Administration officials alarmed by White House push to fast track lucrative 5G spectrum contract, sources say
• Oct 20, 2020
Senior officials throughout various departments and agencies of the Trump administration tell CNN they are alarmed at White House pressure to grant what would essentially be a no-bid contract to lease the Department of Defense's mid-band spectrum -- premium real estate for the booming and lucrative 5G market -- to Rivada Networks, a company in which prominent Republicans and supporters of President Donald Trump have investments.
The pressure campaign to fast track Rivada's "Request for Proposal" (RFP) by using authorities that would preclude a competitive bidding process intensified in September, and has been led by White House chief of staff Mark Meadows, who was acting at Trump's behest, sources with knowledge tell CNN. To push his case, Meadows has sometimes used as his proxy an individual identified by sources in the telecommunications industry as a top financial management official in the US Army.
Sources tell CNN that Trump was encouraged to help Rivada by Fox News commentator and veteran GOP strategist Karl Rove, a lobbyist for, and investor in, Rivada.
Untold billions are at stake. A government auction of 70 megahertz of spectrum in August went for more than $4.5 billion. The Rivada bid would be for 350 megahertz of spectrum -- five times that amount.
Rove denied to CNN that Rivada is seeking an RFP or any non-competitive process. "If we were offered a no-bid contract we would turn it down," he told CNN. "The technology should stand on its own."
Denials notwithstanding, informed sources tell CNN that the White House is unquestionably pressuring the Pentagon to approve what would likely be, in the words of one senior administration official, "the biggest handoff of economic power to a single entity in history," and to do so without full examination of the impact on national security and without a competitive bidding process.
Craig Moffett, a highly regarded Wall Street analyst of the telecommunications sector, concluded in a October 7 research paper: "The whole story smacks of cronyism at best and reeks of 'the swamp' at worst."
"Spectrum is intensely valuable," Rove told CNN. "God is not inventing any more. There is a finite amount of spectrum available to carry wireless communications."
Newt Gingrich, the former Republican speaker of the House and noted Trump supporter, has also been advocating for the Pentagon to share its 5G network with commercial users, and doing so in a way that has left insiders under the impression that he lobbied for Rivada. Gingrich tells CNN he "never advocated for Rivada" specifically and "did all of it pro bono as a citizen."
When asked directly for a comment about alarm that the White House was pressuring officials to offer Rivada the RFP, a White House official told CNN that "the White House has not taken a position in favor of any company over another with regard to 5G spectrum" and insisted that "conversations are ongoing but it is still pre-decisional. Regardless, whatever decision is ultimately made will be a result of best cost/benefit for the taxpayer, not any political reasons."
The Pentagon declined to comment.
A spokesman for Rivada denies that the company is pursuing a non-competitive RFP. "Absolutely not," Rivada spokesman Brian Carney told CNN. "We have always advocated for a competitive process."
Trump's top economic adviser, Larry Kudlow, has been arguing against anything but free market competition for the mid-band spectrum, which is seen as ideal for 5G because it can carry loads of data while also traveling significant distances. For years, Trump seemingly agreed with Kudlow.
Yet something changed come election time, sources tell CNN, and the President began pushing Meadows to help Rivada.
Informed sources speculate that Trump may have been trying to curry favor with Rove, who has never been a reliable member of the MAGA team but remains a powerful fundraising force and strategist in GOP politics.
A more benign interpretation might be that the President and Meadows are focused on having 5G networks spread as quickly and safely across the US and have been frustrated with Pentagon and Federal Communications Commission timelines and bureaucracy.
Pentagon leaders are resisting the move, sources tell CNN, since they are concerned that this is being rushed without thoroughly vetting the impact it could have on military readiness. Pentagon lawyers have told the White House that their department has no authority to issue RFPs for the purpose of leasing or selling off its spectrum, and they think that to do so in the manner the
White House is pushing would be a complete deviation from normal rules and regulations.
Even if the Pentagon had the authority to do this, and didn't have qualms about doing it in a non-competitive way, sources say that Pentagon officials are unsure that Rivada has the ability to lease the spectrum for commercial use while also preserving the US military's ability to use the spectrum for military exercises and the defense of the country.
