Thanksgiving Day - 2011

If calendars weren't so infallible, and I didn't smell the turkey roasting in the oven, I wouldn't believe it is already Thanksgiving.

But it is. And long-time readers know that I always – well, almost always – try to offer some special thoughts on Memorial Day, Independence Day, Thanksgiving, and New Year's.

Most every day of the year, including often weekend days, here at the Free State Foundation we're focused on espousing free market, property rights, and rule of the law principles. And in order for our work to be impactful, oftentimes we're focused on the nitty-gritty of thinking hard about how to translate those broad principles into sound policy recommendations that enhance the nation's welfare.

There aren't too many days that go by that I don't think, at least for a moment, about how fortunate I am to live in a country where I have the freedom to do what we do at FSF – advocate fundamental principles in which we believe. Too many people around the globe still lack this basic freedom.

So, I am thankful for this First Amendment freedom I have, and I am thankful for our Constitution that guarantees it.

And I am thankful for the opportunity to play a part in the ongoing American experiment in democratic republicanism (note the lower case) that has provided the American people with so much bounty and continuing promise.

Nevertheless, it would be foolish on this Thanksgiving, while rightly giving thanks for America's bounty and its promise, to ignore the serious challenges confronting our country in the months ahead. I especially have in mind today the severe fiscal straits in which we find ourselves, with an ever-rising $15 trillion national debt, the result of years of profligate overspending.

It is not the time today to ascribe blame or to push policy proposals. Instead, I want to share one of my favorite poems. There is something in the simplicity of it, and its simple meaning, that comports with the Thanksgiving spirit. And which does so in a way that makes us think anew about how one person extending a hand to another can make our communities and our nation stronger.

The Bridge Builder

by

Will Allen Dromgoole

An old man, going a lone highway,

Came, at the evening, cold and gray,

To a chasm, vast, and deep, and wide.

Through which was flowing a sullen tide.

The old man crossed in the twilight dim;

The sullen stream had no fear for him;

But he turned, when safe on the other side,

And built a bridge to span the tide.

“Old man,” said a fellow pilgrim, near,

“You are wasting your strength with building here;

Your journey will end with the ending day;

You never again must pass this way;

You’ve crossed the chasm, deep and wide --

Why build this bridge at the eventide?”

The builder lifted his old gray head:

“Good friend, in the path I have come,” he said,

“There followeth after me today

A youth, whose feet must pass this way.

This chasm, that has been as naught to me

To that fair-haired youth may a pitfall be.

He, too, must cross in the twilight dim;

Good friend, I am building this bridge for him!”

So, best wishes from those of us at the Free State Foundation for a Happy Thanksgiving and safe travels. And may the bridges you build be many and strong.

Report Examines the Present and Future of the Internet "Exacloud"

For the latest on Internet traffic trends look no further than "Into the Exacloud," a report just released by Entropy Economics' Bret Swanson. The report summarizes from and succinctly analyzes a number of recent studies and estimates on Internet traffic growth. It also looks at the latest advancements in network capabilities as well as applications and content demands. Not surprising, "online video is the driver of network traffic." In addition, the report includes forecasts for Internet traffic growth and related innovation along with some basic policy prescriptions to best accommodate what he calls the growing Internet-era "exaflood." Below is a liberal quotation of the report's executive summary:

• Very large investments in info-tech infrastructure – including wireless – will need to continue for years to come.

• Wireless capacity, coverage, and flexibility is the chief bottleneck that must be addressed – and is today’s chief public policy concern.

• Driven largely by Web video, network traffic continues to grow rapidly and may have accelerated in the last year or so.

• Networks are increasing in capacity, reach, and complexity, and content companies have become Internet infrastructure companies.

• Broadband connectivity enabled the rise of the cloud, and now the cloud requires ever more broadband – both wired and wireless.

• Enormous troves of data, both structured and unstructured, are piling up all over the world.

• The digital ecosystem, comprised of networks, devices, software, services, and the cloud is changing fast. Innovations are improving and disrupting most sectors of life and the economy, including entertainment, education, health, finance, retail, and government, not to mention our social fabric.

• The next generation of exacloud services will deliver unprecedented real-time content and software experiences and impose severe new demands on network capacity and speed.

On the public policy front, the report points to the importance of spectrum and deems wireless capacity to be a "crucial scarcity":

Part of this scarcity can be relieved through investment in new 4G networks and femtocells. A substantial portion of the scarcity, however, is due to a lack of available clean radio spectrum – the type of spectrum that can support 4G networks and the volumes and diversity of future traffic… Unleashing this spectrum through auctions and allowing greater flexibility to use, buy, and sell existing private spectrum is a paramount concern – if vive and thrive in the exaflood era.

