Friday, May 24, 2019

Memorial Day 2019

This Memorial Day message marks my thirteenth consecutive one – and it's no coincidence that the Free State Foundation is now in its thirteenth year. I suppose that's another way of saying, as I said last year, that this tradition continues to exert its pull on me as I ponder the true meaning of Memorial Day.

In little more than a week – on June 6 – America will commemorate the 75th anniversary of D-Day, the day when some 156,000 American, British, and Canadian forces landed on five beaches along a 50-mile stretch of the heavily fortified coast of France’s Normandy region. The invasion, one of the largest amphibious military assaults in history, was the beginning of the end of World War II. In April 1945, Germany was defeated and the war in Europe was over.
Here is Supreme Allied Commander General Dwight David Eisenhower's message upon the commencement of the invasion:

"Soldiers, Sailors and Airmen of the Allied Expeditionary Force: You are about to embark upon the Great Crusade, toward which we have striven these many months. The eyes of the world are upon you. The hope and prayers of liberty-loving people everywhere march with you.

Your task will not be an easy one. Your enemy is well trained, well equipped and battle-hardened. He will fight savagely. But this is the year 1944! The tide has turned! The free men of the world are marching together to victory!

I have full confidence in your courage, devotion to duty and skill in battle. We will accept nothing less than full victory!

Good luck! And let us all beseech the blessing of Almighty God upon this great and noble undertaking."

About 2500 Americans died in the invasion on June 6 alone.

During World War II, the United States lost over 400,000 soldiers, and, of course, many thousands more men and women suffered grievous injuries.

We shouldn't need "special" anniversaries to recall – and to embed deep in our common memory – all those American soldiers who have given their lives defending freedom and liberty here at home and abroad.

In his Farewell Address, speaking of D-Day, Ronald Reagan said this: "If we forget what we did, we won't know who we are. I am warning of an eradication of that - of the American memory that could result, ultimately, in an erosion of the American spirit."

So, on this Memorial Day of this 75th anniversary of D-Day, all Americans, regardless of race, creed, sex, or political affiliation, should pause to remember those who paid the ultimate price to preserve our freedom to speak freely and pray – or not – as we wish.

And, on this Memorial Day, if we do remember, perhaps we will be more likely to appreciate, even embrace, those ideals that we share in common as Americans and that should bind us together. And be less likely to cast stones on the day after.

As Cicero put it over two thousand years ago: “The life of the dead is placed in the memory of the living.”

I wish you and your family the best for a safe, happy, and meaningful Memorial Day!

PS – My past Memorial Day messages are here: 2018, 2017, 2016, 2015, 2014, 2013, 2012, 2011, 2010, 2009, 2008, 2007

Thursday, May 16, 2019

Ericsson Report Touts Consumer Realities About the 5G

Ericsson has released a report titled "5G Consumer Potential: Busting the Myths Around the Value of 5G for Consumers." Based on research that included over 35,000 online interviews worldwide, 6 focus groups, and 22 expert interviews, the report counters myths about 5G mobile network technologies with information indicating strong consumer awareness, interest, and expectations regarding 5G performance capabilities, future uses, and value. 

Tuesday, May 14, 2019

Jim Tozzi and "Regulation of Social Media"

Jim Tozzi, one of the nation's foremost experts on regulation, and a "founder" of the notion of centralized executive branch regulatory review, has started a new site to track developments relating to regulation of social media. His new page is here.

This is part of Jim's long-standing efforts at the Center for Regulatory Effectiveness to track key developments in the administrative state and to foster regulatory reform.

As I say, Jim is one of the "founders" of the modern regulatory reform movement, so whatever he is doing at any time bears watching - and certainly, now, no one denies that potential regulation of social media bear watching.

FCC to Hold Summit on Implementation of anti-Robocall and anti-Spoofing Tech

 On July 11, FCC Chairman Ajit Pai will convene a summit on the voice services industry's implementation of SHAKEN/STIR, a new technology designed to authenticate caller ID and so prevent illegal robocalls and spoofed caller ID calls. Information about the summit is provided in the FCC's Public Notice and press release.

