 5G signal. This is in part because of the additional expense associated with 5G phones and in part for technological limitations on the handheld devices themselves (particularly with respect to battery life and reliability). It will take several years for adoption of affordable, practical 5G handheld devices to catch up with deployment of transmitter technology. 

The real fly in the soup here is that wireless 5G transmission needs many more transmitters than a 4G/LTE system. The 5G micromillimeter wave system, which is the backbone (and the high-speed part) for much of the 5G networks, has a shorter signal length and is more easily blocked than the medium wave 4G/LTE networks we’re all using now. There is an inverse relationship between wavelength and signal power/distance. The shorter the wave, the less far it goes and the more easily it is interfered with. That is, for example, why AM radio signals can be picked up across the country – they use a very long wave signal. 5G needs a couple of orders of magnitude more transmitters – thousands more. Human bodies and leaves have the capacity to block micromillimeter wave signals. 

That deployment of more transmitters requires more City real estate and given that up until recently only one transmitter could be placed on a pole, that meant a push was on for the City to ramp up the distribution of poles. This ran into a number of logistical roadblocks. First, corner signal poles were more valuable to industry, as they logistically had a larger radius of transmission for the short micromillimeter wave transmission. As a result of a consent decree being negotiated by the City in Federal Court having to do with the City’s dilatoriness in making its tens of thousands of street corners comply with Federal accessibility requirements, the City began requiring anyone moving a light pole near a corner to replace all four corners at an intersection.

4G and 5G pole installations

Industry has proposed to the City designs that carry more than one transmitter – as the future standard. These installations are heavier and require the replacement of the pole and the construction of a new foundation for it – triggering the accessibility retrofit requirement for corner poles – making such an installation cost prohibitive. For the time being, the mobile telecom industry is avoiding the coveted corner poles and sticking with midblock poles so as to avoid triggering the six figure cost associated with corner ramps. Also, in the highest need locations there simply aren’t enough poles to accommodate the required transmitters. On 42nd Street and 34th Street the local business improvement districts objected to the erection of transmitters on distinctive poles they had erected in the 90’s in those essential locations. There simply are not enough available poles. 

This is something like what a New York City cable pedestal looks like. Searching the internet I couldn’t find photos of either an actual NYC pedestal or a Verizon “refrigerator box” cable splicing enclosure. That tells you something.

When I was in City government, I advocated for a purpose-built telecommunications structure for sidewalks all over the city. Principally, this got DOT out of the telecommunications business that they didn’t want to be in – and their inspection of poles and installations had become a pinch point in the approval process, given available resources. This would be a structure licensed and regulated solely by the City’s technology agency – making the process simpler. The structure would be designed to accommodate all of the City’s telecommunications needs – mobile, Wi-Fi, cable and 911 – much like the LinkNYC program, but without advertising. The program would be financed by renting out space to telecommunications companies in this telecom condo. The structure would also replace ugly, refrigerator sized cable splicing boxes which exist all of the city outside Manhattan. The Altice and Spectrum boxes, called pedestals, have been around for decades and are generally located in the space between the street and sidewalk. Worse are the Verizon boxes, that hang from telephone pole – on some as many as four, two of which were hung at eye level. That equipment would all go into the proposed telecom structure. 

The structure would need to be 32 feet high, in order to meet the needs of the mobile telecom industry. This would lower the number of needed structures (the higher the structure, the further the signal could be transmitted). Yeah, that’s tall. And yeah, that’s another big piece of stuff on the sidewalks. But my idea was that this structure could be designed by the best and become a symbol of 21st Century New York City, much as the Art Nouveau Paris Metro entrances have become a symbol of Paris. Also, I thought for initial locations, the City could replace the 6,000 DOT wayfinding kiosks, that look like the obelisk from “2001, A Space Odyssey,” and, thanks to the ubiquity of GPS and mobile phone maps, became obsolete nearly as soon as they were constructed. They were a good idea in the 90’s. The would be replaced with the telecom structure – using their sidewalk space. The idea got some, but not enough, traction.

The LinkNYC 5G kiosk

BUT, along came the alleged economic failure of the LinkNYC program (which I plan to discuss in detail in my next post). Part of the solution to creating a new “sustainable business model” for the free public Wi-Fi program was to allow the company that built the system to partner with a telecom infrastructure provider, replace the Wi-Fi kiosks with new 32-foot-tall kiosks, and permit them to (exclusively) host multiple mobile telecom transmitters in the structure. That structure, pictured above, has been approved by the Public Design Commission and is beginning to be deployed. Given the equity issues, the City is requiring that it be built first disproportionately outside Manhattan (despite the fact that the need for additional mobile telecom capacity is in the Manhattan core). I’m not personally fond of the design – and think it could be a lot better – but I do recognize the need for the height – and the need for a structure of this sort, particularly in the high demand spots in Manhattan. This part of the story is only beginning to be played out – as I doubt that the implications of the deployment have been fully understood by elected officials, the public and the other industry players. 

New York City will get 5G service in a timely fashion. It will be as fast, available and reliable as anywhere in the world. Given the competition between the big three and other discount providers that use their network infrastructure the prices will remain highly competitive (I have Altice Mobile service, for example, that uses the T-Mobile system and get unlimited talk and text for $30 per month. The price (for 4G LTE service) is guaranteed forever (whatever that means)). You aren’t likely to notice the difference any time soon – unless you’re planning to step out to the corner to download all of “Better Call Saul.” With a little luck, you won’t notice most of the transmission infrastructure.