Rivada officials are publicly confident about their ability to do both. But that confidence is not shared by many key players in this process. One Pentagon official told CNN that while Rivada believes it has the best solution for sharing the spectrum, the Pentagon hasn't vetted that assertion, so it would be premature to ask the company for an RFP, which would be "an absolute gold mine" if awarded, the official said.
FCC officials have also been stunned at the White House's push, both at its attempt to do this using other agencies instead of their independent commission, and the attempt to do so without respecting the normal independent bidding process.
Concern on Capitol Hill
Both Democrats and Republicans on Capitol Hill are concerned. House Energy and Commerce Committee Chairman Rep. Frank Pallone Jr., Democrat of New Jersey, and the chair of the relevant subcommittee, Rep. Mike Doyle, Democrat of Pennsylvania, recently requested more information about whether "the White House has instructed DoD to proceed immediately to a Request for Proposal ('RFP') in order to move forward toward a national 5G network."
"According to press accounts, several political operatives or lobbyists with close ties to President Trump or his staff...are pushing for the seismic shift in spectrum policy contemplated by the RFI. These reports also suggest these Republican operatives are working for the benefit of a specific company, Rivada, Inc., which has long championed a national network that Rivada would construct and operate using its sharing technology," Pallone and Doyle wrote.
It's not just Democrats who have raised red flags. At the end of September, Sen. John Thune, Republican of South Dakota, along with 18 other GOP senators, protested any potential move which would not "rely on private industry and market forces to foster multiple, facilities-based 5G networks" but rather push "nationalizing 5G and experimenting with untested models for 5G deployment." The GOP lawmakers did not mention Rivada by name.
Failed effort to win first responder contract
Rivada Networks is a privately-held communications company that has won government contracts in the past. Among its investors is Peter Thiel, the noted tech venture capitalist billionaire and Trump supporter. Spokespeople for Thiel did not respond to a request for comment.
Beyond the enthusiasm of Rivada's investors and lobbyists, many administration officials are confused as to why Rivada is even being considered for the lucrative contract.
In 2016 and 2017, the company pursued a nationwide public safety contract, First Responder Network Authority, losing out to AT&T. (AT&T is the parent company of CNN, but no one affiliated with this story has communicated with anyone at AT&T in any way about this story.) Rivada appealed that decision, which a federal court rejected.
"The grounds on which we were turned down was that we did not charge first responders enough," Rove said.
That's not how the court would put it. In her 2017 ruling, Judge Elaine Kaplan said that due to "Rivada's financial situation and the restrictions in the solicitation, there was an unacceptably high likelihood that the banks might invoke those conditions, leaving Rivada without the financial capacity to even begin performance on the contract."
The court also noted that FirstNet had assessed that Rivada "possesse(d) few capabilities, staff, or financial resources"; did "not itself have material experience in...building and operating a nationwide wireless network"; and lacked any experience in "supervising a project of the size and scope" of the nationwide public safety broadband network.
"We think that the evaluation committee in FirstNet erred because it judged Rivada Networks as a standalone entity bidding for FirstNet," Carney told CNN, noting that Rivada was working with a consortium of several large communications companies. But Rivada Networks didn't bid on FirstNet. Rivada Mercury, a consortium jointly owned by Rivada, Harris, Fujitsu and Black & Veatch (IIRC) bid on FirstNet."
Speeding the process
Earlier this year, Meadows asked Pentagon leadership to examine what could be done to free up some of this 5G spectrum for auction by the FCC, and chief information officer Dana Deasy was assigned to the task, according to sources.
This task, which would normally take around 15 months, was fast-tracked to take only 15 weeks. In August, the White House and Pentagon announced plans to free up for auction 100 megahertz band of spectrum. In September the FCC proposed a plan for doing so, with a scheduled auction end-date of December 2021.
This process is being done by the book, observers note, albeit extremely quickly. Separately, in September the Pentagon issued a Request for Information about what should be done with a band of spectrum that Rivada has its eyes on. The due date for the RFI responses was Monday.
Beyond that, and less transparently, is the push by the White House to force the Pentagon to hand over control of this mid-band spectrum to Rivada, sources tell CNN.
"Something is really fishy about this," a senior administration official told CNN.
Neither Rove nor Carney would offer any names when asked who the company had lobbied. "We have spoken to people in the administration about what we support," Carney told CNN.
You can read the full article by Jake Tapper here.