A Pitch for a Nationwide 5G Network Tailor-Made for Trump’s 2020 Campaign

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Earlier this spring, Karl Rove, the veteran Republican strategist, was making the rounds in Congress to talk up Rivada Networks, a telecommunications company with a 5G business model predicated on partnering with the Department of Defense. Rove, a registered lobbyist for and investor in Rivada, met with staff members of the Senate Armed Services Committee and had a phone call with his old friend, John Cornyn, a Republican Senator from Texas who is a co-author of the Secure 5G and Beyond Act. As the broadband system is structured now, the F.C.C. allocates radio spectrum through periodic auctions where the highest bidder—typically one of the major telecom companies—wins control over bandwidth for a fixed number of years, setting prices and choosing where to invest in infrastructure. The D.O.D. spectrum, which is set aside by the government for classified, unclassified, and emergency communications, blankets the country but is often unused. Rivada wants to monetize it—minute by minute, hour by hour, as needed, to telecom and other companies—and share the proceeds with the government. (If the military needs the airwaves, Rivada’s software would automatically bounce commercial users.) “Its technology has the coolest name,” Rove told me. “Ruthless preëmption.”

The Rivada system, Rove explained, would bring 5G cellular services to rural America, which has largely been left behind by the big telecom companies. “We’re becoming a country divided between those that have access to high-quality broadband and those who don’t,” Rove said. “And it used to be that that divide was perhaps more between rich and poor, and that still remains, to some degree, but it’s more urban and suburban versus the rest of America.” The former Speaker of the House Newt Gingrich and the 2020 Trump campaign manager, Brad Parscale, have been making a similar case, in editorials and tweets. (Both say that they have no financial stake in Rivada, which is privately held, and have not been paid by the company or its associates.) Bypassing the auction process, the Rivada argument goes, will allow less-well-resourced companies to enter the market at a lower cost, which will spur development of cellular services in underserved areas. “We’re an advanced developed country, but we are paying among the highest prices in the world for broadband,” Rove said. “Economically, we’re entering a world in which the use of spectrum is going to become an important tool for economic growth and vitality.”

Aside from Rove, the only other known investor is Peter Thiel, the Silicon Valley billionaire, self-avowed libertarian, and early Trump supporter. In a recent essay, Jonathan Lee, a telecom attorney, wondered, “What is it about Rivada’s plan/service that requires lifelong ‘free market’ defenders to embrace the heavy hand of government?” To Scott Wallsten, the president of the Technology Policy Institute, the answer is obvious. “They’re hoping to get access to spectrum without having to pay for it,” he said. “And, I mean, it’s this hugely valuable commodity, worth billions and billions. If someone is just given it, that’s just a gigantic subsidy.” If Rivada’s proposal were to be adopted, it would create a new asset class—bandwidth—that could be traded on the commodities market, like oil or soybeans. And it would make Rivada, which holds patents to run this market (a process known as dynamic spectrum arbitrage), an extremely lucrative company. Charles Duan, the director of technology and innovation at the R Street Institute, a D.C. think tank, recently wrote in Fortune, “The company would be able to extract payments from potentially every player on the network.”

Declan Ganley, the Rivada chairman and C.E.O., is an enigmatic Irish businessman with an uncanny ability to spot markets before they materialize. He began building his fortune in his early twenties, trading forestry holdings in Russia and aluminum in Latvia after the fall of the Soviet Union. In Albania, Ganley and his associates established the Anglo-Adriatic Investment Fund to collect the privatization vouchers that the Albanian government was handing out to its citizens. (It failed when the government changed the rules.) In the late nineties, Ganley began buying wireless-spectrum licenses throughout Europe, eventually selling them to Comcast. In 2001, he put together a consortium of investors to create Cable Bulgaria, the country’s first private cable-television company. “It is a cash cow, not just for the next two years but for the next 80 years,” Ganley told the Wall Street Journal at the time, calling Bulgaria the Silicon Valley of the Eastern Bloc. (He no longer owns it.)

When the Coalition Provisional Authority (C.P.A.) took over governance of Iraq, in 2003, Ganley tried to capture some of the billions of dollars allocated for reconstruction by bidding to build the country’s cellular-phone system. When that proposal was rejected, he endeavored to set up and run its emergency-communications system. Defense contracts are typically awarded on a competitive basis. But Jack Shaw, the U.S. Deputy Under-Secretary of Defense for International Technology Security at the time, helped Ganley partner with a Native Alaskan company, Nana Pacific, to take advantage of a provision in federal contracting law that allows small, minority-owned businesses to obtain government contracts without having to bid for them. That law also exempts Native American companies from a three-million-dollar contract cap, as well as from having to be minority-run. But the plan went sideways when the C.P.A. discovered that a clause had been surreptitiously inserted into the contract that opened a back door for Ganley’s group to build the Iraqi commercial cellular network after all. According to a report in the Irish Times, it was Ganley who instructed Shaw to add the clause that let the group circumvent the telecommunications bid; Ganley denies the assertion, claiming instead that he—Ganley—was a whistle-blower who was “raising questions about being encouraged to purchase expensive equipment that was not needed for his project.” In any case, the D.O.D.’s inspector general, and then the F.B.I., got involved. Shaw, who had served in the Ford, Nixon, Reagan, and both Bush Administrations, was eventually fired, and Nana Pacific lost the contract.

But, in the years since, Rivada has continued to partner with a number of Native Alaskan corporations to obtain government telecommunication projects without having to go through the bidding or review process. It is a scheme that has scored Rivada hundreds of millions of dollars of defense contracts, as well as contracts from the Department of Homeland Security and U.S. Customs and Border Protection. (Companies that partner with Indian-owned businesses also get a five per cent incentive from the D.O.D.) Over the years, Ganley has developed deep ties to the American military and the Republican Party establishments, as well. Since 2007, Rivada has donated nearly half a milliondollars to the Republican Governors Association; one of its board members is Edwin Feulner, the founder and former president of the Heritage Foundation.

A few years ago, the First Responder Network Authority, which is also known as FirstNet, was created by Congress to establish “a nationwide, interoperable public safety broadband network.” The Department of the Interior sought proposals for the project, which was worth $6.5 billion, and Ganley made a push for it. According to Rivada’s spokesperson, Brian Carney, the company was proposing “a network for first responders that was allowed to monetize any excess capacity that the first responders weren’t using. We’d provide free service to first responders, and any time they weren’t using the network we would sell that on a wholesale basis to the highest bidder, on a dynamic basis where the market sets the price and we share that revenue with the government.” In the run-up to the request for FirstNet proposals, Rivada added the former governors Jeb Bush and Martin O’Malley to its board. Even so, the company’s application to submit a bid was denied by the Department of Interior after the reviewers rated Rivada’s business management, leadership and program management, architecture and infrastructure, and, perhaps most crucially, security, to be unacceptable. The “substantial number of significant weaknesses and deficiencies” in Rivada’s proposal, they wrote, “introduce excessive, increased risks” that might “result in [its] inability to perform.” They also determined that Rivada “did not adequately demonstrate that its proposed wholesale marketplace . . . would be adopted by potential customers,” creating “a significant risk of unsuccessful performance.”


Post Author: Intercourier

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