PRESS RELEASE: The USF Fund May Be Constitutional, But It's on Shaky Ground

 

Free State Foundation President Randolph May issued the following statement regarding the Supreme Court’s decision in the FCC v. Consumers’ Research case:

“While the Supreme Court upheld the constitutionality of the FCC’s universal service programs, I hope the challenge at least served to highlight the long-standing problems with the nearly $10 billion per year Universal Service Fund. Without meaningful substantial reform, the USF fund, as it exists now, is unsustainable. Consumers of traditional telephone services are now paying a tax of 36% on all their calls as the contribution base continues to shrink. Congress needs to get serious about engaging in a top-to-bottom examination of the program to determine its size and scope going forward, how it should be funded, or whether it should even exist."

 

FCC Deletes, Modernizes, Streamlines Cable Rate Regulation

At today's Commission open meeting, Chairman Brendan Carr's IN RE: DELETE, DELETE, DELETE initiative bore fruit when the agency adopted a Report and Order providing the cable industry with long-overdue relief on the rate regulation front. As long as Section 623 of the Communications Act remains on the books (see below for more on that), the rate a cable operator not facing "effective competition" – essentially a null set, legally speaking, since 2017 –charges for the Basic Service Tier (BST) remains subject to regulation. This item, (circulated version available here), however, "will remove from … regulations approximately 27 pages, 11,475 words, 77 rules or requirements, and 8 forms."

The Report and Order deregulates most cable equipment, exempts smaller systems, and declines to extend its rules to commercial establishments. It also modernizes and streamlines those rules that remain in place, primarily to reflect the sunset, over 25 years ago, of tier regulation beyond that of the BST – that is, the tier (1) upon which local broadcast television stations and public, educational, and government access (PEG) channels must be carried, and (2) to which rate regulation in theory still applies.

In practice, of course, given the ubiquitous presence nationwide of "effective competition" from direct broadcast satellite (DBS) operators, telco TV providers, and virtual multichannel video programming distributors (vMVPDs), rate regulation of the BST no longer occurs. As the item notes, the Commission itself is "unaware of any local communities that are actively regulating cable rates at this time."

In a June 5, 2025, post to the FSF Blog, Free State Foundation President Randolph May described this undertaking broadly as "a meaningful regulatory reform accomplishment" and referenced the following language from our comments: "what primarily stands in the way of unbridled, consumer-benefitting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply." The Report and Order, the goal of which is to "unleash prosperity through deregulation," is significant step in the right direction.

Speaking of deregulation, according to Law360 (subscription required), earlier this week House Energy and Commerce Committee Chairman Brett Guthrie (R-KY) stated that "'it's time to have a real conversation and update the 1992 Cable Act.'" Consistent with the position for which I (as well as others associated with the Free State Foundation) long have advocated, most recently in "Deregulation Is the Cure for the Video Regulatory Disparity," a June 9 post to the FSF Blog, Chairman Guthrie indicated that he opposes calls to extend legacy MVPD regulation to virtual alternatives: "'I fear that imposing additional regulation on this industry rather than relieving burdens on others would slow down innovation rather than encourage it.'"

Nielsen: Streaming Surpassed Cable and Broadcast Combined in May

Nielsen's The Gauge™ provides a monthly snapshot of consumer viewing behavior. More to the point, it documents the trend over time away from traditional sources – "cable" and broadcasting – toward streaming options. Over the last four years, I have highlighted a few noteworthy milestones on that path:

• In "Nielsen: Viewership of Streaming Video Has Surpassed That of Broadcast Television," a June 2021 post to the FSF Blog, I noted that, in May 2021, consumers for the first time spent more time watching streaming services (26 percent) than broadcast television (25 percent).

• In September 2022's "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives from FSF Scholars, I pointed out that, as cable subscriber losses approached 1 million (949,209) during the second quarter of 2022, streaming for the first time exceeded one-third of total viewing.

• In an October 2022 post to the Free State Foundation blog, I reported that, in September 2022, for the first time streaming (36.9 percent) surpassed cable (33.8 percent).

The zero-sum ascendence of streaming continues: according to the most recent edition of The Gauge, in May 2025 streaming (44.8 percent) for the first time exceeded cable and broadcast television combined (44.2 percent):

In a Perspectives published earlier this month, I wrote that "[f]ar from raising competitive concerns, the Charter-Cox merger appears to represent a pragmatic effort to accelerate the modernization of legacy cable offerings to a world where video competition is both fierce and consumer-driven." This latest data point from The Gauge serves to underscore that conclusion.

FSF Is Hiring! Positions Available

The Free State Foundation, one of the nation's leading pro-free market, free speech, property rights, and rule of law independent think tanks is hiring to accommodate its continued growth and to maintain its leading position in the communications law and policy, intellectual property, constitutional law, and administrative law fields.

Here are the currently open positions:

• Vice President and Senior Fellow

• Senior Fellow, Research Fellow, and Research Assistants

While we welcome applications to join FSF's highly respected team, please read the required qualifications carefully and only apply if you meet them!

