The following may be attributed to Free State Foundation
President Randolph May:
“On June 3, I issued a press release stating that the FCC
was expected soon to announce that the USF contribution factor (aka the “USF
tax”) would top 40% for Q3 2026. Well, I was wrong, and I’m always happy to
correct the record. The good news is that on June 12, the FCC issued a Public
Notice reporting that the USF contribution factor for Q3 2026 will be only
38.8%. The bad news is that USF tax, at 38.8%, will be near the highest it has
ever been, if not the highest. As I said a week ago, the current USF regime is
in desperate need of a meaningful market-oriented overhaul that fits today’s
market and technological environment."
Pole
attachments are attracting increased attention because of their importance to
promoting the deployment of broadband facilities, including those financed by
the Broadband Equity, Access, and Deployment (BEAD) program. As part of BEAD’s
efforts to expand broadband coverage into all unserved and underserved areas,
providers will have to obtain approval to work on millions of poles. The time
and cost associated with this task will have a large effect on a project’s
success in bringing Internet coverage to new households.
Last week
the FCC’s Wireless Competition Bureau issued a Public Notice and Press Release regarding state regulation of pole
attachments. The Notice informed states of their responsibilities for state
regulation. These include:
Issuing
rules and regulations implementing the state’s regulatory authority.
Regulating
rates, terms, and conditions of pole attachments.
Establishing
procedures for resolving disputes.
The Notice
also requested public comments on how the FCC should ensure that state
regulation is effective. This includes whether the Commission has a duty to
review state certifications to ensure the regulatory regime is adequate to meet
the requirements of the Communications Act of 1934. The FCC also seeks comments
on what else it can do to ensure that attachers in state-regulated states are
not subject to unnecessary costs and delay.
As I wrote
in a previous blog, ownership and regulation of poles
is not always straightforward. According to one study and analysis,
pole regulation is “scattershot” and “highly fragmented.” Poles are owned by a
number of different entities including utilities, local exchange companies, and
government entities. Poles in many states are regulated by states, not the
federal government.
The FCC
regulates most poles under Section 224
of the Communications Act of 1934. Its rules lay out processes and timelines
for attachers and pole owners when the former seek to attach communications
infrastructure to poles. However, the provision gives states the option of
“reverse-preemption” by certifying that they will regulate pole attachments in
their state. As of now, 23 states and the District of Columbia have taken this
option.
The FCC’s
Notice is important because pole attachments can have a large impact on project
cost and completion. According to the above study, BEAD-funded projects will
touch an estimated 3,954,030 utility-owned poles across 2,053 electric utility
service territories. Current plans are for aerial fiber to cover 188,287 miles.
Pole-related costs for BEAD projects could range from $534 million to $4.63
billion. The authors find that many of the poles involved are not regulated by
the FCC. It is clear that the availability of pole attachments on reasonable terms
is important to furthering broadband deployment.
The
Commission also seeks information on how it can improve the regulation of pole
attachments in the states that have chosen to regulate attachments themselves.
One way is to ensure that any adjudications are timely and effective. Delays in
obtaining permits can have a significant impact on the cost and even viability
of broadband deployments, including BEAD projects. This request is timely given
the history of the dispute between Comcast and Appalachian Power Company. Appalachian
Power sought to charge Comcast for the full replacement cost of damaged poles
even when a portion of the damage was caused by third parties. Comcast
demurred. The FCC quickly issued a judgment favoring Comcast. However, several months later the
dispute is still delaying work. Both parties have filed documents alleging that
the other party is not abiding by the judgment. Rulings that come late or that cannot
be enforced will do little to address the problem.
Another
possibility is to allow non-deployment BEAD funds to be used to give states the
resources they need to provide effective permitting. BEAD funding represents a
huge increase in the effort to extend Internet coverage. As the FCC notes,
increased investment has led to extensive new deployments in recent years,
resulting in a significant increase in pole attachment applications for large
numbers of utility poles. Many states and localities may lack the personnel and
experience needed to deal with this sudden increase in volume.
In
conclusion, the FCC is wise to focus on the issue of state regulation. State rules
should be essentially equivalent to FCC regulations to ensure that attachers in
reverse-preemption states do not experience prolonged delays and unreasonable costs.
As the Notice says: “[S]tate pole attachment regulation can either advance [ubiquitous
deployment of next-generation broadband] through clear and effective rules or
become a roadblock to such deployment if a state adopts a pole attachment
regime that is incomplete or unclear or fails to adopt pole attachment
regulations in the first instance.”
Broadband
availability is closely linked to economic growth in a particular area. It
benefits everyone when the regulatory reviews needed to effect deployment speed
this benefit rather than delay it.