Friday, May 10, 2019

David Redl: A Dedicated Public Servant

Like many in Washington and elsewhere, I was caught by surprise by David Redl's resignation yesterday from his position as Administrator of the National Telecommunications and Information Administration. I am very sorry to see him go. David is a long-time dedicated public servant, with extensive experience and expertise in the communications law and policy field.

From where I sit, David did an excellent job as NTIA Administrator. One of his jobs was to "manage" the government's use of its spectrum. Especially now, with ever-increasing demands for spectrum by the private sector in connection with the deployment of 5G, and competing demands from government users, his job was not an easy one. But David did not seek out easy jobs, but rather ones in which he could make a difference.

The nation owes him a debt of gratitude.

And, speaking of gratitude, I was personally grateful that David delivered keynote addresses at the Free State Foundation's last two annual telecom policy conferences. You can find his keynote addresses for the 2019 conference here and for the 2018 conference here.

A quick perusal of either, or both, will reveal the important work in which David was engaged, and the relish with which approached serving the country.  

Thursday, May 09, 2019

Considering Sprint's Decline and the T-Mobile/Sprint Merger

Did you see Sprint's latest financial reports? Here is the Wall Street Journal's May 7 story, "Sprint Reports Steepest Decline of Cellphone Customers in Years," which contains the gory details.

In short, Sprint lost far more postpaid customers than anticipated. As the WSJ lead put it: "Sprint lost 189,000 of its most lucrative phone connections in the first three months of the year, the steepest such decline since at least 2015." The net loss attributable to Sprint was $2.17 billion for the quarter. You can peruse the entire report for more facts and figures.

I'm willing to stipulate, of course, that in an ideal world – or more to the point here, in an ideal market – the existence of more viable competitors is preferable to the existence of fewer viable competitors. I understand that.

But, unlike the proverbial wheat market used to explain supply and demand in an Econ 101 course, the telecommunication marketplace, of which wireless is a segment, is not a textbook teaching ideal. It is a real-world marketplace with a market structure that necessarily is influenced by – if not dictated by – the tremendous investment and financial resources required to build-out and expand ubiquitous network facilities.

So, Sprint's ongoing financial difficulties have real-world financial and marketplace implications. Sprint's chief executive said, in the aftermath of the latest earnings report, that absent approval of the T-Mobile/Sprint merger, Sprint may have to narrow its coverage.

I take no pleasure in the travails of any person – or any company.

Nevertheless, it would be blinking reality for the Department of Justice and the FCC not to take account of Sprint's financial difficulties in the context of considering the T-Mobile/Sprint merger. In initial comments filed in August 2018 in the FCC's proceeding to review the proposed merger, I (along with my Free State Foundation colleague, Seth Cooper) said this: "It appears unlikely that T-Mobile and Sprint separately would have the capital resources necessary to invest in and timely deploy nationwide 5G networks that could compete effectively with AT&T and Verizon."

And in the September 2018 reply comments this: "Sprint’s recent financial history and analysts’ projections reveal that a standalone Sprint would likely be less competitive and perhaps not even viable in the 5G era."

Sprint's financial condition hasn't improved since those FCC comments were filed. Nor have its prospects as a sustainable wireless competitor in the broadband marketplace.

With all the focus, rightly, on enhancing the U.S.'s prospects for 5G leadership, and aside from all the other reasons, it would be foolish for U.S. authorities to rely on formulaic shibboleths, such as "no 4 to 3 mergers," when the sustainability of one of the four increasingly is in doubt.

Wednesday, May 08, 2019

FCC Commissioner O'Rielly: Government Wholesale 5G Network Would Be 'Preposterous'

FCC Commissioner Michael O'Rielly has been an articulate advocate in explaining why a government-sponsored 5G network doesn't make sense. The claim by those pushing such a notion seems to be that the government network would make available capacity on a "wholesale" basis to private networks.

