Don't

At a public meeting on April 25, the Democrat majority on the Federal Communications Commission is expected to adopt new regulations that convert broadband Internet service providers into common carriers akin to public utilities. 

I have just one word of advice: “Don’t!”

 

Oh well, we know that doesn’t work in all instances, foreign or domestic. Not really much drama here. Nevertheless, I am disappointed and baffled that the FCC is determined to pursue such an unwise course, one very likely to be held unlawful.

 

As Ronald Reagan famously declared in 1980 in the second presidential debate with Jimmy Carter: “There you go again!”

 

Well, here we go again. I’ve been opposing proposals to apply Analog Age telephone utility regulations to Digital Age broadband Internet service providers (ISPs) for over two decades now. With so many other important issues confronting communications policymakers today, such as closing remaining digital divides in broadband deployment and adoption and ensuring the availability of more mid-band spectrum for private sector use, the FCC’s time and resources would be so much better spent on those matters rather than “net neutrality.”

 

Regarding the Commission’s proposal, Free State Foundation scholars have filed nearly 100 pages of comments and reply comments with the Commission. These comments treat both the policy and legal issues in a detailed and comprehensive fashion. Additionally, recently we have filed two ex parte submissions for the record, here and here.

 

I won’t endeavor to even summarize all the extensive arguments in those papers here. Rather, as the Commission vote nears, I offer a few big-picture observations in the nature of “closing thoughts.” Again, each is addressed more comprehensively in our filed papers.

 

·      As I said, I have opposed the imposition of a common carrier regime on broadband ISPs for two decades now. Regardless of whether you agreed with my position in 2004, it is surely the case, in 2024, with the demonstrable increase in facilities-based broadband marketplace competition, coupled with ongoing rapid technological innovation, that the case for imposing common carrier regulation today is considerably weaker than it was even in 2015. That was the last time the FCC voted to regulate ISPs as common carriers.

 

·      This is one of the very rare rulemakings across the administrative state in which substantial burdensome regulatory mandates are proposed without any credible evidence of present harm recited in the proposal. The Commission’s supposed support for the rules is based entirely on a very few old claimed (but disputable) incidents, coupled with plenty of conjecture about what ISPs could or might do, but haven’t done. After the silly dire predictions of utility regulation advocates in 2017 that predicted “the end of the Internet as we know it” and that “you’ll get the Internet one word at a time” – and more – if the common carrier regime was eliminated, there is no justification for according any credibility to predictions now regarding what ISPs might or could do.

 

·      Absent any credible evidence of present harm, and the indisputable record of utility advocates’ wrong-headed predictions of speculative future harms, it is arbitrary and capricious, and inconsistent with any notions of a sound cost-benefit analysis, to risk ongoing investment and innovation by ISPs by virtue of imposition of a utility regulation straight-jacket.

 

·      Unlike the last time the FCC imposed common carrier regulations on ISPs in 2015, the Supreme Court has now embedded the Major Questions Doctrine in its jurisprudence. In short, this means that agencies may not decide questions of extraordinary economic and political significance without a clear congressional authorization for the power it claims. The absence of such a clear congressional authorization here renders the Commission’s forthcoming action very vulnerable as a matter of law – as two former Solicitors General who served under President Barack Obama have written. They contend that classifying ISPs as common carriers without congressional authorization would run afoul of the major questions doctrine.

 

·      In one tell-tale sign of this legal vulnerability, Chief Justice Roberts, in his opinion for the Court in West Virginia v. EPA, quoted from then-Judge Kavanaugh’s dissent on the denial of rehearing in United States Telecom Assn. v. FCC: “We presume that ‘Congress intends to make major policy decisions itself, not leave those decisions to agencies.’” The “major policy decision” to which then-Judge Kavanaugh referred, of course, and which Chief Justice Roberts pointedly highlighted in West Virginia, is whether the FCC possesses authority to impose common carrier regulation on ISPs – the very same question that the FCC is now serving up again to the courts.

