Tuesday, February 19, 2019

Momentum Builds for New T-Mobile After New York Commission's Approval

On February 7, the New York Public Service Commission approved the proposed T-Mobile/Sprint merger. Its order noted the merging parties' "assert[ion] that the new T-Mobile will be able to build a larger, more robust [5G] network in a more timely fashion, than either of the two companies on their own." On the condition that the new T-Mobile maintains at least the same number of employees in New York State as both carriers have now, the New York Commission's order concluded the merger is in the public interest. While the propriety of the New York PSC or other state public utility commissions conditioning their approvals on maintaining specific employee levels or job commitments is questionable, at least the NYPSC completed its review in a timely fashion.

FierceWireless reported the proposed T-Mobile/Sprint merger now has received approval from 16 of the 19 purportedly required state public utility commissions (PUCs). Among those remaining, California's PUC has yet to reach a decision. Hopefully, California's PUC and the other remaining PUCs recognize that all or nearly all of the salient competition issues implicated by the T-Mobile/Sprint merger are within the jurisdiction of the FCC and the U.S. Department of Justice.

To its credit, New York's PSC recognized "issues related to wireless and [mobile virtual network operator] MVNO competition are the subject of the FCC and [U.S.] Department of Justice reviews and that those concerns are before those federal bodies." And, hopefully, all remaining state PUCs weighing in on the merger also will expeditiously complete their reviews. 

Free State Foundation President Randolph May and I analyzed potential benefits of the new T-Mobile in our Perspectives from FSF Scholars paper "T-Mobile/Sprint Merger Offers Public Interest Benefits: Likely Presents a Fast Track to 5G":
There is strong evidence that the merger, if approved, would benefit consumers and businesses by enabling faster mobile broadband speeds, higher data capacity, and reduced per-megabit prices. A combined T-Mobile/Sprint likely would have the resources needed to rapidly deploy a nationwide 5G network. And the combined company likely would be able to compete more effectively against current wireless market leaders AT&T and Verizon as well as other service providers in the broader multi-platform broadband market.  
We expanded on those insights in comments and reply comments submitted to the FCC in its pending merger review proceeding. Also, we explained the 5G-related benefits of the proposed T-Mobile/Sprint merger in an op-ed. It's our conclusion that the market's competitiveness makes it unlikely that the merger, if approved, would result in harmful price increases for consumers. Consider, for instance, market entry in 2017 and 2018 by Wi-Fi/hybrid mobile providers Comcast and Charter Communications, the ongoing race to deploy 5G by multiple providers, and metrics in the Communications Marketplace Competition Report(2018) indicating continuing price decreases – for mobile wireless average revenue per user (down 7%), wireless consumer price index (down 11%), and revenue per megabit (down 10% to 29%).

As Randolph May explained, T-Mobile and Sprint's commitments to maintain price stability for three years following the merger's closing would further alleviate any competitive pricing concerns. Additionally, FSF blog posts have addressed competition from MVNOs and explained why merger approval would benefit resellers and hybrid services. 

Remember that the T-Mobile/Sprint merger is already subject to separate reviews by two federal agencies. As I've pointed out before: "State reviews add yet another layer of multi-agency proceedings to the merger review process. The more agencies conducting reviews, the more likely such reviews are to delay the overall merger process and saddle merging parties with administrative and lost market opportunity costs." The progress to date that has resulted in 16 completed state PUC reviews is encouraging. California's PUC and the other PUCs that have yet to complete their review of the T-Mobile/Sprint merger should do so promptly.

Wednesday, February 13, 2019

T-Mobile/Sprint Merger Bolstered by 5G Benefits and Price Commitments

Today and tomorrow, the House Communications and Technology Subcommittee and the House Judiciary Committee will hold separate hearings on the proposed T-Mobile/Sprint merger. It is appropriate, of course, for members of Congress to hold hearings on the proposed mergers, and, undoubtedly, they will reach their own conclusions about the proposed merger's merits. As they do so, I want to point out that Free State Foundation scholars submitted detailed comments and reply comments to the FCC which concluded that, all things considered, a combined "New T-Mobile" likely would benefit the public, including by furthering rapid deployment of a competitive nationwide 5G network. And we concluded that it is unlikely the merger would result in significant harms. 
As Free State Foundation scholars have indicated in other publications and posts, our view has not changed since our comments and reply comments were filed with the FCC. Indeed, as stated in my recent February 5 blog post, the likelihood of any harm is further reduced by T-Mobile's and Sprint's offer of 3-year "rate stability" for consumers. Presumably, this commitment would become an enforceable condition upon approval of the merger by the FCC.


