EchoStar: Chutzpah in Communications Land

 A classic example used to explain the meaning of the Yiddish term "chutzpah" is the joke about a boy who murders his parents and then begs the judge for mercy because he is an orphan.

 

EchoStar hasn't killed anyone. But its ploy to claim payments from the trust fund the FCC required EchoStar to establish as a condition of its approval of the transfer of EchoStar's spectrum licenses to AT&T and SpaceX certainly qualifies as one of the most egregious acts of chutzpah in Communications Land.

 

The background facts are well-known. When the FCC's Wireless Telecommunications Bureau (WTB) approved EchoStar’s sale of its licenses on May 12, 2026, for tens of billions of dollars, it required EchoStar to set up a trust fund to help pay tower companies and others that helped construct EchoStar's 5G network. While EchoStar was required to build the network as a condition on its licenses, it refused to pay the vendor companies that actually did so.

 

EchoStar has now told a federal bankruptcy court that this fund can be used to pay a loan one EchoStar subsidiary supposedly made to another, a claim so large, according to the WTB, it threatens to "swallow the fund."

 

In a July 30, 2026, order, the WTB firmly rejected EchoStar's act of chutzpah: "We disagree, and clarify what should be obvious – that the fund cannot be used to pay companies that did not build the network. And to ensure that that the purpose of the fund is not perverted, we also modify the fund’s terms to explicitly exclude from payment any claims of EchoStar or its subsidiaries."

 

Never one to give up on a far-fetched gambit – especially one trying to "swallow a fund" meant for the benefit of others – EchoStar has now asked the full Commission, in an August 30 Application for Review, to reverse the Bureau's order. EchoStar contends that, because the agency's order establishing the trust does not explicitly limit the payouts to claims of third parties, it's entitled to take funds from the trust with one hand that it supplied with the other.

 

The Wireless Telecommunications Bureau's July 30 order, to ensure its intent in creating the trust fund is carried out, modifies the definition of a fund claim to exclude any claims on behalf of EchoStar or its subsidiaries or affiliates, or any assignee thereof. The Bureau's July 30 order explains what almost certainly was evident to all when the FCC required that the trust fund be established as a condition of its approval of the transfer of EchoStar's spectrum licenses:

 

"The purpose of requiring EchoStar to create the Fund was to ensure that some of the tens of billions of dollars EchoStar is receiving for its wireless licenses be used to pay those who built the 5G network that EchoStar promised and was required to build as a condition on holding those licenses. That purpose is not realized if EchoStar pays the money to itself (directly or indirectly), or uses it to pay other of its debts or those of its subsidiaries or affiliates."

 

In essence, EchoStar's main argument seems to be that the Administrative Procedure Act prevents the Bureau from clarifying its July 30 order to make crystal-clear, if need be, that the lack of an explicit limitation in the agency's original order creating the trust fund did not mean that EchoStar itself would be able to claim payments from the very trust it funded. I don't think the APA does any such thing.

 

If EchoStar's gambit succeeds, not only would the specific tower and other 5G infrastructure builders for whose benefit the trust fund was established be injured, but, as importantly, the prospect for future network build-outs will be diminished as a result of the lack of confidence that contracts will be honored and that the rule of law will prevail.  

 

I forget what happened to the orphan who, in a show of chutzpah, pleaded with the judge for mercy after killing his parents. But you don't need to be an expert in administrative law or in Yiddish to suspect that, in this instance, EchoStar's exercise of chutzpah in Communications Land will be to no avail.

Maryland’s Digital Ad Tax Struck Down: The Fight Is Likely to Continue

Last week, the Maryland Tax Court struck down the state’s controversial 2020 digital advertising tax on grounds that it violates the Constitution and the federal Internet Tax Freedom Act (ITFA). The ruling on the first-of-its-kind law drew national attention as tech companies, advertisers, and other statehouses watched to see what it might mean for digital product taxes nationwide.

While mounting legal defeats signal trouble for various states’ attempts at digital ad taxes, it's likely states will keep looking for ways to tax and regulate tech. The impetus stems from two key drivers in our current political environment – governments’ persistent urge to tax their way out of their over-spending habits and a growing public antipathy towards large technology companies.

The tax, passed in 2020, applied to companies that sell digital advertising in Maryland, with progressive tax rates from 2.5% to 10% based on company revenue. The Maryland Tax Court ruled on August 14 in favor of challenges filed by Apple, Google, and streaming service Peacock TV. The court – an administrative quasi-judicial agency whose decisions are binding – also ordered the state to refund over half a billion dollars ($536million) it collected since the tax took effect.