 

·      There are many factors, addressed in our comments and in a recent Perspectives from FSF Scholars by my colleague Seth Cooper, supporting the contention that the Commission’s proposal presents a “major question” of extraordinary economic or political significance. One warrants special mention here. I have pointed to Chairwoman Rosenworcel’s public statement, in announcing the FCC’s proposed action, inviting proponents of the common carrier regulation “to make some noise” and “raise a ruckus.” In over 45 years of experience in communications law and administrative law generally, including service as Chair of the ABA’s Section of Administrative Law, a Public Member of the Administrative Conference of the United States, and a Fellow of the National Academy of Public Administration, I am unaware of any other agency head or commissioner inviting advocates to “raise a ruckus” and “make some noise” in an ordinary rulemaking proceeding. Thus, Chairwoman Rosenworcel’s appeal is noteworthy as an indication that she considers the Commission’s action to be of extraordinary economic and political significance, warranting a call to popular action beyond the normal public participation expected in the dozens of ordinary rulemaking proceedings considered in any given year.

 

All things considered, I’d say, “Don’t!” Or to put a finer point on it, don’t convert Internet service providers into public utilities.

Senators' Court Brief Challenges FCC Authority to Subsidize School Bus Wi-Fi

On April 9, a group of seven U.S. Senators, including Sens. Ted Cruz and Marsha Blackburn, filed an amicus curiae brief with the Fifth Circuit in the case of Molak v. FCC. The case involves a legal challenge to the Commission's authority under Section 254(h)(2)(A) of the Communications Act to use E-Rate funds to subsidize Wi-Fi on school buses. The Republican Senators' position that the statute does not authorize E-Rate subsidies for school bus Wi-Fi and their primary policy objection to those subsidies are put forth succintly in the brief's summary:

The Federal Communications Commission (FCC)'s plan to subsidize Wi-Fi on school buses is unlawful and misguided. Under section 254 of the Communications Act of 1934, the FCC is authorized to use E-Rate funds only "to enhance . . . access to advanced telecommunications and information services for . . . school classrooms . . . and libraries." 47 U.S.C. § 254(h)(2)(A) (emphasis added). But rather than follow the law restricting the use of E-Rate funds to only classrooms and libraries, the FCC chose to put Wi-Fi on school buses. And this decision comes in the wake of Congress’s decision to not renew the COVID program that authorized the FCC to temporarily fund Wi-Fi off-campus during the pandemic. School buses are neither "classrooms" nor "libraries" within the meaning of Section 254, making the FCC's decision to fund Wi-Fi on school buses contrary to law. 

Moreover, the FCC's proposed expansion of funding raises concerns about child safety and a lack of accountability regarding federal spending. The FCC's E-Rate plan funnels millions of dollars to expired COVID-era policies without any evidence that unsupervised teenagers with smartphones on school buses will opt for trigonometry over TikTok. The FCC has not performed any analyses, produced any survey data, or even required an accounting to determine whether the money already spent on equipping school buses with Wi-Fi has resulted in more students completing their school assignments or otherwise served the academic purposes for which the COVID-era funding was intended. Rather than conduct a careful analysis based on public comment of the efficacy of funding school bus Wi-Fi, the FCC's E-Rate program greenlights children's unsupervised Internet access while failing to address the well-documented and corrosive effects on minors of social media, online pornography, and cyber bullying. The FCC's proposal is unsupported by evidence that the existing program works and lacks appropriate guidelines to ensure that the E-Rate funds advance the interests of children, parents, teachers, and taxpayers.

In our February 2024 Perspectives from FSF Scholars, "FCC's School Bus Wi-Fi Subsidy Lacks Statutory Support," Free State Foundation President Randolph May and I addressed legal problems with the Commission's order that is now under review in Molak v. FCC.  

Maryland’s Broadband Spending Dashboard

The state of Maryland has recently made a big move to increase transparency regarding public broadband spending. The Maryland Office of Statewide Broadband has created a dashboard for Marylanders to track the number of projects and broadband grant amounts the state has funded. Additionally, the dashboard keeps track of what years the grants were given, which company received the grants, and what geographic area of Maryland the projects support, going back to 2019.