President Trump Holds White House Meeting to Discuss EchoStar and FCC Review

News outlets have reported that President Donald Trump held a meeting at the White House with EchoStar Chairman Charlie Ergen and FCC Chairman Brendan Carr on June 12. Although we do not know for certain what was discussed at the White House meeting, it is a supremely safe bet that the conversation included the FCC's current review of EchoStar's compliance with deadlines for reaching wireless facilities construction milestones. Reports indicate the President rightly hopes to prevent a scenario in which a major U.S. company goes bankrupt. 

EchoStar previously acquired wireless spectrum licenses in conjunction with the T-Mobile/Sprint merger and settlement with the U.S. Department of Justice. It has invested billions in private capital to build out a nationwide 5G wireless network, which is available to 80% of Americans. EchoStar's network offers a fourth competitive nationwide facilities-based mobile wireless service, and its network is unique for its deployment of Open Radio Access Network (Open RAN) technology. 

 

Free State Foundation President Randolph May and I expressed our views regarding the FCC's review of EchoStar's compliance with buildout commitments in reply comments filed on June 6.

Reduce Multiple Government Agency Merger Reviews

On June 11, the Connecticut Public Utilities Regulatory Authority reportedly issued an order approving the Verizon/Frontier merger. The approval is welcome news, insofar as it involves the clearing of a regulatory hurdle to the completion of a pro-competition, pro-consumer transaction. As explained in a blog post from last month, the FCC approved the Verizon/Frontier on May 16. In its order, the FCC found that there are no potential transaction-related public interest harms and that there are some likely public interest benefits from the transaction. Verizon's and Frontier's wireline services operate in different geographic territories, meaning consumers do not lose a choice of providers as a result of the merger. Moreover, Verizon is more likely to invest in and improve service in Frontier territories than Frontier would absent the merger. Verizon's acquisition of Frontier means that fiber will reach more Americans – sooner.

 

Even with the approval by Connecticut regulators, the Verizon/Frontier merger is reportedly subject to pending reviews by state regulators in Pennsylvania and California. This raises the process issue of whether overlapping reviews of proposed mergers by state regulators are likely to provide added public benefits or more likely to result in extra costs and delays due to redundant reviews. This is not a new issue; it was the subject of my December 2010 Perspectives from FSF Scholars, "Multiple Government Regulatory Reviews Burden Telecom Mergers with Too Many Conditions." Therein, I discuss the problem of compounding process costs and regulatory conditions that can result from redundant merger reviews. 

 

One approach for a more efficient, streamlined process for mergers involving interstate communications service providers is to enable a sole federal agency review process in which state regulators are encouraged to provide input regarding state-specific concerns. 

 

Also, the FCC could adopt rules or issue a declaratory order setting forth limits on state regulatory conditions for merger approval as well as limits on state-level merger review process shotclocks. Actions by state regulators that transgress those limits and conflict with federal law would be subject to federal preemption. Certainly, this approach is viable in the interstate wireless communications services context, as merger review by state public utility commissions effectively constitutes state-level restrictions on market entry contrary to Section 332(c)(3) of the Communications Act. 

 

Hopefully, Pennsylvania and California will promptly conclude their reviews of Verizon/Frontier and allow fiber broadband to timely deploy to more Americans. 

Regulation Article Critiques the Weak IP Rights Regime

The Spring 2025 issue of Regulation magazine features an eye-opening article by Law Professor Jonathan M. Bartlett titled "The Perils of 'Free' Information." In the article, Mr. Bartlett tackles the narrative that IP owners are exploitative monopolists that inflate prices and bar competition and corresponding legal and policy strategies employed by certain tech platforms "to weaken IP rights to reduce the costs of securing content and tech assets, which are then monetized within a portfolio of complementary products and services." 

One of Mr. Bartlett's insights is that "even [IP-free] markets usually restore some form of property rights—whether implemented by IP law, contract, or technology—to sustain incentives to invest in innovation." He describes how tech platforms have migrated toward closed-access subscription models that rely on technology and contracts to serve as a function equivalent of IP rights. The weakening of IP rights undermines innovation and market entry by new competitors. According to Mr. Bartlett, "[w]hile innovation in information-technology industries can sometimes persist in a weak-IP environment, it would likely take place principally within the bundled product-and-service ecosystem maintained by tech platforms or the vertically integrated structures maintained by large bricks-and-mortar producers." 

 

Mr. Bartlett writes that "IP rights are often a precondition for sustaining the innovators and artists that drive knowledge ecosystems." He is in good company in writing this. The idea that creators and inventors require secure and exclusive rights in their writings and discoveries to fully realize their ideas and bring them to market goes back to the earliest days of our nation when the Framers of the U.S. Constitution drafted the Article I, Section 8 IP Clause. 

 

Mr. Bartlett's article is worth reading in full. It is based on his important new book, The Big Steal: Ideology, Interests, and the Undoing of Intellectual Property (Oxford University Press, 2024).