Thursday, September 28, 2017

It's Time to Confirm Ajit Pai

I just saw this piece in the Verge by Gigi Sohn, who served as counselor to former FCC Chairman Tom Wheeler. Ms. Sohn is urging people to “make their voices heard” to oppose FCC Chairman Ajit Pai’s confirmation by the Senate to a new term.
Even aside from the overheated rhetoric, the substance of Ms. Sohn’s arguments is wrong and misleading. A bit more on that score in a moment.
But first I’ll say this: I’ve known Gigi for many years, and, as she knows, I’ve considered her a friend even though we generally disagree on matters of communications law and policy. I’ve always believed, and still do, that differences in philosophical or policy perspectives shouldn’t stand in the way of reasoned discussion and debate – or of friendship.
That said, I’m disappointed that Ms. Sohn is opposing Mr. Pai’s confirmation. It is true, as Gigi says at the outset of her piece, that Mr. Pai is “smart,” “personable,” and “nice.” Those obviously are important qualities for a leader of a multimember agency which ought to aspire to operate on a collegial basis. No one doubts that Mr. Pai possesses those qualities – in spades. But, as importantly, there is widespread agreement that Mr. Pai, by virtue of his prior service on the Commission and on its staff, possesses vast knowledge and expertise regarding the substance of the issues that confront the FCC.
So, the real basis of Ms. Sohn’s objection to Mr. Pai’s confirmation to a new term is that his policy predilections differ in fundamental respects from hers and those of Tom Wheeler, the FCC chairman she served. Well, that’s to be expected in a new administration – and it is in no way a sufficient reason to oppose Mr. Pai’s confirmation. And it never has been. Indeed, I didn’t agree with many of Mr. Wheeler’s actions leading the FCC and knew before he took office that I wouldn’t – but I suspect he will recall that on several occasions, prior to his Senate confirmation, I defended him publicly when his fitness to serve was attacked.
Now, briefly, back to the substance. Mr. Pai has made clear that closing existing digital divides is a priority, and he understands that the existing universal service programs are important tools in achieving this objective. Ms. Sohn’s problem is that, at the same time, Mr. Pai wants to reform the programs so that, to the extent possible, the acknowledged waste, fraud, and abuse that exist are minimized. That must be done if these subsidy programs – currently funded by a nearly 20% tax assessed on all consumers’ telephone bills! –  are to maintain public support. Ms. Sohn should share that objective.
As for “media consolidation,” throughout her career, Ms. Sohn and her like-minded pro-regulatory colleagues have cried wolf about “massive media consolidation” even as media outlets have continued to proliferate. One notable example: They claimed the ill-fated AOL-Time Warner merger would forever dominate the media/Internet landscape. How off-base was that wolf-cry?
Let’s face it. We now live in an era of media abundance – with radio, TV, cable, newspapers, magazines, and, oh yes, the Internet. In other words, digital media nirvana for those who want access to hundreds, nay, thousands, of different views and perspectives. I’ve been involved in communications law and policy for four decades, and I know that when Ms. Sohn raises the red flag of media consolidation, it’s simply a ruse to justify advocating policies that would give government more control over the media.
I don’t have any doubt that Mr. Pai will faithfully enforce any media ownership limits that Congress has put in place or will enact. But I’m glad that, unlike Mr. Pai’s predecessor for whom Ms. Sohn worked, Mr. Pai is unlikely to use the boogeyman of supposed “media consolidation” as an excuse to adopt new regulatory mandates that, in effect, give government more control over the programming content and editorial decisions of media outlets. That is the wrong way to go in an age of media abundance.
Finally, the Internet. Truth be told, the real gravamen of Ms. Sohn’s objection to Mr. Pai’s confirmation is opposition to his proposal to consider repealing the current public utility-style regulatory regime put in place by Mr. Wheeler, with Ms. Sohn’s assistance. This gravamen is gravely wrong.
As Mr. Pai explained in his lengthy dissent to the Wheeler Commission’s decision to impose public utility regulation on Internet service providers, there are serious questions regarding the Commission’s legal authority in this regard. It is entirely proper for the Commission to reexamine those legal issues, as Mr. Pai has proposed to do.
Moreover, aside from questions relating to the Commission’s authority, there are good reasons to reconsider whether the imposition of public utility-style regulation on Internet service providers is unsound as a matter of policy. Up until Mr. Wheeler led the Commission to embark on a radically different course, there was a bipartisan consensus that Internet providers should not be regulated under the same “common carrier” regulations as old Ma Bell, which, after all, operated in a monopolistic environment.
Back in 1999, at the dawn of the modern Internet Age, then-FCC Chairman William Kennard – a Democrat appointed by President Clinton –  declared, in turning away pleas from pro-regulatory interests, that it would be wrong to “just pick up this whole morass of [Title II telephone] regulation and dump it wholesale on the [broadband] cable pipe. That is not good for America." Of course, almost twenty years later, in today’s far more dynamic, competitive digital broadband Internet market environment, imposing “telephone world” regulation, as Mr. Kennard then put it, on Internet service providers is certainly “not good for America.” Already there is persuasive evidence, for example, that the Title II public utility-like regulatory regime imposed by Mr. Pai’s predecessor has depressed investment in broadband infrastructure. That is not good for America.
In any event, surely the fact that Mr. Pai has initiated a rulemaking proceeding to reexamine public utility regulation of Internet service providers is not a reason to mount a political-style campaign against his Senate confirmation.
Gigi Sohn is entitled, as she says, to “make her voice heard.” That’s true. But it is true that Ajit Pai deserves prompt confirmation to another term. And not only because, as Ms. Sohn acknowledges, he is “nice,” “personable,” and “smart.” The agency needs to turn away from the doggedly pro-regulatory disposition of Mr. Pai’s predecessor toward a free market and rule of law-oriented disposition suited to today’s dynamic digital communications marketplace. Mr. Pai surely is the right person to lead the FCC at this time.