House committee members ought to have a forward-looking perspective to the wireless market generally and to the proposed T-Mobile/Sprint merger specifically. Next-generation 5G networks will be essential for supplying future wireless demand. By combining spectrum resources, New T-Mobile projects its merger-enabled nationwide 5G network's monthly capacity would reach 6.8 exabytes in 2021 and 20.3 exabytes by 2024. The 5G network would have 30 times more capacity than T-Mobile's existing network, with peak speeds up to 100 times faster. It also would enable advanced "smart city" capabilities and Internet-of-Things connectivity.
If the merger is approved, New T-Mobile likely will be a stronger competitor to Verizon and AT&T, the current wireless market leaders. As we explained in our comments and reply comments submitted to the FCC, in today's dynamic communications marketplace, it is wrong to suggest, simplistically, that effective competition will suffer as a result of a "four-to-three" merger of the leading wireless broadband providers. Indeed, today, wireless and wireline broadband services are more properly viewed as part of an overall broadband communications market – a broader broadband market, if you will.  
Absent the merger, T-Mobile's 5G network likely will be less capacious and its rollout decidedly slower. Also, evidence regarding Sprint's substantial debt and analysts' projections indicate a standalone Sprint likely would be far less competitive – and perhaps not a viable 5G competitor at all going forward.  
As pointed out in the Free State Foundation's comments, FCC merger precedents recognize the public interest benefits of accelerated 5G deployment. For instance, the Verizon/XO Order (2016) characterized "the rollout of 5G technology" as an "important Commission policy priority for the general benefit of all consumers." The Verizon/Straight Path Order (2018) credited "the expeditious use of [] spectrum for the potential introduction of innovative 5G services to the benefit of American consumers." Further, the AT&T/DIRECTV Order (2015) recognized that merger-enabled benefits such as new technologies and services may outweigh the loss of a competitor. Moreover, House subcommittee members should recognize that recent wireless market entry by Comcast and Charter provides consumers with additional choices and provides a check against anticompetitive conduct. At the end of 2018, Xfinity Mobile already had 1.2 million subscribers and the entry into the market by cable providers bodes well for consumers.  
On February 4, T-Mobile and Sprint made the following pledge in a filing to the FCC: "New T-Mobile will make available the same or better rate plans as those offered by T-Mobile or Sprint as of today’s date for three years following the merger." Those legacy rate plans will continue "for three years after the merger or until better plans that offer a lower price or more data are made available, whichever occurs first," subject to increases in taxes, surcharges, as well as third-party partner service changes beyond New T-Mobile's control. In connection with this pledge I wrote: "[O]n the whole the price stability commitment should be reassuring to consumers -- and to the regulators and antitrust authorities reviewing the proposed merger." This commitment ought to increase the likelihood that the proposed merger's public benefits would outweigh the likelihood of significant public harms.  
In short, the proposed T-Mobile/Sprint merger likely will bring public benefits by enabling rapid 5G deployment and fostering a wireless marketplace that, on a long-term basis, is even more competitive than today's marketplace. The recent price commitments by the parties bolster the pro-consumer case for merger approval.

Tuesday, February 12, 2019

United States Still Leads the World in Strong Protections for IP Rights


On February 7, 2019, the U.S. Chamber of Commerce’s Global Innovation Policy Center (GIPC) released the seventh edition of the International IP Index. Appropriately enough it's titled “Inspiring Tomorrow.” The Index rates the intellectual property (IP) systems of 50 countries, representing over 90% of the world’s gross domestic product. Scores were derived from several specific factors pertinent to gauging protection of intellectual property rights.

Thus, the GIPC Index is a valuable tool which allows policymakers to better understand where their countries stand in relation to others.

Although the U.S. ranks at the top of the International IP Index, its release nevertheless should prompt U.S. policymakers to strengthen our IP rights system. The Index identifies the lack of a targeted legal basis for addressing online piracy as a key area of weakness. Moreover, poor Index scores for IP rights systems in certain foreign countries should spur U.S. trade negotiators to seek stronger protections for Americans’ IP rights overseas. By seeking to bolster IP protections around the globe, the U.S. will further benefit from the strong relationship between strong IP rights and economic activity.