During the
June 4 celebration of the Free State Foundation’s 20th anniversary, Arielle Roth, currently the Administrator for
the National Telecommunications and Information Administration (NTIA),
participated in a keynote conversation with former FCC Commissioner and Free
State Foundation Adjunct Senior Fellow Michael O’Rielly. Administrator Roth
used the occasion to discuss the Administration’s plans for auctioning the 2.7 GHz
band of spectrum.
NTIA is
under a congressional directive to release 500 Megahertz of federal spectrum to
be reallocated for commercial licensed use. “The work is on us to get it done in a timely
manner and we hope to meet or hopefully exceed our deadlines and targets,” said
Administrator Roth.
The
Administration is working on the 2.7 GHz band.NTIA “fully agrees” that this band should be devoted to commercial
licensed use. A tech panel consisting of the Office of Management and Budget,
the Federal Communications Commission, and NTIA recently signed off on spectrum
relocation funds so that the incumbent leadership can perform the engineering
studies needed to transfer control.
These
efforts are currently in the middle of a statutory waiting period of 60 days
for notifying Congress of the recommended transfer. This period ends June 30th
after which NTIA can use spectrum relocation funds to conduct the engineering
work so that the spectrum can be identified and hopefully auctioned as soon as possible.
Administrator
Roth's remarks regarding the progress in getting spectrum in the 2.7 GHz band transferred
for private sector commercial use are encouraging.
The following statement should be attributed to Free State Foundation President Randolph May regarding the anticipated increase in the USF contribution factor:
“According to a report in Communications Daily, the USF contribution factor, a tax really, is expected to hit 42.3% in Q3, the highest ever, based on numbers released. That would be an increase of 5%, up from 37% in Q2. Boom! Breaking 40% is akin to breaking the sound barrier.
It’s crystal clear that the current USF regime is unsustainable because at some point — and the point could come suddenly — the USF tax on telecom services will be too much for consumers, and then policymakers, to bear. Reforming the regime should be a near-term priority for Congress. The focus should be on making available subsidies only upon a clear and convincing showing of need, and a reliance on market forces wherever possible to maximize efficiency and reduce waste and fraud."
Every
month the U.S. Bureau of Labor Statistics (BLS) announces its latest estimate
of the cost of all consumer goods and services. These initial estimates are
then revised as additional data come in. One of the key drivers of the American
economy over the last few years has been the declining cost of information in
relation not only to other goods and services but occasionally also in nominal
prices. This blog reviews the current procedures for measuring information
costs, hopefully giving readers more context about the long-term trends.
We
examine seven discrete categories of goods and services that have the primary
purpose of collecting and processing information. Four of these goods are
members of the broader category of Information technology, hardware and
services. Two lie within the category of Telephone services. The
final one lies within the category of Video and audio.
Approximately
half of the index for telephone hardware, calculators, and other consumer
information items consists of cellphones (about 95 percent of which are smartphones)
with home-based phones, phone accessories and smartwatches making up the rest.
The Consumer Price Index (CPI) records the actual price of a smartphone, with
promotions deducted from the advertised price. The BLS also separates out the
price of hardware from accompanying services such as Internet access and
television subscriptions. These services are collected in a separate category
of spending.
One
of the most important information products is smart phones. These goods are
the only item in their broader category that are quality adjusted due to the
rapid rate of technological advancements and improved quality for consumers. For
the vast majority of products, BLS simply records the price without any
adjustment for quality. However, for smartphones BLS economists have developed a
hedonic regression
model
that allows them to identify how much of a price rise is due to specific improvements
in quality. Assuming some of a price increase was due to product improvements
such as better screen resolution, BLS would add the value of those improvements
to the previous price of the smartphone and compare it to the new price. If
both prices were the same, consumers would be paying more but also getting
more, as opposed to paying more for the same benefit due to general inflation. Wireless
telephone services and television services undergo similar adjustments.
CPI
also uses the concept of directed substitution for both smartphones and
computers because of the rapid quality improvements in each good. Basically,
twice a year BLS assumes that consumers are purchasing the newer version of a
product even if the older one is still available. The resulting data recognizes
that manufacturers are improving the cost and/or quality of the product even if
consumers are not purchasing it yet.
Another
key fact is that information services make up a growing share of consumers’
total spending. This multiplies the impact of cost restraint. A 50 percent
price reduction in housing, which currently accounts for more than 44 percent
of spending, has a much larger effect on living standards than a 50 percent cut
in furniture and bedding, which makes up less than 1 percent. Table 1 shows the
relative weights for selected categories of information spending for 2017-18 compared to 2024. Some items have
increased their share of the consumer’s budget while others have contracted.
