Court Hears Arguments on Challenge to School Wi-Fi Bus Subsidies

 On November 4, oral arguments were held before the U.S. Court of Appeals for the Fifth Circuit in the case of Molak v. FCC. The case involves a legal challenge to the Commission's October 2023 School Bus Wi-Fi Order. The Petitioners, represented by Mr. David A. Suska during oral arguments, claim that the agency lacks authority under Section 254 of the Communications Act to use E-Rate funds to subsidize Wi-Fi on school buses. 

By a declaratory ruling passed on a 3-2 vote of the Commission's members, the agency is interpreting the law to effectively extend the Emergency Connectivity Fund (ECF) beyond its sunset date of June 2024. The ECF was a $58.2 billion subsidy program for subsidizing Wi-Fi hotspots and broadband services for school buses and off-campus connectivity. The program was authorized under the American Rescue Plan Act of 2021 (ARPA) as a lockdown-era emergency measure. Section 7402 of the ARPA expressly authorized subsidies for supporting "eligible equipment" and advanced telecommunications and information services for use by students, school staff, and library goers "at locations that include locations other than the school" and "other than the library."

 

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 School Bus Wi-Fi Order. Section 254 of the Communications Act is more limited than Section 7402 of the ARPA. Section 254(h)(1)(B) authorizes the Commission to provide subsidy support to telecommunications carriers for "services to elementary schools, secondary schools, and libraries for educational purposes." And Section 254(h)(2)(A) directs the Commission to adopt competitively neutral rules to enhance "access to advanced telecommunications and information services for all public nonprofit elementary and secondary school classrooms, health care providers, and libraries." In short, we concluded that the FCC overreached in subsidizing school bus Wi-Fi subsidies under Section 254 because buses are notschools, classrooms, or libraries – and schools are not telecommunications carriers. 

 

Before the Fifth Circuit, Mr. Suska ably argued that the School Bus Wi-Fi Order exceeded the law in four ways: (1) by making subsidies available to anyone, not just telecommunications carriers; (2) by making subsidies available for any kind of service, not just telecommunications services; (3) by making subsidies available for equipment, which is not in the statute; and (4) by providing subsidies to schools instead of telecommunications carriers. In short, 

 

On behalf of the FCC, Ms. Rachel Proctor May argued: "The word 'classroom' is best interpreted to include buses that have been outfitted with Wi-Fi so they can serve as rolling study halls." That type of elastic interpretation might have sufficed under the old "Chevron doctrine." But that is a decidedly strained and result-driven interpretation by the FCC, and one the agency cannot rely on for its authority now that the Supreme Court's decision in Loper-Bright v. Raimondo has overruled Chevron. Moreover, it goes against human experience to think that any non-microscopic amount of homework will take place on Wi-Fi-connected school buses. No claimed agency technical expertise about imagined homework on school buses ought to rescue the FCC from the overreach of its School Bus Wi-Fi Order. 

 

A significant portion of the oral arguments before the court addressed threshold procedural issues regarding exhaustion of administrative remedies and standing. Yet if the Fifth Circuit rules on the merits, there is a strong likelihood that the court will vacate the FCC's School Bus Wi-Fi Order. 

CSIS Reiterates Importance of Spectrum to National Security

Recently published commentary from the Center for Strategic & International Studies (CSIS) makes familiar points regarding America's pressing need for additional, globally harmonized commercial spectrum – but also places the continuing spectrum-allocation impasse in a broader, geopolitical context characterized by serious national security and intelligence implications.

"Spectrum Allocations and Twenty-First-Century National Security," by James Andrew Lewis, echoes arguments raised by another CSIS scholar, Clete Johnson, that I summarized in an October 2024 post to the FSF Blog. Namely, that Congress must act quickly to renew the FCC's spectrum auction authority and work with the Department of Defense and other federal agencies to ensure that the same bands used in other parts of the world are made available for commercial use in the U.S.

The concern, according to Mr. Lewis, is China:

The United States is in a global competition with China over markets, rule setting, and technological leadership…. To remain competitive, the United States will need to adjust how it has allocated radio spectrum to emphasize commercial innovation. The government-centric spectrum allocations of the last century will need to change if we are not to fall behind. 

Specifically, U.S. policymakers must appreciate that, going forward, technological innovation by the commercial, rather than the government, sector is the key to national security in the twenty-first century: "[c]ommercial technologies underpin modern military strength." And that to facilitate that technological innovation, domestic commercial interests must have access to the same spectrum bands used in the rest of the world:

If the United States does not use a harmonized spectrum, it shrinks the economies of scale that trusted vendors need to compete with Huawei…. In simple terms, people will build devices to use specific spectrum bands for commercial purposes designated by the WRC. Essentially, if the United States does not use spectrum allocated everywhere else for commercial purposes, it will be handicapped in any competition.

In other words, U.S. policymakers must move beyond the antiquated notion that government control of certain bands, in and of itself, enhances our national security – and instead recognize that military might today hinges in large part upon America's ability to dictate the technological standards for mobile networks used worldwide. Commercial access to globally harmonized spectrum bands is critical to achieving that objective.

Mr. Lewis concludes with a warning: "[t]he timing for action is short, perhaps a year or two since a failure to act puts the United States at the cusp of a great strategic blunder that will let an ambitious China build the network that forms the backbone of the global economy."

Court Hears Arguments on Challenges to FCC's New Title II Order

On October 31, the U.S. Court of Appeals for the Sixth Circuit heard oral arguments in case MPC No. 185 Open Internet Rule. The case consolidates several legal challenges against the FCC's April 2024 Securing and Safeguarding the Open Internet Order. The Commission's order turned broadband Internet access services into a public utility and subjected broadband Internet service providers (ISPs) to rate regulation.