The tax court determined that the law violated the Constitution’s dormant Commerce Clause and Due Process Clause as well as ITFA. The tax violates the First Amendment by discriminating against digital advertising and exempting print and broadcast ad sales. The weak legal standing was clear from the start. Free State Foundation scholars predicted back in 2020 that the tax would not survive judicial scrutiny. This ruling also follows last year’s decision in federal appellate court that the tax’s pass-through provision – which prohibited companies from directly passing the tax costs to consumers – violated the First Amendment.

Comptroller of Maryland Brooke Lierman, in response to last week’s ruling, said that she and the Attorney General of Maryland would continue to defend the tax law. This could include possible appeals to the state trial court, where the law could get stuck for a while. Until a final outcome, the state will continue holding the taxes already collected.

These defeats in state tax and federal appellate courts (hopefully) signal trouble for digital ad taxes in other states. Illinois, Utah, and Washington have also passed digital ad taxes. Utah, apparently sensing legal trouble brewing in Maryland, crafted its 2026 digital ad tax law to skirt ITFA violations by avoiding the phrase “digital advertising.” Digital ad taxes are part of a wider push across states to tax digital goods and services. In 2026 alone, 22 states considered proposals to tax digital ad sales, with 12 bills enacted, according to a MultiState analysis.

This growth in digital tax proposals is happening as many states explore ways to tax their way out of their spending problems. Proponents argue they just want to raise revenue and modernize the tax code by taxing newer goods and services. In Maryland’s case, it adopted the tax partly to help fund the state’s massive education plan, which is contributing substantially to unsustainable spending and budget challenges. A MultisSate report describes how Maryland is among many states facing such serious budget issues.

Public antipathy towards large technology companies and targeted advertising is also a major impetus for the wave of digital ad tax proposals. Supporters of Maryland’s tax made clear (here and here) that they wanted the tax to penalize “big tech companies” for “monetiz[ing] personal data for targeted advertising.” Maryland Comptroller Lierman also said in her statement that an appeal would be to “ensure that the country's biggest tech companies pay their fair share.” And of course, digital advertising taxes are among many other regulatory proposals aimed at tech such as age verification, digital privacy, data center moratoriums, and AI regulation.

In this debate about digital ads, “tech giants,” private data, and “taxing the rich,” the tax proponents misunderstand who the real winners are from this ruling – Maryland businesses that buy ads and consumers who receive them. Without the tax, those businesses can afford more ads and pass along savings and better-targeted offers to everyday people – the consumers. And in the voluntary exchange that is the lifeblood of the Internet, people share information in return for free access to websites. Targeted advertising helps people browse websites freely to find the best products and services at the best possible prices, which helps lower-income consumers the most.

Marylanders need another win in the state trial court or, better yet, state surrender. Moreover, states need an approach opposite to what we’ve seen – one that embraces lower taxes and the Internet’s free market-oriented voluntary exchange of information.

PRESS RELEASE: "FSF President Randolph May Applauds the California PUC's Approval of the Charter-Cox Merger"

 

I'm pleased that the California Public Utilities Commission – finally! – approved the proposed Charter-Cox transaction, clearing the way for the merger to be consummated. It's worth remembering that the proposed merger was announced in May 2025. That's a long time ago in today's fast-changing communications marketplace.  

It was easy to see from the get-go that this merger is much more likely than not to be pro-competitive and pro-consumer. This is because Charter and Cox do not compete against each other in any meaningful way in their broadband and video distribution businesses. The reality is that, in today's facilities-based multi-platform communications environment, they each confronted strong broadband and video competitors, whether from fiber providers, wireless companies, broadcasters, satellite operators, and not least, from giant Internet streamers like Netflix, YouTube, Amazon, and so on. Together, the combined Charter and Cox will be a stronger competitor in an indisputably dynamic marketplace – although there are certainly no guarantees for success for any of the market participants.

 

And an important final point: The current merger review process takes longer than it should, and the requirement for individual state approvals – like California's here – is one reason the process is unduly long. This is especially so when states use the transaction review process to extract so-called "voluntary" conditions from the merger applicants before granting approval, even though the conditions often are unrelated to the specifics of the merger.

 

For many years, Free State Foundation scholars have advocated the adoption of reforms to improve the merger review process at both the federal and state levels. There's still work to be done on that score.

California Reward Programs Underscore Gravity of Copper Theft

California, in particular, has a serious problem. Its communications infrastructure is under assault. And high-value copper is the motivator. Fortunately, there is a solution: deregulatory policies that promote the transition to all-IP networks.