Scores in the 2019 International IP Index are based on eight key categories relating to IP rights: patent rights, copyrights, trademarks, trade secrets, commercialization of IP assets, enforcement, systemic efficiency, and membership in and ratification of international treaties. Those eight categories encompass 45 separate indicators pertinent to assessing the strength of an IP system.

Because scoring for this year’s Index is based on 45 indicators instead of 40 as in last year’s Index, a weighted-score was calculated to determine whether countries’ protections of IP rights were stronger or weaker than that calculated in last year’s Index. Among the 50 countries, 23 improved their weighted-scores in the 2019 Index. Many of the improved scores came from developing countries.

For the seventh consecutive year, the United States had the highest score. The U.S. IP system rated 42.66 out of 45. The United Kingdom and Sweden followed with scores of 42.22 and 41.03, respectively. The countries with the lowest scores were Egypt, Algeria, and Venezuela at 11.83, 10.28, and 7.11, respectively.

Despite the United States’ leadership, there are some areas of weakness discussed in the Index. For example, the United States has a perfect score with regard to encouraging creativity by virtue of strong copyright protections, but it lacks an effective enforcement regime to disable access to websites which facilitate pirated content and counterfeit goods. A 2017 report by the IP Commission found that the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economy is between $225 billion and $600 billion.

To combat online piracy, Congress can help by updating the Digital Millennium Copyright Act’s notice and takedown system under Section 512. My October 2018 FSF blog stated that the United States-Mexico-Canada Agreement (USMCA) strengthens IP rights protections and enforcement relative to the North American Free Trade Agreement’s (NAFTA) IP Chapter. However, the USMCA failed to address the outdated “notice and takedown” provision to improve its protection for creators' content.

Moreover, modernizing the U.S. Copyright Office by updating its technological capabilities to maintain a readily searchable database of copyright registrations would be helpful. So too would be giving the Copyright Office the authority to address Section 512 matters and establishing a process for adjudicating small infringement claims. Congress should act to modernize the Copyright Office to enable it to adequately address piracy issues and other copyright-related infringements.

While there was significant improvement among many of the developing countries in GIPC’s Index, the low scores in many developing countries reinforces the need for U.S. pursuit of trade agreements that better secure protections for IP rights holders internationally. As more countries adopt strong protections of IP rights through trade agreements, the entire global economy also will grow substantially, because legal institutions, including regimes that safeguard IP rights, constitute a positive externality for the global economy. The mutual gains from global trade increase when more nations adopt and enforce laws that protect IP rights.

Importantly, the Index emphasizes that there is a “strong correlation between the strength of the national IP environment and different types of economic activity, including rates of R&D spending, innovation, technology creation, and creativity.” Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity. On average, IP-driven countries:
  • Are 26% more competitive,
  • Are 53% more likely to employ high-skilled and high-paid workers,
  • Are 33% more likely to receive private-sector investment in R&D activities,
  • Are 39% more likely to attract foreign investment,
  • Have over 4 times more online and mobile content generated,And are twice as likely to produce and export complex, knowledge-intensive products.
Strong protections for IP rights incentivize investment in research and development, innovation, and creative content production because they ensure entrepreneurs have an opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, consumers are the ultimate beneficiaries as new goods and services, in whatever form they take, are brought to market.

In sum, the International IP Index provides U.S. and foreign policymakers a useful tool for assessing the need to improve their IP systems so that they can enhance innovation and creativity in today’s economy.

Monday, February 11, 2019

Whither Socialist Communications Policy?


The apparently growing yearning for socialism in the United States is disturbing. Disturbing enough that even Chuck Schumer and Nancy Pelosi joined the applause when, in his State of the Union address, President Trump proclaimed: "America will never be a socialist country."
History is replete with socialism's tragic failures for those who choose not to ignore history. But one need not retreat to the history books for proof. Today Venezuela may be Exhibit A, but there are many others, such as close-by Cuba.
And while socialism's appeal among the young is on the rise, its elixir spans the generations. Witness the almost half-century age difference between 77-year old Bernie Sanders and 29-year old Alexandria Ocasio-Cortez, two of the most prominent stars in the American socialist firmament. Indeed, a recent Gallup poll reports that Democrats view socialism more positively than capitalism – and by a wide margin.
Perhaps all the proud new socialist devotees have taken to heart Oscar Wilde's tongue-in-cheek quip: "The one duty we owe to history is to rewrite it."
To be sure, it's one thing to proclaim, "I am a socialist," and entirely another to understand what you mean to suggest, programmatically, by so proclaiming. For example, while we can be certain that "Medicare for All" and the "Green New Deal" would mean considerably more government control of the health care and energy markets, the programmatic details of such control would need to be worked out.