In his just-released blog, "Substantive Objections to a Government 5G Wholesale Network," Commissioner O'Rielly explains, once again, why in his view, "the entire effort is jam-packed with insurmountable problems."

That's my view too.

If you haven't already read Commissioner O'Rielly's blog, it's worthwhile doing so.

Tuesday, May 07, 2019

Regional Sports Networks, the DOJ, and the First Amendment

Sinclair Broadcasting Group has agreed to buy 21 regional sports networks and Fox College Sports from Disney.
As predictably as a proverbial knee-jerk, some competitors in the video marketplace quickly announced their opposition to the deal. Matt Polka, CEO of America's Communications Association, a trade group representing smaller cable operators and telecommunications providers, has already called on the Department of Justice to reject the transaction.
I'll say right up front that I have questions regarding whether the DOJ's Antitrust Division, at least when it comes to the communications, information services, and video markets, appreciates the extent to which ongoing transformations and convergences are altering the competitive landscape so that traditional legacy product and market definitions no longer hold.

I certainly don't doubt that those at the Antitrust Division are acting in good faith. But I hope the Department will not lightly dismiss the judicial rebuke it received when U. S. District Court Judge Richard Leon refused its request to block the AT&T/Time Warner merger. The trial court's decision, affirmed by the D.C. Circuit's recent opinion in United States v. AT&T, Inc., repeatedly faulted DOJ for refusing to credit the "real-world evidence" of the "tectonic" changes occurring in the video marketplace. Foremost among these changes is the quick rise of major online video streaming services like those offered by Netflix, Amazon, Hulu, and the like. And the court also took into account the extent to which digital web giants like Google and Facebook increasingly are cutting into advertising revenues heretofore garnered by traditional video distributors such as cable operators and broadcasters.
Regarding a current FCC proceeding to determine whether, pursuant to Section 623 of the Communications Act, "effective competition" exists in particular local video markets so as to relieve Charter from rate regulation, just last week I said this in "The Metaphysics of Video Competition":
"This one 'effective competition' determination proceeding demonstrates yet again why Congress needs to update the Communications Act. Whatever Congress may have been thinking when it adopted the "effective competition" provision in 1992, it certainly didn’t have in mind today's myriad – and still proliferating – Internet video streaming services. I need not name them all here or say more here about their competitive impact."
I understand that the FCC, in the "effective competition" proceeding, is acting in the context of the Communications Act's provisions which, aside from the outcome of any particular proceeding, are in need of updating when it comes to regulations applicable to the video marketplace. That's why I said:
"A good place at least to start considering an update of the Communications Act video provisions is Rep. Steve Scalise's deregulatory 'Next Generation Television Marketplace Act,' first introduced in 2011. The bill made sense then and it makes even more sense now, when the video marketplace is much more competitive today than it was eight years ago."
But now back to the Sinclair-Disney transaction and Sinclair's acquisition of the regional sports networks. I hope DOJ will be cognizant of the extent to which consumers already have – and increasingly so – choices available with regard to both video distributors and video programs.
It's no surprise that there will be claims of potential foreclosure, or diminishment of competition, by those seeking to prevent consummation of a merger or acquisition of assets, or at least to have conditions imposed. That's as sure a bet as wagering that the sun will rise in the East tomorrow. Most often these claims come from competitors, or those purporting to represent consumers, who forget that the antitrust laws are intended to enhance consumer welfare, not protect competitors.
One final note: It is likely that the Antitrust Division will be importuned to interfere with the Sinclair-Disney transaction based on the claim that the regional sports network programming somehow is "must have" programming – presumably meaning, in this age of media abundance, that a platform that doesn't offer the very same sports programming at the very same time, and in the very same format, ipso facto is rendered non-competitive. No matter that there is more sports programming available on more platforms than ever before.
In the context of commenting over the years on the FCC's program access regulations, in essence a form of compelled speech that in and of themselves raise First Amendment concerns, I have said that FCC enforcement actions relying on agency-defined "must-have" categories of programming, such as sports networks, amount to content-based speech controls.
Were the Department of Justice to base its actions on judgments regarding whether particular programming is or is not "must have" content, the First Amendment concerns are not materially different than they are cross-town when the FCC engages in such content-based determinations. Absent a video marketplace in which consumers' choices of viewing platforms and programming are demonstrably shrinking, rather than expanding, I'd prefer to leave the choice of what programs consumers "must have" to the marketplace, rather than the government.
Such an approach would be better for consumers – and for respecting the First Amendment as well.