Earlier this week in California, Verizon "announced a $25,000 reward program for information leading to the arrest and conviction of individuals involved in vandalism that have cut off thousands of Verizon customers from critical wireless and wireline communications services." AT&T created a similar reward program last August specifically focused on copper-related crime in the Golden State.

Outdated regulations that force providers to maintain legacy copper-based networks incentivize such vandalism and theft. These include California's "Carrier of Last Resort" rules that are the subject of a pending Petition for Preemption and Declaratory Ruling filed by AT&T – and in support of which Free State Foundation President Randolph May and I filed comments and replies.

As Verizon highlighted in its press release, "California is at particular risk for vandalism – when it comes to the economic impact of these outages, the state saw the largest losses at $252.6M." In the petition referenced above, AT&T wrote that in California alone it must "spend $1 billion a year to maintain a nearly-empty copper network that has become an easy mark for criminals" and reported roughly 2,000 outages attributable to copper theft in just the first five months of 2026.

No matter what the form, deregulatory actions that accelerate the migration to all-IP networks – forbearance pursuant to Section 10 in the context of a general rulemaking proceeding (regarding which the Free State Foundation filed comments) or a petition for specific relief, or preemption in response to the petition filed by AT&T in the wake of the FCC's March 2026 Network Modernization Order – help relieve carriers from the obligation to provide thieves with additional helpings of copper (among other pro-consumer benefits).

They also mitigate the need to enlist ordinary citizens in the fight against vandalism and theft through the offering of bounties.

Permitting Reform Remains a Top Priority: BEAD Contractors Need to Obtain Over 86,000 Permits

In order to complete all of the construction projects funded by the $42.45 billion Broadband Equity and Access Deployment (BEAD) program, a new study projects that contractors will have to obtain at least 86,402 permits from a wide range of governing bodies. While some permit processes may go smoothly, others are already imposing significant costs and delays. Moreover, the estimate likely understates the scope of the problem, as the authors made several conservative assumptions in producing the report. Permitting reform is already a significant focus of both Congress and the FCC. It needs to remain a top priority as this report documents.

On August 5, 2026, Broadband Expanded issued a study and summary conducted by Alex Karras and Michael Santorelli to quantify the size of the permitting challenge that contractors face across the nation. They find that “BEAD-funded broadband builds face a broad, multi-jurisdictional permitting burden.” Looking at just the basics, the study covers 2,942,440 BEAD-funded locations within 3,783 projects and 126 federal, state, and local jurisdictions. This produced 6,933 project areas (a match between a single project and a specific permitting jurisdiction) and tries to measure the number of permits each will require. In total the study identifies 86,402 permitting “triggers.” The median project area faces 11 triggers and 8 permitting authorities.

 Who requires these permits? The study assumes that every project area will require at least one permit from each of the counties in which it is located. It also reports that 95.2 percent of project areas trigger a federal environmental review. At the state level, 75.5 percent of project areas require state-level permitting (mainly for highway rights-of-way) and 61.7 percent require municipal permits.

The authors made several conservative assumptions. As a result, the actual number of permits is likely to be significantly greater than projected. These assumptions include:

• Each permitting requirement is only counted once in each project area even though in many cases the jurisdiction may require more than one permit to complete the project.
• Due to data limitations the analysis does not include permits for infrastructure that is not physically close to a served household.
• The study omitted all satellite projects on the assumption that they require no physical plant and therefore do not need permits.
• Features crossed only by fiber or other infrastructure running between premises with no construction are not counted.

Other than counties (which are assumed to apply to all projects), the most common triggers for a permit are wetlands (89.4 percent of projects), flood zones (72.6 percent), interstate, U.S. and state highways (71.6 percent), impaired waters (64.6 percent), and municipal overview (61.7 percent).

Because they touch many projects with different responsibilities, some entities have a larger presence than others. The U.S Army Corps of Engineers covers 89.8 percent of project areas, the Environmental Protection Agency 83.2 percent, and the Federal Emergency Management Agency 72.6 percent. Since federal agencies issue 48.2 percent of all permits, permit reforms in these agencies will have an out-sized impact. The problem is not limited to government authorities. Private parties account for 15.7 percent of permits. Railroads account for 44.3 percent of all projects (as opposed to permits issued). Utilities and pipelines are also significant. 

Harras and Santorelli do a good job of summarizing the basic size of the permitting process. They conclude that “ISPs face a thicket of byzantine permitting processes at the local, state, and federal levels that could slow or derail progress towards meeting BEAD’s goals at scale." Given their assumptions, the figures are likely a lower-bound estimate of the true burden.