Here I want to focus on what socialism might imply for communications policy, and, more specifically, for control of the channels of communications that enable the American public to connect with their families, friends, and civic groups, to engage in social and political affairs, and to inform and entertain themselves. In short, to live their everyday lives by communicating freely.
What do the socialists have to say about this?
By no means did Karl Marx and Friedrich Engels, in The Communist Manifesto, ignore the significance of control of communications channels to the establishment of the socialist revolution. One of the ten key measures that Marx and Engels said would be necessary in advanced countries to achieve the proletariat revolution is: "Centralisation of the means of communication and transport in the hands of the State."
Of course, with a vengeance that was ruthless, Vladimir Lenin put Marx's and Engels' injunction into practice as he consolidated control of communications in state-run propaganda organs, while simultaneously vanquishing independent media.
In other words, Venezuela's Hugo Chavez, once the darling of American liberals such as former Representative Joe Kennedy and actor Sean Penn, didn't invent the socialist playbook regarding state control of the media and communications channels.
Now fast forward to America, circa 2009. In an interview with a publication called The Bullet, a publication of "The Socialist Project," Robert McChesney said this, in the context of discussing what he called "the battle for network neutrality": "What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility. We want an Internet where you don't have to have a password and that you don't pay a penny to use. It is your right to use the Internet."
Robert McChesney, an American professor teaching at the University of Illinois at Urbana- Champaign, not only publishes in "The Socialist Project," he is an avowed socialist. Here is what The Socialist Project says about itself: "The SP opposes capitalism out of necessity and supports the anti-capitalist struggles of others out of solidarity."
Oh, and by the way, Robert McChesney is a co-founder and director emeritus of the advocacy organization, Free Press.
I mention Robert McChesney's connection to Free Press because the organization is a leader – if not the leader – in the fight to turn Internet service providers into public utilities by once again shackling them with so-called "Title II regulation." In its January 2018 Restoring Internet Freedom Order, the FCC's current Republican majority repealed the Title II public utility regulation of Internet providers that had been mandated by the Obama FCC.
Now, please carefully note: I am not suggesting that, like Professor McChesney, all advocates of Title II regulation of Internet providers are socialists, although I suspect an increasing number would proudly embrace the label. In any event, thankfully, we live in a free country in which you can call yourself whatever you wish, and more importantly, believe whatever you wish.
But here's what I am suggesting: With infatuation with socialism on the rise, it is wise to pay attention to what socialist ideology implies for communications policy. The House Communications and Technology Committee held a hearing last week on "Net Neutrality." And a Free Press representative was invited by the Committee majority to testify, and she advocated a return to public utility regulation of Internet providers. That being so, it's worth repeating Free Press's co-founder Robert McChesney's declaration: "What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility."
Oscar Wilde may have said: "The one duty we owe to history is to rewrite it." I prefer Winston Churchill's felicitous rephrasing of George Santayana: "Those who fail to learn from history are condemned to repeat it."

Reallocating Mid-Band Spectrum Will Create Significant Economic Benefits

On February 5, 2019, the Analysis Group published a study in conjunction with CTIA titled "The Economic Impacts of Reallocating Mid-Band Spectrum to 5G in the United States." The use of mid-band spectrum is a necessity for developing 5G networks capable of maintaining high speeds and low latency. The study examines the economic impact of reallocating 400 MHz of licensed mid-band spectrum between 3.45 GHz and 4.2 GHz. Over a seven-year buildout period, wireless providers will invest $154 billion in 5G infrastructure, resulting in $274 billion in additional economic activity and 1.3 million new jobs.

Friday, February 08, 2019

A Maryland Small Cells Bill

In Maryland, Delegate Dereck Davis, a Democrat, introduced a "small cells" bill to help speed the deployment of wireless infrastructure, especially new 5G networks. The bill would mandate that local governments streamline certain processes and remove certain obstacles that presently hold up wireless network build-outs.

Delegate Davis's bill is important in order to keep Maryland broadband-friendly.  