Table
1: Relative Importance of Components in the CPI, 2017-18 and 2024
Spending
Category
2017-18
2024
Computers,
peripherals, and smart home assistants
0.285
0.293
Computer
software and accessories
0.016
0.027
Internet
services and electronic information providers
0.856
0.923
Telephone
hardware, calculators, and other consumer information services
0.066
0.461
Wireless
telephone services
1.824
1.340
Residential
telephone services
0.405
0.126
Cable,
satellite and live streaming television service*
1.145
0.606
*Was
Cable and satellite television service in 2017-18
It
is important to note that the CPI only collects data on consumer items. Price
and quality improvements on products purchased by businesses are not recorded.
This excludes a major source of innovation and productivity in the economy.
However, many of these changes are eventually captured as competition eventually
forces companies to pass most of the benefit on to consumers. Also excluded from
this table are subscriptions to on-line magazines, games, and music and video
downloads, which are treated just as if the consumer purchased them offline. Non-business
subscriber fees for residential television are included, but pre-recorded video-on-demand
subscription streaming services are not.
BLS
faces a constant problem separating out changes in general inflation from
changes in the quality and capacity of specific goods and services. Products
that seldom change from one period to another present little problem. However,
the true prices of products that change rapidly are more difficult to measure. A
current example is the rise in pay-per-view streaming which charges viewers fees
for a greater choice of programming content. If a replacement product is better
than its predecessors and BLS can measure the value of the difference in
quality, it will raise the price from the previous month to reflect that there
has been no change in the real price. In cases like this, nominal price
increases may simply reflect the fact that consumers are getting more for
their money. In this case the market is doing exactly what it should.
The
relationship between prices and growth is complex. Some experts argue that much
of the U.S. productivity boom in the 1990s and 2000s was due to statistical
agencies using hedonic measures to overestimate productivity gains. However,
others point to the large unincluded value of free services such as ChatGPT,
Facebook, Gmail, Google Maps, and YouTube. Although these services deliver
tremendous value to consumers, they are not counted in GDP. This debate will
not end soon. In the meantime, the important point is that technology does
increase our living standards even if the inherent level of data uncertainty
makes this hard to see.
As most of you reading this (hopefully) already know, the
Free State Foundation will be celebrating its Twentieth Anniversary with a
luncheon event on June 4 at the National Press Club.
Do you recall the opening lyrics to one of my favorite Jimmy
Buffet tunes, "Changes in Latitudes"?
"I took off a weekend last month just to try and
recall the whole year
All of the faces and all of the places wonderin' where
they all disappeared
I didn't ponder the question too long, I was hungry and
went out for a bite
Ran into a chum with a bottle of rum and we wound up
drinkin' all night!"
Forget about
the "chum with a bottle of rum" part – at least for now. But I will admit
that I spent a weekend last month – well, many weekends and weekdays over the
last couple of months – just trying to recall all that the Free State
Foundation has done in the two decades since its founding in 2006!
At the time,
in 2006, a friend told me, "Randy, if you do this, you're just going to be
one man and a fax machine. He was half right. I didn't have a fax
machine!"
Don't worry!
I'm not going to indulge myself here – or risk boring you – by reciting a
litany of my favorite events or publications, policy victories or defeats, and so
forth. But in the recesses of my own mind, I've done a lot of, as Jimmy Buffet
would say, "recalling" recently.
And I'll just
say, looking back, I'm truly proud of what we've accomplished.
Obviously, there
would have been no accomplishments without the hard work over the years of my many
FSF colleagues. Here, with the obvious disclaimer of limitations of space and
time, and the understanding that necessarily I am drawing a line, I want to
call out longtime FSF staff members Seth Cooper, Kathee Baker, and Andrew Long
for special appreciation for their contributions and commitments to the
organization. And my wife, Laurie, who has served as FSF Secretary/Treasurer
since the inception (or is it conception?), has contributed so much and has been
a source of support in so many ways that go beyond her "official"
duties. And thanks to all those staff members and Free State Foundation
academic advisors, unnamed here, for their many and varied contributions to our
success.
And, of
course, special thanks to those who have sustained our work with their
financial contributions. It goes without saying that we could not have kept the
lights on – and accomplished all we have – without your steadfast confidence in
the persuasiveness and integrity of our work.
What I am
most proud of, though, can't be measured by the number of Perspectives from
FSF Scholars published (849 from 2006 on) or the number of blogs posts (2,444
from 2006 on). Or the number of star-studded events held.
No, what I am
most proud of is that, since its founding, the Free State Foundation has remained
true to its proclaimed mission. Right at the start, I posted on our website that
FSF's mission was "to promote, through
research and educational activities, understanding of free market, free speech,
limited government, and rule of law principles … and to advocate laws and
policies true to these principles." Regardless of who held the White House,
which party controlled Congress, or who was in charge at the FCC or elsewhere
in government, we've tried to stay true to those foundational principles as
we've gone about our daily work.