The problem is further complicated by the fact that each jurisdiction has its own timetables, requirements, and processes. In addition, the BEAD program contains time limits that contractors must meet once they have received government funding. Finally, many jurisdictions lack the resources to handle a sudden surge in construction. On the upside, the BEAD program currently has $21 billion in unspent funds. Free State Foundation scholars have supported using at least some of these funds to improve the permitting processes that currently delay broadband deployment.

FCC to Improve USF Management but Still Congressional Reform Is Needed

The FCC voted last week to strengthen its management of the Universal Service Fund, including improving the FCC’s oversight of the Universal Service Administrative Company. Chairman Brendan Carr called this effort a “top-to-bottom review of all aspects of the USF by looking at how these programs are being administered.”

I welcome the FCC’s ambition here to review the fund that subsidizes telecommunications services across the country. Administrative improvements are commendable and help make for proactive, responsible regulators. But what the USF still really needs is comprehensive reform from Congress to fix deeper issues, something Congress has talked for years about doing.

Reflecting the USF’s deep issues is the out-of-control contribution factor – basically a tax – that funds the USF. Now, interstate and international telecom revenues are being taxed at 38.8% and likely will keep climbing until Congress acts.

The tax rate rose from 9.1% in the second quarter of 2003 to 38.8% in the third quarter of 2026. That’s correct – the USF tax rate more than quadrupled over the 23-year period from the earliest readily available data to the most recent data. And in the last five years alone, the tax rate rose from 31.8% in the third quarter of 2021 to 38.8% in the third quarter of 2026 – a 22% or 7-percentage-point increase.

 

Until Congress enacts major reform, the existing USF regulatory scheme requires the tax rate to keep climbing to sustain its level of funding. This pressure exists because the tax base – traditional interstate and international telecom revenues – that pays into the fund is shrinking as consumers rely more on services other than traditional telecom services to communicate. In September 2025 comments submitted to the Senate USF Working group, the Free State Foundation summarized this issue here.

Additionally, Free State Foundation scholars routinely discussed how the fund’s High Cost program is redundant and outdated. These days, (too many) overlapping federal subsidy programs support broadband deployment. And already deployed capable infrastructure has greatly reduced the number of areas with prohibitively high costs anyway.

A bicameral, bipartisan group of legislators created the Universal Service Fund Working Group in 2023 to reform the fund, largely to address the shrinking tax base. The group relaunched in 2025 after a hiatus and collected public comments in September 2025, including those from the Free State Foundation.

Since then, the working group has hit delays. In the most recent public update, Rep. Richard Hudson (R-NC), a member of the group, said the group aimed to introduce draft legislation for major reform in June 2026. And before that, he estimated May 2026, citing “tremendous progress.” But no draft bill has been introduced to date.

The telecommunications marketplace has changed so radically since the creation of the current USF’s regime that top-to-bottom reform is needed without further undue delay. Hopefully, Rep. Hudson’s estimates are close to becoming reality, and we will see legislation unveiled this year to help Americans access telecommunications in a more cost-efficient and cost-effective way that avoids waste and fraud.

Otherwise, the chart above will continue to show a sharp upward trend on the right-hand side.

California PUC Scheduled to Vote on Charter/Cox Transaction: Additional Bites at the "Conditions" Apple Shouldn't Be Allowed to Upset the Pro-Consumer Cart

Next Thursday, the California Public Utilities Commission (CPUC) at long last is poised to vote on the transfer of control of Cox Enterprises, Inc. (Cox) to Charter Communications, Inc. (Charter). And with little time to spare. The question is, will extra-legal attempts to saddle this pro-consumer transaction with unjustified conditions "jeopardize the Transfer's public benefits altogether"?

In comments filed with both the CPUC and the FCC, a June 2025 Perspectives from FSF Scholars, and a series of blog posts, Free State Foundation President Randolph May and I consistently have argued that the proposed combination of Charter and Cox is likely to generate clear consumer-benefitting efficiencies and, as a result of the de minimis overlap of their service territories as well as the impact of intense competition from Big Tech, no significant offsetting harms.

As we concluded in our submission to the FCC:

[T]he combination of Charter and Cox promises numerous consumer benefits. These include [(1)] lower costs, greater choice, and additional innovation in traditional cable offerings (broadband and video) fostered by an enhanced ability to compete with often much larger rivals, including Big Tech platforms with global reach; (2) the expansion of Charter's hybrid [mobile virtual network operator] offering into Cox's footprint combined with lower costs through greater scale; and (3) the "onshoring" of Cox customer-service jobs. And given the lack of any meaningful overlap in service territories, not to mention the high level of third-party competition in all three marketplace sectors, there appears to be little, if any, basis for concern that the transaction could result in significant harms.