Wednesday, September 27, 2017

FCC Paves the Way for More Satellite Broadband Deployment

Yesterday, the FCC adopted a Report and Order to modernize rules facilitating deployment of next-generation satellite systems. In a June 2017 Perspectives from FSF Scholars entitled “The Problem with Municipal Broadband and Solutions for Promoting Private Investment,” Ted Bolema and I discussed how satellite broadband is an emerging technology that could be a viable solution to closing the gap of the digital divide. Satellite broadband is accessible to 99.1% of Americans at 10Mbps down and 1 Mbps up, but innovation has enabled consumers to access speeds of 25 Mbps down and 3 Mbps up. By simplifying regulatory approval processes and relaxing requirements for antenna pointing and frequency-band usage, this Report and Order will allow satellite broadband providers to experiment with consumer-friendly innovations and deliver high-speed broadband access to rural Americans.

Monday, September 25, 2017

FCC Proposed Wireless Report Should Acknowledge the Market's Competitiveness

At its September 26 public meeting, the FCC is scheduled to consider for approval its Twentieth Wireless Competition Report. Data cited in the draft report solidly demonstrate the effectively competitive state of the commercial mobile services market. After several years of avoidance, the Commission is finally set to reach the commonsense conclusion that there is effective competition in the market for commercial mobile services.
The competitiveness of the commercial mobile services market bolsters the case for the Commission to adopt its Restoring Internet Freedom proposal to remove its Title II public utility regulation of broadband Internet access services. The Commission should restore the light-touch regulatory environment in which mobile broadband services have thrived and which best matches today's competitive conditions.
Section 332(c) of the Communications Act provides that the Commission shall provide an analysis of "whether or not there is effective competition" in the commercial mobile services market. The Commission has dodged the congressional directive for the last six reports by preparing analyses devoid of any effective competition determinations. Much to the Commission's credit, this time around it appears the Wireless Competition Report will fulfill Section 332(c)'s mandate with a positive determination.
Several key data points contained in the Commission's draft report offer clear and convincing evidence to support a determination that the commercial mobile services market is effectively competitive:
  • Consumer connections and data consumption have risen. Wireless connections rose from 378 million at the end of 2015 to 396 million at the end of 2016. At the end of 2016, monthly data usage per smartphone subscriber reached an average of 3.9 GB, up 39% from year-end 2015.
  • Prices have decreased. In 2016, Average Revenue per User (ARPU) fell 7%, from $44.65 to $41.50. Between 2012 and 2016, while the overall consumer price index (CPI) rose 4.5%, the annual Wireless Telephone Services CIP decreased 8%.
  • Consumer access to advanced network capabilities has increased. At the start of 2017, 92% of the U.S. population had access to four or more service providers offering 3G technology or better, up from 82% at the start of 2014. And 89% had access to at least four service providers offering 4G LTE technology, up from 41% in mid-2015. Between 2013 and 2016, nearly 4,000 new cell sites were added. Further, service providers increasingly have deployed small cells and DAS sites to improve coverage and prepare for 5G network deployments. Mobile service providers have also begun trials for 5G networks.
  • Speeds have increased. Mean LTE download speeds increased to 23.5 Mbps in the first half of 2017, up from 14.4 Mbps in the first half of 2014. Over that same span, median LTE download speeds increased to 15.5 Mbps, up from 11.0 Mbps.
  • Increased availability of pro-consumer pricing options. In 2016, "unlimited" data plans became widely available to consumers once again. Also, in 2016 and early 2017 free data plans became much more widely available. Free data plans exempt certain types of content, especially streaming video, from subscribers' monthly data allowances. Meanwhile, consumers enjoy choice among postpaid as well as prepaid plans. Prepaid offerings include Cricket and MetroPCS brands offered by national mobile broadband ISPs as well as popular offerings by mobile virtual network operators (MVNOs) such as TracFone.