The dashboard features an interactive map of Maryland, a key tool that empowers users to zoom in and select specific projects based on their location, thereby accessing more detailed information. While these grants have been distributed across the state, it is evident that the more rural areas of western, northern, and eastern Maryland have required the most infrastructure investment.

The service providers with the largest total grant amounts are Comcast and Talkie, with $40 million; Choptank Electric, at $37 million; and Quantum, at $27 million. According to the dashboard, a total of $239 million has been invested through 178 projects since 2019, with the yearly cap being 60 in 2021.

This initiative is part of a comprehensive plan by Maryland, as articulated by the State Secretary of Housing and Human Development, with the ambitious aim of "connecting all Marylanders to broadband before 2030." The Broadband Hub serves as a tool for the public and the legislature to monitor the progress towards this goal. As of February 2024, 98% of Maryland has broadband access, and that includes at least a 25 Mbps download and 3 Mbps upload rate.

Another part of the plan is the Maryland Broadband Explorer, which, instead of tracking spending, tracks broadband access and quality throughout the state to show the areas with the greatest need and improvement. It does this by showing the total number of Broadband Service Providers (BSPs) per census block, showing that while most of the state has one, two, or even three, large chunks of the panhandle and Delmarva still have no BSPs.

By merging public investment with private competition, Maryland will likely provide all its residents broadband access by its goal date. Achieving this goal is even more critical than ever with the post-COVID increase in remote learning and remote work. Regardless of whether one supports public investment in broadband, this increase in spending transparency is an essential step in the right direction for Maryland's broadband support system.

FCC's Misleading Rehash of 2018 Fire Incident Doesn't Justify Title II

On Monday, April 8, FCC Chairwoman Jessica Rosenworcel is set to join the Santa Clara County Fire Chief in California for a media event to discuss the Commission's proposal to transform broadband Internet networks into public utilities. According to a media advisory, Chairwoman Rosenworcel "chose to travel to the Bay Area to highlight an incident involving the Santa Clara County Fire Department where their internet access was throttled in the midst of their public safety response to the largest fire on record in California history." 

But there is a problem with Chairwoman Rosenworcel's apparent attempt to turn that bygone matter into a media flash point for public utility regulation. The July 2018 "wildfire incident" involving the Santa Clara County Fire Department was not a "net neutrality" violation.

One of the major flaws of the Biden FCC's proposed Internet regulation plan is that there is no existing problem that would justify such heavy-handed government controls. All or nearly all broadband providers in the nation pledge, in legally enforceable terms of service, to not block or throttle their subscribers' Internet access. There is a lack of real-world examples of broadband providers engaged in discriminatory blocking or throttling. The July 2018 "wildfire incident" provides no such example and its occurrence certainly doesn't justify Title II reclassification of broadband services.

 

I wrote about the July 2018 "wildfire incident" back in an August 2018 FSF Blog post, "Attempt to Turn Usage-Based Pricing into Net Neutrality Issue Is Non-Starter." To briefly recap, the Santa Clara County Central Fire Protection District signed up for a lower-tiered mass-market retail broadband Internet service plan with a monthly so-called "data cap" that resulted in slower speeds when the cap was exceeded. Near the end of July 2018, while a massive fire was blazing, the Fire District experienced exceeded its service plan's data allotment. Although the broadband service provider had a policy of making exceptions for emergencies, a customer service employee did not execute that request and the Fire District experience slowed service for some time thereafter. The broadband provider later apologized for the mistake and changed their policy to prevent that sort of result from happening again.

Although supporters of public utility regulation almost immediately made noise about the 2018 wildfire incident, there was no underlying net neutrality violation. Even if the 2015 Title II Order had remained in force in 2018, the usage-based pricing plan that the Santa Clara County Central Fire District subscribed to would have been permissible. As I explained in my August 2018 blog post: 

Usage-based pricing with data allowances was affirmed under the now-repealed 2015 Obama FCC Title II Order. According to paragraph 122: "Because our no-throttling rule addresses instances in which a broadband provider targets particular content, applications, services, or non-harmful devices, it does not address a practice of slowing down an end user's connection to the Internet based on a choice made by the end user. For instance, a broadband provider may offer a data plan in which a subscriber receives a set amount of data at one speed tier and any remaining data at a lower tier."