Thursday, February 07, 2019

Research Fellow Michael Horney Testified on Maryland House Bill 141


On February 6, 2019, I testified before the Committee on Economic Matters in the Maryland General Assembly’s House of Delegates on House Bill (HB) 141 “Commercial Law – Internet Privacy and Net Neutrality.” I argued that HB 141 is legally problematic because it would impose a burden on interstate commerce, putting it at risk of preemption by the Federal Communications Commission. I also argued that HB 141 would harm consumers because the costs imposed on Internet service providers having to comply with state-by-state net neutrality and privacy regulations would crowd out resources that otherwise could be used for additional investment and innovation.
You can watch my testimony here around the 48-minute mark and please read my full written testimony, which was prepared by me and Free State Foundation President Randolph May and goes into much more detail about why the bill is legally problematic and unwise as a matter of policy.

Tuesday, February 05, 2019

MLC Coalition for Songwriter Royalties Stands on Rock Solid Ground

On February 4, the Mechanical Licensing Collective (MLC) Coalition announced it has received an impressive list of endorsements from all major associations and organizations in the U.S. music industry. The MLC Coalition will be making a submission to the U.S. Copyright Office in order to create a collective entity for administering mechanical licensing royalties pursuant to the Music Modernization Act of 2018 (MMA). 

For songwriters, federal copyright law secures protections in their musical compositions but also subjects their compositions to compulsory mechanical licensing. Mechanical licenses grant third parties rights to record, reproduce, or sample original music compositions in exchange for payment of mechanical licensing royalties to songwriters. Mechanical licensing royalty rates are either established by contractual agreement or set by the Copyright Royalty Board. 

Songwriters have sometimes suffered from lack of timely receipt of mechanical licensing royalties, particularly for digital audio transmissions of sound recordings of their songs by digital music service providers such as Spotify and Pandora. Apparently, digital music service providers have experienced difficulties in accurately identifying and locating songwriters for purposes of making royalty payments. The 115th Congress passed the MMA to alleviate this mechanical licensing royalties problem by facilitating proper payments to songwriters. Over the course of several Free State Foundation blog posts, we supported passage of the MMA.

The MMA authorized the Register of Copyrights to designate a mechanical licensing collective that would have authority to perform functions such as offering and administering blanket licenses for usage of music compositions by digital music providers, collecting royalties from digital music providers and distributing them to songwriters and other copyright owners in music compositions, making efforts to identify music compositions embodied in sound recordings and to identify and locate the copyright owners of those compositions, as well as maintaining a database for musical works necessary to administer mechanical licensing. By March 21, the MLC Coalition will make its submission to the Copyright Office in connection with this provision of the MMA.

Given the widespread consensus support from performance rights organizations, music publishers, the recording industry, and digital music service providers, the MLC Coalition is ideally suited to administer the mechanical licensing functions spelled out in the MMA. In making its forthcoming submission to the Copyright Office, the MLC Coalition stands on rock solid ground.   

T-Mobile, Sprint Price Stability Commitments Are Positive

Yesterday T-Mobile and Sprint filed a pleading at the FCC pledging rate stability for consumers for at least three years after the merger is approved. Specifically, the merger applicants stated: "T-Mobile and Sprint legacy rate plans will continue as New T-Mobile plans for three years after the merger or until better plans that offer a lower price or more data are made available, whichever occurs first." While T-Mo and Sprint said that the stabilized rate plans may be adjusted for increases in taxes, surcharges, and the like beyond their control, on the whole the price stability commitment should be reassuring to consumers -- and to the regulators and antitrust authorities reviewing the proposed merger.

Any merger this size deserves careful -- but nevertheless timely -- scrutiny by the appropriate authorities, including the FCC and the Department of Justice. In comments submitted to the FCC in August 2018, Free State Foundation scholars said: "[T]here is strong evidence that the proposed T-Mobile/Sprint merger, if approved, would greatly benefit consumers and enterprises by enabling faster mobile broadband speeds, higher data capacity, and reduced per-megabit prices. A combined 'New T-Mobile' would have the resources to rapidly deploy a nationwide 5G network and to compete more effectively against AT&T and Verizon, presently the two largest wireless carriers."

Nothing that has occurred since the comments and reply comments were submitted has altered that view. Some form of "price stability" commitments have almost become pro forma in merger proceedings, even in advance of the almost inevitable, but nevertheless still unseemly, last-minute "midnight" extractions of volunteered regulatory conditions. That said, the new T-Mobile-Sprint commitments bolster the case that merger approval would be pro-consumer.

It is also worthwhile noting that Representative Anna Eshoo (D-CA), not one known to endorse proposed telecom mergers on a knee-jerk basis, has submitted a letter, with broad bipartisan support, to the FCC and DOJ pointing out, in their view, the pro-consumer benefits of the merger and the benefits to the economy in terms of increased investment and innovation.