In addition to being proof positive of the effectively competitive state of the commercial mobile services market, the foregoing data points undermine the "virtuous cycle" or "gatekeeper" rationale for imposing public utility regulation on mobile broadband Internet access services. The Title II Order (2015) posited that broadband Internet access service providers (ISPs) control the point of Internet access between edge content providers and consumers and thereby possess the incentive and the ability to harm consumers by blocking content or discriminating against content providers. Yet, as explained in the Free State Foundation's public comments in the Restoring Internet Freedom proceeding, the plausibility of the virtuous cycle theory depends on broadband ISPs possessing market power. For its part, the Title II Order failed to provide any evidence that broadband ISPs possessed such power. Now draft report data regarding the availability of choices among mobile broadband service providers – including 89% of the population having access to at least four service providers offering LTE – highlights once more the non-existence of broadband ISP market power and the implausibility of the virtuous cycle theory for public utility regulation.
Additionally, the draft report’s observation that "service providers have offered various promotions designed to partially or fully compensate consumers' switching costs," contradicts the Title II Order's claim that high "switching costs" create gatekeeper power. Consistent with the draft report, the Eighteenth and Nineteenth Wireless Competition Reports recognized that trends have reduced or eliminated switching costs. Providers have phased out term contracts and offer early termination fee buyouts to attract new customers.  
Unfortunately, the Title II Order has negatively impacted mobile infrastructure investment. Using a baseline of actual capital investment from 2003 to 2014, the Free State Foundation's Michael J. Horney found broadband investment decreased $5.6 billion in 2015 and 2016 as a result of the Title II Order. Consistent with those findings, data cited in the draft report indicate that mobile service providers invested an incremental $28.0 billion in 2016, a decline of 9% from the $30.9 billion invested in 2015. Further, "AT&T, Sprint, T-Mobile, and Verizon Wireless spent a combined $27.5 billion in 2016, $30.3 billion in 2015, and $31.2 billion in 2014." Capital investment by those four major providers account for nearly 100% of industry investment.
Moreover, the regulatory uncertainty posed by the Commission's investigation into free data plans based on its vague general conduct standard – adopted in the Title II Order – had the negative consequence of curtailing innovative pro-consumer offerings. Free data plans offer value-conscious consumers, especially including low-income consumers, unlimited streaming of video or other popular apps that do not count against their monthly data allowances. To its credit, under Chairman Ajit Pai's leadership, in early 2017 the Commission closed its inquiry and withdrew its misguided inquiry report on free data plans. As indicated in the draft wireless competition report, free data plan options are now increasingly available to consumers. Competitive choice among mobile broadband providers and pricing options available to consumers constitute further reasons why the Commission ought to restore a pro-innovation environment in which free data plans and other innovative offerings are readily available sources of value for consumers.
The Commission's proposed adoption of the draft Twentieth Wireless Competition Report – including its determination that there is effective competition in the market for commercial mobile services – is backed by a firm set of data points. After several years of ducking such determinations, the Commission's willingness to face up to the evidence of mobile wireless competition is surely welcome. Recognition of the effectively competitive state of the commercial mobile services market should lead the Commission to restoring a light-touch environment for wireless services. This result can be accomplished by adopting its Restoring Internet Freedom proposal and removing Title II public utility regulation of broadband Internet access services.