Thursday, May 02, 2019

The FCC Should Curb Cap-Busting Fees Levied on Cable Operators

The FCC is considering a proposal to clarify the legal limits on the amount of local franchising fees that can be charged to cable operators. Some local governments have evaded the limits by charging fees for access to public rights-of-way on top of the five percent franchise fee they are permitted to charge cable operators.

The Commission should stop such wrongful duplication of fees – which ultimately redound to the detriment of residential and business consumers in the locality.

The Commission should declare that rights-of-way fees are within the scope of the Cable Act's five percent cap on franchising fees that may be imposed on cable operators. This is important because cable operators are also broadband Internet service providers. Limiting excessive cable franchise fees will free up financial resources for investment in deployment of next-generation networks. 

Section 621 of the Cable Act recognizes state or local franchising authorities (LFAs) may charge cable operators a franchising fee for constructing and operating a cable system. But Section 621 also includes limits that state and LFAs must follow. The statute caps the franchising fee at five percent of the cable operator's annual gross revenue. (Prior blog posts as well as the Free State Foundation's reply comments in the cable LFA reform proceeding explain why the Commission should adopt its proposed "mixed-use" and "in-kind" contribution rules.) 

In addition to adopting its proposed rules clarifying Section 621, the Commission should ensure that LFAs do not stack public rights-of-way fees on top of five percent franchising fees, thereby evading the statutory cap. Inherent in the concept of cable franchises is the authority to access public rights-of-way for distributing video content to subscribers within franchise territories. This is evident from the text of Section 621(a)(2): "Any franchise shall be construed to authorize the construction of a cable system over public rights-of-way, and through easements, which is within the area to be served by the cable system and which have been dedicated for compatible uses" (emphasis added). 

To be sure, states and local governments possess authority to charge fees or taxes on service providers that access public rights-of-ways. And the Cable Act Section 622(g)(2)(A) excludes from the definition of a "franchise fee" "any tax, fee, or assessment of general applicability." But the Cable Act recognizes broad franchising authority and the exceptions should be construed narrowly – particularly when it would avoid an absurd result such as duplications of fees. There is an overlap between cable franchise fees and public rights-of-way fees. An April 19 ex parte filing by NCTA, for example, cites California's simultaneous taxing of cable operators right to access public rights-of-way and imposing of five percent franchise fees for that same right. States and LFAs ought to be prohibited from imposing two or more sets of fees, however they denominate the ways, as a means of evading the franchise fee limits set by Congress. 

The Commission should declare that fees or taxes for public rights-of-way access by cable operators must be included within the scope of the total franchise fee amount – and therefore subject to the five percent statutory cap. This commonsense interpretation of Section 621 would prevent the statutory cap on franchise fees from being undermined. 

The Commission previously has highlighted its actions "reducing regulatory barriers to the deployment of wireline and wireless infrastructure." Fees that exceed the statutory cap constitute a regulatory barrier to broadband infrastructure deployment. If the Commission curbs duplicate fee charges, this will allow cable operators to use the freed-up funds for deployment of next-generation broadband networks. 

Small Claims Court for Copyright

Rep. Doug Collins, Ranking Member of the House Judiciary Committee, and Rep. Hakeem Jeffries, Chairman of the House Democratic Caucus, introduced the Copyright Alternative in Small-Claims Enforcement (CASE) Act. This bipartisan legislation establishes the Copyright Claims Board at the Copyright Office to make it easier and less expensive for independent creators, such as photographers, songwriters and graphic artists, to better defend their intellectual property from theft.

Read more about the bill here.