Buried in footnote 13 of the legal brief challenging the 2017 Restoring Internet Freedom Order, Santa Clara County and other pro-regulatory advocates admit they are not attempting to argue that Verizon's usage-based pricing plan with the fire district would have violated the 2015 Title II Order. This makes the net neutrality theater act pretty obvious.

 

After an intermission, the theater act resumed last fall. Chairwoman Rosenworcel invoked the incident in her statement accompanying the FCC's September 2023 Notice of Proposed Rulemaking to reclassify broadband Internet access services under Title II. However, the Notice didn't mention it. (The Free State Foundation filed comments and reply comments in response to that Notice, recommending against Title II regulation.)

 

Now the Commission's April 2 draft order invokes the 2018 wildfire incident in seeming support for new agency rules. But the result is underwhelming. Paragraph 452 includes a brief summation of clashing views of public comments: 

Commenters reach differing conclusions regarding the significance of the 2018 Mendocino Complex Fire. Commenters who support reclassification point to the wildfire incident as an example demonstrating the need for the open Internet rules and for the Commission to have greater authority to examine and investigate such incidents, and ultimately, to prevent future harms from occurring. Without such rules, these commenters warn, BIAS providers will engage in conduct that could result in harm to public safety, and that voluntary commitments are insufficient to ensure public safety. Commenters who oppose reclassification contend that the wildfire incident is irrelevant to, and an unpersuasive example used in support of, reclassification and the open Internet rules, because “the data plan at issue was marketed to government users, and therefore not covered by the FCC’s 2015 rules, nor by the definition of BIAS contained in the NPRM” and that Verizon’s actions would not have violated the 2015 Open Internet Order.  In other words, they state that the type of data use plan that Verizon offered and that the Santa Clara fire department purchased did not violate the 2015 Open Internet Order. Opponents also argue that the Santa Clara fire department did not purchase a data plan that was appropriate for their needs.  

The paragraph next offers the Commission’s brief take on the matter: 

In our view the 2018 Mendocino Complex Wildfire incident demonstrates that given the high stakes at issue—the loss of life and property—reliance on the free market alone is insufficient in the area of public safety. 

For all the fuss over the 2018 wildfire incident, at the end of the day the draft order never deems the incident to be a violation of net neutrality principles or the no-throttling rule. Instead, the incident is again being used in a misleading way to kick up dust in support of the proposed regulation. 

 

Public safety is a primary function of government. But responsibility for public safety belongs primarily to agencies like the Department of Homeland Security – and not to the FCC. Congress never provided any clear statement of authority for the Commission to impose public utility regulation on broadband services for public safety purposes. The draft order faces a cliff because the Supreme Court's Major Questions Doctrine requires a clear statement of authority for the agency to undertake such a politically and economically significant action as imposing public utility regulation on broadband Internet access services. The Commission's attempt to rebrand Title II regulation as a public safety matter is an empty and likely doomed attempt to get around the agency's lack of authority problem. 

 

Moreover, there is a huge mismatch between public safety and Title II regulation of commercial mass-market retail broadband Internet access services offered principally to residences and small businesses. Law enforcement agencies and emergency responders rely substantially on enterprise or dedicated networks, including FirstNet. The Title II legacy telephone regulatory framework was designed for rate-regulating common carrier services, and it has almost nothing to do with public safety. There is no reason to think that Title II reclassification of broadband will improve public safety outcomes. 

FSF Scholars Warn Against the Title II Threat to Innovative 5G Network Slicing

On April 2, the Free State Foundation released a Perspectives from FSF Scholars by President Randolph May and Senior Fellow Andrew Long titled "The 'Network Slicing' Debate Exposes How Title II Will Kill Innovation." Their Perspectives paper provides a helpful descriptive overview of 5G mobile network slicing and how it can provide optimal service for different use cases, including broadband Internet access services, telemedicine, Internet-of-Things, and more. But as FSF President May and Mr. Long explain, the Commission's proposal to reclassify broadband Internet access services as a Title II "telecommunications service” under the Communications Act threatens to impede these breakthrough uses of next-generation broadband networks. Their paper concludes: "To encourage continued investment and innovation, the Commission should shelve its entire proposal to impose a public utility straitjacket on Internet providers and let technological advancements and marketplace competition do the job of enhancing consumer welfare."