*    *    * 

Regarding the state of play in California, the last hurdle that the transaction must clear, let's start with (potentially) good news: as I noted in my June 23 post to the FSF Blog, the parties expressed concern in a June 18 notice of ex parte communication that the CPUC's failure to act by August 13 – that is, the very day upon which the vote is scheduled – could result in the expiration of the Department of Justice's Hart-Scott-Rodino (HSR) approval. That "would cost the companies $2.5 million in filing fees and require them to wait at least another 30 days for DOJ clearance."

Should a vote to approve proceed as scheduled, those imminent instances of inefficiency and waste would be averted.

And now, let's turn to the (potentially) bad news: as I described in that same blog post, commenters, certainly aware of that looming deadline, had urged the CPUC to impose still more conditions – that is, on top of those agreed to by the parties in comprehensive settlements (Settlements) with the CPUC's Public Advocates Office and the California Emerging Technology Fund (CETF) and described in a May 18 notice of ex parte communication.

(Without getting too far into the weeds, there are two proposals before the CPUC: (1) the Proposed Decision of Administrative Law Judge Ormond (PD), to which Charter and Cox roundly object, and (2) the Alternative Proposed Decision of Commissioner Matthew Baker (APD), which is based upon the Settlements.)

In reply comments, CETF took issue with the PD, contending that "[b]ottom-line, a settlement agreement requires the assent of its parties" (emphasis in original).

Similarly, in their reply comments regarding the PD, Charter and Cox asserted it "deviates from longstanding Commission precedent, resulting in 'clear legal error and technical inconsistency,' by improperly superseding Settlement terms, and imposing extraneous measures with no record support. It would materially impede Charter's ability to compete and jeopardize the Transfer's public benefits altogether" (citations omitted).

By contrast, Charter and Cox noted approvingly in their reply comments on the APD that it "correctly finds that the Transfer, with the Settlements, serves the public interest, and, 'paired with the mitigations' that Joint Applicants accept (subject to modest revisions), also 'address[es] concerns raised by parties outside the [Settlement A]greement[s]'" (emphasis in original).

*    *    *

The Settlements to which Charter and Cox – as well as the CPUC's Public Advocates Office – are a party appear to be more than sufficient to address any potential harms resulting from this transaction. The CPUC therefore should reject calls to unilaterally supersede those agreements and instead approve the APD at its meeting next week.

FCC Simplifies Its Broadband "Nutrition" Labels

On July 22, the Commission adopted a Report and Order modifying its broadband "nutrition" label rules. According to the News Release, these changes "mak[e] [the labels] a more useful tool for consumers and reduc[e] compliance burdens on providers." They also bring those rules into better alignment with their authorizing congressional language.

2021's Infrastructure Investment and Jobs Act directed the Commission to "promulgate regulations to require the display of broadband consumer labels, as described in the Public Notice of the Commission issued on April 4, 2016 (DA 16–357), to disclose to consumers information regarding broadband Internet access service plans" (emphasis added).

"GFiber FCC Broadband Label" by Wikimedia Commons user JBoots07 is licensed under CC BY-SA 4.0.

But as I cautioned in a Perspectives from FSF Scholars published prior to the adoption of the original rules in November 2022, various commenters would have the agency ignore such statutory guardrails and instead "overload those labels with extraneous information intended to advance unrelated policy agendas rather than facilitate broadband comparison shopping."

Regrettably, the FCC at that time did not embrace my concerns.

The item adopted on July 22, however, addresses that overreach – and at the same time renders the labels more useful for consumers and less burdensome for ISPs. As the News Release underscores, the "initial broadband label rules … resulted in sometimes-confusing labels that strayed beyond the statutory framework Congress created, increasing compliance costs for providers in the process."

Among other things, the updated rules:

• Allow customer service representatives to communicate information contained in the labels conversationally rather than requiring them to read the labels word for word;

• Ensure "that consumers have … clear, accurate, and concise information about broadband plans, making the labels a more useful shopping tool";

• Eliminate obligations to provide outdated information, such as references to the since-discontinued Affordable Connectivity Program;

• Allow providers to "use links or icons at point-of-sale to avoid unwieldy amounts of information that can overwhelm consumers"; and, most saliently,

• Remove obligations that exceed the underlying statutory mandate.

In his Separate Statement, Chairman Brendan Carr assured that "[n]one of those changes come at the expense of transparency…. The result is a label that's easier for consumers to use, while reducing costs for providers. That's a win for everyone."