Wednesday, September 20, 2017

California Privacy Act Fails to Pass

Last week, the “California Privacy Act,” modeled after the FCC’s Broadband Privacy Order, failed to make it to the floor before California’s 2017 legislative session ended. This is not the first time a state tried to pass problematic privacy legislation. The Maryland State Senate proposed a similar bill in April 2017 and it also failed to pass. As I stated in an April 2017 blog, state-level broadband privacy laws raise many practical questions about enforcement efforts. Ultimately, privacy jurisdiction should return to the FTC, where privacy matters can be adjudicated on a case-by-case basis. 

Tuesday, September 19, 2017

Maryland Joins FirstNet and AT&T for Public Safety Network

On September 18, 2017, Maryland Governor Larry Hogan announced that the state will partner with FirstNet and AT&T to deliver a wireless broadband network to Maryland's public safety community, creating faster, more informed and better coordinated responses.  During the announcement Governor Hogan said: 

Keeping Marylanders safe is our top priority, and our first responders need to be equipped with every tool possible to protect our citizens. By adopting this plan, our first responders will now have the ability to efficiently and effectively work together not just within the state, but across the region and at the national level. This innovative initiative will also spur investment into Maryland's economy, helping to create jobs and enhance mobile broadband coverage in rural parts of the state.

This partnership will transform the way Maryland's fire, police, emergency medical services, and other public safety personnel communicate and share information. The enhanced wireless broadband coverage will reduce response times, mitigate damage, and save lives.

Chairman Pai: Additional Spectrum Will Enable Quicker Disaster Response Efforts

Last week, FCC Chairman Ajit Pai issued a keynote address at the first-ever Mobile World Congress Americans in San Francisco. Chairman Pai discussed the important role the FCC plays in disaster response efforts, specifically monitoring the status of communications networks in affected areas. Chairman Pai said that the damage caused by Hurricanes Harvey and Irma "would have been a lot worse if it weren't for wireless communications."

Although wireless communications networks during these two hurricanes were much more resilient than in some previous disasters, Chairman Pai says that unleashing licensed and unlicensed spectrum across low-, mid-, and high-bands will enable first responders to quickly assist with recovery and restoration efforts. Additional spectrum will help deploy 5G wireless technology which will create three million jobs and $500 in economic activity. But most importantly, when horrible disasters occur, 5G technology and robust wireless networks will enable communication between first responders and affected residents.

Thank you to the brave first responders during these disasters!

Monday, September 18, 2017

A Natural Rights Perspective of the Constitution

Yesterday, September 17, 2017, was Constitution Day, commemorating the 230th anniversary of the formation and signing of the U.S. Constitution. For a good source of information regarding the natural rights perspective that influenced the Founding Fathers during the formation of the Constitution, please read "The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective" by Free State Foundation President Randolph May and Senior Fellow Seth Cooper.

Friday, September 15, 2017

A Day to Remember Our Constitution's Protections for IP Rights

On Constitution Day – September 17 – we celebrate the framers signing of America’s written fundamental law. Among its sections and clauses, the Constitution’s provision for intellectual property (IP) rights deserves renewed appreciation by the public and support by Congress. Stronger security for IP rights enhances our economic climate and fulfills an important constitutional obligation.
Copyrighted works and patented inventions increasingly are vital to our nation’s prosperity in today’s digital Internet-connected global economy. A report by the U.S. Department of Commerce found that value added to our economy by copyright- and patent-intensive industries totaled approximately $1.8 trillion in 2014, amounting to about 10.6% of the U.S. gross domestic product. Also, jobs supplied by copyright-intensive industries totaled 5.6 million in 2014, while patent-intensive industries provided 3.9 million jobs.
The vibrant growth in IP’s value to our economy has been driven by digital technology and Internet connectivity. However, modern means of production and distribution also render IP vulnerable to online theft and infringement. Although often overlooked, the Constitution entrusts Congress with the responsibility to meet such challenges and ensure the security of copyrights and patent rights. The conceptual and historical backdrop of that responsibility are examined in the book, The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective, that I co-authored with Free State Foundation President Randolph May.