Monday, April 29, 2019

USTR Issues Two Important IP Reports

Piracy of intellectual property (IP) remains a major global problem, and it is important that the United States, along with governments around the world, maintain – and in many cases – strengthen efforts to combat such illegal conduct.

To that end, two reports released by the United States Trade Representative in connection with #WorldIPDay on April 26 contribute to an understanding of the scale of the piracy problem and the need to take measures to combat it. pertaining to global intellectual property rights in advance of World IP Day, which is celebrated on April 26. The USTR’s 2018 "Out-of-Cycle Review of Notorious Markets Report" identifies markets around the world that engage in and facilitate copyright piracy. And USTR's "Special 301 Report" is an annual review of the state of IP rights protection and enforcement globally.

Pasted in below is the statement of MPAA Chairman and CEO Charles Rivkin regarding the release of the two USTR reports:

“The film and television industry is a community of millions of creators and innovators whose daily work in the business and art of storytelling entertains and inspires audiences worldwide. In the United States alone, the industry employs 2.6 million Americans and contributes hundreds of thousands of dollars into local economies every day. The industry also generates a trade surplus with every major economy across the globe, producing a $10.3 billion aggregate surplus. Ahead of World IP Day tomorrow, the USTR rightfully shines a light on the foreign threats to our creative economy, specifically around online content theft.

“The Notorious Markets report makes it clear how criminals are profiting on the backs of American workers in our creative economy. In addition, the Special 301 report underscores this Administration’s commitment to protecting those workers’ intellectual property from those threats. 

“Today’s reports highlight the global nature of piracy and demonstrate that all governments need to do their part in protecting intellectual property, fostering legitimate commerce, and protecting creators. We applaud Ambassador Lighthizer and the USTR staff for doing their part in recognizing some of the most critical challenges and committing to address them. We look forward to continuing our work with them to protect intellectual property rights and grow our creative economy.”

Policymakers should be committed to protecting IP rights every day, of course. But surely World IP Day should be an occasion to recommit to that end."

The Metaphysics of Video Competition

Do you want another example – aside from possibly resolving the long-running "net neutrality" controversy – of why the Communications Act needs to be updated, if not completely overhauled?

Okay, I've got one for you.

If you're a regular reader of this space, or even a halfway regular one, you know that Section 623 of the Communications Act exempts cable operators from rate regulation by state or local franchise authorities (LFAs) if the cable system is subject to "effective competition." What's more, the "no regulation" provision is contained in a subsection titled "Preference for Competition." I bet you can't find very many other "Preference for Competition" subtitles in the U.S. Code.

Section 623(l) contains definitions of "effective competition" that the Federal Communications Commission must apply in making a finding as to whether effective competition exists. In 2015, the Commission established a national presumption in favor of an "effective competition" finding, reversing the then-existing presumption against such a finding. I didn't agree with many of the FCC's actions under then-Chairman Tom Wheeler's leadership, but I had no hesitation commending this one, and often.

The FCC's decision still permitted franchising authorities to file certifications claiming to rebut that presumption. Which brings us to the point I wish to make regarding competition in the video marketplace.

In September 2018, Charter Communications, Inc., filed a felicitously-styled "Petition for Determination of Effective Competition" seeking a determination from the FCC that it faces “effective competition” in certain franchise areas in Massachusetts and in Kauai, Hawaii. Charter asserted that in each of these franchise areas it is subject to effective competition under the so-called "Local Exchange Carrier Test" (LEC Test) because of the availability of AT&T’s DIRECTV NOW streaming service, which offers customers access to at least 65 channels of live television, cloud DVR services, and, in the majority of areas, additional local broadcast channels.
So, here is the "LEC Test" as set forth in Section 623:

"a local exchange carrier or its affiliate (or any multichannel video programming distributor using the facilities of such carrier or its affiliate) offers video programming services directly to subscribers by any means (other than direct-to-home satellite services) in the franchise area of an unaffiliated cable operator which is providing cable service in that franchise area, but only if the video programming services so offered in that area are comparable to the video programming services provided by the unaffiliated cable operator in that area."