By an August 1, 2024 order, a three-judge panel of the Sixth Circuit stayed the Commission's order pending resolution of legal merits of challenges to that order. The court's decision to stay the agency's order was discussed in an August 23 Perspectives from FSF Scholars by FSF President Randolph May, "The Sixth Circuit Stays the FCC's Latest Net Neutrality Flip-Flop." A different panel was designated to decide the legal merits.

 

Oral arguments before the three-judge merits panel lasted approximately one hour. Judge Raymond M. Kethledge pressed legal counsel on the meaning of statutory terms – such as "information services" under Title I of the Communications and "telecommunications services" under Title II. Other judges expressed greater interest in the "major questions doctrine," pointedly asked the "major questions doctrine" is still operative following the Supreme Court’s decision in Loper-Bright v. Raimondo and whether reclassifying broadband Internet access services under Title II and subjecting it to public utility regulation and rate controls amounts to a matter of economic and political significance under the “major questions doctrine.” 

 

The Free State Foundation’s 2017 initial comments and reply comments in the FCC's Restoring Internet Freedom proceeding emphasized the statutory definitional case for why broadband Internet access services are Title I "information services." 

 

Moreover, FSF's 2023 initial comments and reply comments in the Safeguarding and Securing the Open Internet proceeding explained why reclassifying broadband Internet access services under Title II and thereby subjecting those services to a public utility regime with rate regulation triggers the "major questions doctrine." That is, turning broadband ISPs into public utilities and asserting control over their rates is a politically and economically significant matter. Congress nowhere provided the FCC clear authority to make such a momentous decision. 

 

The Sixth Circuit panel that issued the August 2024 stay decision in MPC No. 185 Open Internet Rule concluded that the FCC's order likely violated the "major questions doctrine." But the Sixth Circuit's merits panel that just held oral arguments will offer its view in due time. The judges will more comprehensively answer the disputed questions about the Commission’s authority.

The Rate Regulation Difference: A Biden FCC v. A Trump FCC

 I’ve been asked many times in the last days and weeks about the likely differences in communications law and policy between a Harris FCC or a Trump FCC. As Yogi Berra declared, “It’s tough to make predictions, especially about the future!” 

True enough, and a reason to be cautious.

 

Nevertheless, while I hope I'm wrong, I’m comfortable hazarding this prediction: A Harris FCC will likely move to regulate the rates charged by broadband Internet service providers, while a Trump FCC would not. And to my mind, this is a big deal, because rate regulation of ISPs almost certainly will stifle investment and innovation and lead to less consumer choice.

 

“Price controls” – explicitly favored by Vice President Kamala Harris in various market segments – is just another way of saying “rate regulation.” Remember, price controls always lead to a curtailment of supply. In the context of broadband, that means less network infrastructure deployment, less new services made available, and less variety of service offerings from which consumers may choose.

 

The rate regulation may be implemented in connection with innocuous-sounding programs, such as elimination of “data caps” and elimination of “free data” plans, or mandates for “affordable” service options.

Rate regulation, of course, all the same.

TMT with Mike O'Rielly – Ep 14: Role & Treatment of Media Industries

Episode 14 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 29. In this episode, titled "The Role and Treatment of Today's News and Media Industries," Mr. O'Rielly has a conversation with guest Danielle Coffey, President & CEO, News/Media Alliance. Streaming video of the episode is now available: 

Small Claims Board Providing Copyright Owners Access to Justice

On October 22, the U.S. Copyright Office released a "Key Statistics" report on the Copyright Claims Board. The Board was established under the Copyright Alternative in Small-Claims Enforcement Act (CASE Act), passed by Congress in December 2020 and signed into law by President Donald Trump. The Board serves as a voluntary, virtual forum for resolving disputes over alleged copyright infringement claims where the damage amount in controversy is $30,000 or less. Both sides must agree to resolve their dispute at the Board, and its decisions are enforceable in federal court.  

According to the information provided by the Copyright Office, as of September 2024, nearly 1,000 claims have been filed with the Copyright Claims Board. Also, 63% of such claims involved self-represented individuals, and 46% of the cases were for smaller damages of less than $5,000. 

 

The Board appears to be performing a useful function by providing copyright owners with a cost-effective venue to protect and enforce their intellectual property (IP) rights in creative works, such as photos, movies, and music recordings. For a copyright owner to hire an attorney and bring an infringement case in federal court, he or she typically must be willing to spend tens of thousands of dollars.  

 

Free State Foundation President Randolph May and I recommended the creation of such a small claims venue in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Webinar Panel Weighs FCC's Proposed AI Political Ad Regulation

On October 7, Free State Foundation President Randolph May moderated a webinar, "The FCC's Proposal to Regulate Political Ads Using Artificial Intelligence." Video of the webinar is now available online. The Federalist Society-hosted webinar featured a panel discussion on the Commission's proposed rulemaking that would require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political candidate and political issue ads that contain content generated using artificial intelligence (AI). The proposed rulemaking also would require notice filings in online political files regarding ad usage of AI, and impose obligations on broadcasters (and cable and DBS operators) to act when informed by "credible third parties" that the ads being transmitted contain AI-generate content. 

The FCC's novel regulation of political ads with AI-generated content raises important questions about the scope of the agency's authority and the policy merits of the proposal. Those topics are ably tackled by the webinar panel, consisting of FCC Commissioner Brendan Carr, Public Knowledge President Christopher Lewis, as well as Prof. Bradley Smith, a former FEC Chairman. To learn more, check out the webinar video. 

On September 19, the Free State Foundation filed initial comments in the FCC's novel AI political ad regulation proceeding. And FSF filed reply comments on October 7. text