FSF President May and Mr. Long's Perspectives paper is worthwhile reading on network slicing and the harm to innovation posed by Title II regulation. Also, an April 5 FedSoc Blog post by former NTIA Administrator John Kneuer, titled "Network Slicing and Net Neutrality" elaborates on these same matters and cites favorably to that paper. 

Music Revenue Report Should Spur Congress to Secure Copyrights Fully

On March 26, the Recording Industry Association of America (RIAA) released its "Year-End 2023 RIAA Revenue Statistics." On the positive side for music sound recording artists and copyright owners, RIAA's report reveals annual increases in U.S. recorded music market revenues. But the report's release also ought to remind Congress that it ought to secure broader legal recognition of music copyrights and promote creative and economic opportunities by passing the American Music Fairness Act – S.253 and H.R. 791.

According to RIAA's report, total revenues retail for the U.S. sound recording grew 8% to $17.1 at retail estimated value, up from $15.9 billion in 2023. Revenues from paid subscriptions to streaming music services grew 9% last year $11.2 billion, amounting to 78% of streaming revenues and almost two-thirds of total revenues. Paid subscriptions to on-demand music services totaled 96.8 million, constituting an annual growth rate of 5.7%

 

Although annual revenues from digital downloads dropped again in 2023 – slipping to $434.1 million compared to nearly $495 million in 2023 – revenues from sales of physical copies of sound recordings rose again last year. In 2013, vinyl record sales revenues rose to $1.4 billion, up 11% compared to the year before, marking the seventeenth consecutive year of vinyl sales increases and the second consecutive year in which vinyl unit sales have exceeded CD unit sales. Last year, CD sales revenues also rose 11% to $537 million.

 

These positive annual revenue totals and trends reflect the high value and growth potential of copyrighted music. Copyrighted property deserves legal protections and a market environment favorable to creative and economic flourishing. As Free State Foundation President Randolph May and I observed in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020), the American Founders believed that one of the key roles of government is to protect and promote the creation, acquisition, use, and value of private property. The U.S. Constitution's Article I, Section 8 Copyright Clause gives the federal government a direct charge to secure rights in creative works, declaring that Congress shall have power "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Congress should take action to promote creative and economic opportunity in the U.S. recorded music market. It should advance the American Music Fairness Act – S.253 and H.R. 791. 

The American Music Fairness Act would ensure equal legal treatment of different music distribution platforms and alleviate unfairness to copyrighted owners of recorded music who receive no compensation when their recorded songs are commercially by terrestrial AM/FM stations. Under current copyright law, terrestrial AM/FM radio stations have a special exemption from paying royalties to owners of copyrighted sound recordings when those stations play the music on the air. But S.253 and H.R. 791, would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do.  

 

Under existing international agreements, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. Passage of the American Music Fairness Act would open up those foreign royalty streams to U.S. copyright owners. Importantly, the legislation is sensitive to the limited financial resources of smaller commercial and non-profit stations by treating them to a low, flat royalty rate. 

 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings."

FSF Submits Comments to the FCC Opposing a So-called "Amnesty"

 

Today, Free State Foundation President Randolph May and Senior Fellow Andrew Long submitted comments to the FCC opposing a so-called "amnesty" window during which winners of auctions to award government subsidies from the Rural Digital Opportunity Fund could back out of their commitments to construct broadband infrastructure without meaningful consequence.

Here are key sentences from the top of the comments:

"Granting this request would further delay the connection of unserved households. It would unjustly favor certain auction participants – a privileged group that seemingly includes government-owned and government-affiliated networks already unduly advantaged by their government status – over others. And by creating a classic 'moral hazard,' it would encourage irresponsible behavior that threatens the efficacy of reverse auctions generally. The WCB therefore must deny this request.”