Logically, IP rights reflect the natural rights principle that a person has a right to the proceeds of his or her own labors. Those proceeds are a person’s private property, deserving protection by equal laws. Historically, this natural rights and property rights understanding of copyrights and patents prevailed in the newly independent American states. By the time the framers met for the Philadelphia Constitutional Convention in 1787, twelve of the thirteen former colonies had adopted state copyright laws, and a few provided patent protections for inventors.
James Madison concluded that the lack of uniformity of among state copyright laws was a vice that needed to be remedied. Other framers in Philadelphia agreed. The Constitution’s Article I, Section 8, Clause 8 — the intellectual property (IP) clause — grants Congress the 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.” As Madison observed in Federalist No. 43, conferring on Congress the power to protect copyrights and patent rights would be highly useful to individual authors and inventors and also serve the public good.

The First Congress to convene under the Constitution promptly exercised its constitutional power to secure copyrights and patent rights. In addition to establishing a system of taxes and revenues, setting up the federal judiciary, selecting the permanent capital site, and drafting the Bill of Rights, the First Congress passed the Copyright and Patent Acts of 1790. Both acts were signed by President George Washington. Those landmark laws set IP on a free market footing by expressly recognizing authors’ and inventors’ exclusive rights to contract for the sale or licensed use of their writings and inventions. The Copyright and Patent Acts of 1790 also provided civil rights of action for creators and inventors whose protected works or inventions were infringed.

In the nearly two hundred fifty years that have followed, Congress has intermittently exercised its constitutional power to further secure IP rights. Drawing upon natural rights and property rights principles, statesmen such as Daniel Webster and Henry Clay helped pass the first substantial revisions of the Copyright and Patent Acts in the 1830s. Also cognizant of natural rights and property rights principles, in 1891 the Centennial Congress secured copyright protection for foreign authors in order to ensure American authors were treated equitably overseas. In 1897, Congress made willful infringement of certain copyrighted works a crime subject to federal prosecution. And through subsequent legislation by Congress, the scope of copyright protections has expanded beyond books and engravings to include unauthorized reproductions or public performances of motion pictures and digital sound recordings. Likewise, the scope of patent protections now includes inventive designs as well as manufacturing and other production processes that embody the latest digital technologies.
Bearing those constitutional, historical, and economic considerations in mind, there is work ahead for Congress that is essential to securing American IP rights in the Digital Age:

  • The Copyright Office’s capabilities are outdated. Only limited online searching for copyright registration records is available and online searching for recorded copyright title transfer is unavailable. Congress should pass legislation to modernize and restructure the Copyright Office. It should give the Register of Copyrights the independence necessary to make technology upgrades and to establish a comprehensive searchable online database of copyright records. Upgrading the Office’s capabilities will reduce parties’ compliance costs and enhance the economic value of copyrighted works.
  • Steep losses to the U.S. economy caused by overseas piracy of IP need to be curtailed. A 2017 report by the bipartisan IP Commission calculated that counterfeit goods, pirated software, and trade secret theft cost our economy between $225 and $600 billion annually. Congress should urge the Trump Administration to include strong IP rights enforcement provisions in foreign trade negotiations, and proposed treaties that contain such provisions should be ratified and supported by implementing legislation.

As we reflect on our Constitution’s origin as well as its guarantees for representative government and individual freedoms, we should not forget the wisdom of the framers in including the protection of copyrights and patent rights in our nation’s fundamental law. Congress should vigorously pursue its constitutional responsibility to secure IP rights and put our nation’s economy on the strongest possible footing for the Digital Age.