In its petition, Charter states:

"The LEC Test is satisfied if a LEC affiliate offers a comparable video programming service by any means (other than direct-to-home satellite service) in areas that substantially overlap with the cable system’s franchise area. DIRECTV NOW meets each requirement of the LEC Test. It is a non-satellite video programming service offered by DIRECTV, LLC (“DIRECTV”), an affiliate of AT&T. It is offered throughout the Franchise Areas to any household with an Internet connection, which is available to virtually 100 percent of Charter’s customers in these areas. AT&T has marketed DIRECTV NOW extensively, and residents are well aware of this competing service. Finally, DIRECTV NOW meets the Commission’s definition of a “comparable” video programming service, with at least 12 channels of non-broadcast programming."

On its face, Charter's reading of the statute and its contention regarding the existence of "effective competition" is persuasive. Nevertheless, when I perused the docket, admittedly only casually, I saw that the Massachusetts and Hawaii franchising authorities put forward several different reasons why the DIRECTV NOW streaming offering, even though available to nearly all of the residents in the subject localities, doesn't satisfy the "LEC Test" requirement.

You can go through the docket if you like to examine back-and-forth arguments. If you do, you'll see that they are mostly based on dissecting the techno-functional constructs that are built into the LEC Test definition. These arguments – tending heavily towards the metaphysical – have to do with contending characterizations of the meaning of "facilities" used to deliver the streaming service, whether they are "physical" facilities or not, whether DIRECTV NOW is offered "directly" or "indirectly" to customers, what "by any means" means, whether AT&T is or is not a LEC, and the like.

By the way, when I say the arguments tend towards the metaphysical, I mean metaphysical in the very same sense that I did when I wrote what became my widely-circulated "The Metaphysics of VoIP" piecein 2004. I submit that, fifteen years later, it's still a worthwhile read if you want to appreciate why we need a Communications Act overhaul that doesn't tie regulation to techno-functional constructs.

In other words, in the present case, in doing their best to pick apart the statutory definition in order to retain their rate regulation authority, Massachusetts and Hawaii discuss almost everything but what ought to be the most relevant question: Does the availability of the DIRECTV NOW streaming service, which offers customers access to at least 65 channels of live television, cloud DVR services, and additional local broadcast channels, constitute effective competition and provide customers with an alternative multichannel video service choice if they are dissatisfied with Charter's offering?

To repeat, I find Charter's reading of the statute as it relates to the "LEC Test" persuasive. In any event, at the least, it is within the realm of the Commission's interpretative discretion to the extent the provision is ambiguous. Recall Chevon deference. And recall the "Preference for Competition" subtitle in Section 623.

But the point I wish to make is more fundamental. This one "effective competition" determination proceeding demonstrates yet again why Congress needs to update the Communications Act. Whatever Congress may have been thinking when it adopted the "effective competition" provision in 1992, it certainly didn’t have in mind today's myriad – and still proliferating – Internet video streaming services. I need not name them all here or say more here about their competitive impact.

Whatever the outcome of the proceeding in which Charter is now engaged to free itself from rate regulation of its cable service, I submit that the present competitiveness of the video marketplace – in which cable operators, satellite companies, over-the-air broadcasters, wireless providers, and Internet streaming services all compete – cries out for Congress to take deregulatory action. It doesn't make sense today for the FCC to be required to parse analog age techno-functional constructs embedded in legacy Communications Act definitions to determine whether regulatory relief should be granted.

A good place at least to start considering an update of the Communications Act video provisions is Rep. Steve Scalise's deregulatory "Next Generation Television Marketplace Act," first introduced in 2011. The bill made sense then and it makes even more sense now, when the video marketplace is much more competitive today than it was eight years ago. When Rep. Scalise reintroduced the bill under the same name in July 2018, I wrote about it here in a Washington Times piece. In any updating of the Communications Act, Congress should require that regulation be tied to assessments of competition and consumer harm -- not to abstruse techno-functional definitions that give rise to metaphysical argumentation divorced from marketplace reality.