Others, of course, are free to make their own judgments about what we've
done. But I'm satisfied that we have succeeded, over two decades, in remaining
true to promoting policies consistent with our principles. It's my fervent wish
that so long as FSF exists, it will continue to do so.
I leave on this note. As America celebrates its 250th anniversary, there
is no doubt we are living in challenging times – not for the first time, of
course. And for those toiling in the realm of public policy advocacy – like
Free State Foundation scholars – today's frenetic, frantic, hyper-ventilated,
"influencer"-saturated environment certainly presents challenges. Too
often, public policies appear to be divorced from foundational principles – for
example, free markets, free speech, property rights – that not long ago were proclaimed
sacrosanct.
It is the season of click-bait, with crude memes, name-calling, and even
profanity-laced tirades much in fashion in places where they would have been
verboten only yesterday. This makes constructive civil discourse in the public
policy space ever more challenging. But this is not the place where I wish to cast
aspersions on any person, party, group, or special interest. And, truth be
told, there's enough aspersions to cast all around!
This is what I want to say now. However difficult America's challenges
may be today, and however difficult the challenges may be today in the
policymaking arena in which the Free State Foundation labors, I am certain that
the best way forward for America to realize the promise of the Declaration of
Independence which we celebrate, and for FSF to be true to its founding vision,
is adherence to a fixed set of foundational principles. Indeed, that's the only
way forward.
Robert Frost, the quintessential American poet, declared: "Most of the change we think we
see in life is due to truths being in and out of favor."
Going forward, as it has been since June 2006, the Free
State Foundation's mission will remain helping to ensure that free markets,
free speech, limited government, and the rule of law endure as truths in favor.
***
I
would be very pleased to have you attend FSF's Twentieth Anniversary
Celebration on June 4 at the National Press Club. The event agenda is here.
Space is limited. To attend, you must register here if you haven't already
* **
What Others Are Saying About FSF's
Twentieth Anniversary
The latest broadband pricing report released by USTelecom | The Broadband Association (USTelecom) tells a familiar – and welcome – tale of falling prices and rising speeds.
Released on Tuesday and, as in previous years, prepared by Business Planning, Inc.'s Arthur Menko, "2026 Broadband Pricing Index: Faster Speeds, Lower Prices" (2026 BPI) analyzes data from 2025. It concludes that real (that is, adjusted for inflation) prices fell as speeds continued to climb. Specifically:
PRICE: For the most-popular offerings (those delivering download speeds between 100 Megabits per second (Mbps) and 940 Mbps), the 2026 BPI reports that real prices dropped by 6 percent. The price of so-called "entry-level" plans – which provide download speeds between 100 and 249 Mbps and which USTelecom characterizes as "the most accessible tier for price-sensitive households" – reportedly decreased by an even greater margin: over 17 percent. According to the 2026 BPI, the price of gigabit (1,000 Mbps or greater download speeds) services fell nearly 5 percent.
SPEED: The 2026 BPI concludes that subscribers to the most-popular offerings in 2025 saw speeds increase by nearly 22 percent – and since 2014, those speeds have increased by 145 percent.
Americans appear to recognize that the broadband value proposition hasn't merely improved but stands as a welcome outlier in comparison to other household expenses. According to a March 2026 survey of 1,500 likely voters conducted by Impact Research and cited in the 2026 BPI, only 2 percent of respondents identified the price of home Internet service as a top two cost concern, rendering it the least pressing of all surveyed categories, which included groceries, health insurance, housing, gasoline, and prescription drugs, among others.
It is important to note, of course, that none of this happens by accident. Thanks to the expenditure of tens of billions of dollars in private capital each year – according to an October 2025 USTelecom investment report, nearly $90 billion in 2024 and over $2.2 trillion total since 1996 – fierce competition among a diverse set of facilities-based providers increasingly delivers better service at lower cost.
In a companion blog post, USTelecom CEO Jonathan Spalter summarized the report in plain terms – "broadband internet service continues to deliver more value for less money" – and urged policymakers to ensure that those trends continue. Specifically, he identified copper retirement and permitting reform as two areas ripe for further deregulatory action.
Free State Foundation scholars have summarized every BPI report released by USTelecom. Posts to the FSF Blog addressing previous versions are available here: 2024 | 2023 | 2022 | 2021 | 2020.
To view videos of FSF’s Seventeenth Annual Policy Conference, March 2025, at the National Press Club, click herehere!
FSF EMPLOYMENT OPPORTUNITIES
The Free State Foundation is seeking to fill the positions for Senior Fellow, Research Fellow, and Research Assistant. For information and to apply, please clickhere!
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