This emphasis on spectrum for wireless services provides a timely reminder of the significance of NTIA's much-anticipated and hopefully soon-to-be-released report on the 1755-1850MHz. That spectrum band is a potentially rich resource for serving consumers' growing demands for next-generation wireless services.

FCC Should Pursue Solutions to Make Lifeline an Effcient Job Line

Posted for Deborah Taylor Tate 

Over the years, I've written a lot about the Lifeline-Linkup program which -- thankfully and finally -- is part of the overall USF Reform being undertaken by the FCC.  As a former FCC Commissioner and Federal Joint Board Chair, I had really hoped to start the "reform" back in December 2009; however, better late than never. And sometimes I wish I were still at the FCC so I could put out a statement whenever companies step forward with creative, positive solutions to real problems.

This past weekend, two of the leading Lifeline providers -- Nexus and TracFone -- announced a plan to help resolve a "bumper sticker" issue of "waste, fraud and abuse," specifically as it relates to any duplication of Lifeline. By law, Lifeline is restricted to one subsidy per household. Nexus and TracFone "plan to engage a third party vendor to develop and implement a database which will enable all ETCs [eligible telecommunications carriers] to determine whether applicants for enrollment in their Lifeline programs are enrolled in other ETCs' Lifeline programs." The two providers intend to "reach out to other Lifeline providers to participate in this cooperative effort" to prevent and reduce incidences of duplicative enrollment in Lifeline.

The FCC has an opportunity to adopt an industry-led, voluntary, resolution that will be cost-saving -- i.e., paid for by the companies themselves. It can certainly be implemented much more quickly than a burdensome bureaucratic government scheme.  And, most importantly, it will resolve the problem.

With 44 million Americans in poverty -- not to mention that a recent report recognized those communities are "predominantly of people of color" -- I have never understood why Lifeline was not being championed as a "job line."  Even though the FCC and this Administration say they are intent upon getting broadband deployed to every American, how incredible that huge segments of our population still do not have access to a simple phone. (And how odd that we often applaud developing countries for connecting their poor to cell phones while we still can do more to help our own citizens to gain access to communications in the 21st Century!).

We all agree that any fraud should be investigated, waste reduced, and abuse stopped. And, in the abstract, more regulatory oversight, stiffer eligibility rules and additional hoops to get Lifeline make for a terrific sound bite. However, with unemployment continuing at an all time high and Americans facing ongoing tough times, we should utilize a program that could actually help solve larger societal problems: helping link up someone who is jobless to a job, or accessing necessary health care, or just finding out your child is sick.

Lifeline was created during the Reagan Administration. As President Reagan so eloquently put it: "Welfare's purpose should be to eliminate, as far as possible, the need for its own existence." Lifeline-Linkup is one of the few government programs that does precisely that.

And by the way: Just try leaving your cell phone at home for a day and see what its like to be without your lifeline.

Congressional Subcommittee Passes Cost-Benefit and Other FCC Process Reforms

As covered in recent news accounts, the House Communications Subcommittee passed a pair of FCC process reform bills on November 16. In a November 3 blog post titled "Reforming the FCC's Regulatory Process," FSF President Randolph May discussed both bills: H.R. 3309 and H.R. 3310.

The FCC is an independent agency and not subject to existing Presidential Executive Orders regarding regulatory processes. So among its many provisions, H.R. 3309 incorporates some key language contained in Executive Order 12866 (1993) and Executive Order 13563 (2011) regarding identification harm and cost-benefit analysis.

H.R. 3309 contains requirement that must be met by the FCC in conducting rulemakings that will have an "economically significant impact"—i.e., will cost $100 million or more annually or have "a material adverse effect on the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local or tribal governments or communities." In particular, the FCC must identify and offer an analysis of "the specific market failure, actual consumer harm, burden of existing regulation, or failure of public institutions that warrants the adoption or amendment." The FCC must also provide:

Cost-benefit analysis is receiving increasing attention as a method for bringing more discipline to administrative agencies and for halting or perhaps even turn the tide against escalating numbers of new federal regulations. Taking reasoned steps to curb unnecessary costs and restrictions imposed by federal regulations is particularly important in light of our existing economic travails.

Also on November 16, Dr. Jerry Ellig and Sherzod Abdukadirov of the Mercatus Center published a short primer on "Regulatory Analysis and Regulatory Reform." Ellig and Abdukadirov sketch out a useful framework for assessing the quality of regulatory impact analysis and offer some prescriptions for improving such analysis. It should come as no surprise that they recommend that "[r]egulatory analysis must be legislatively required for all agencies, including independent agencies."

a reasoned determination that the benefits of the adopted rule or the amendment of an existing rule justify its costs (recognizing that some benefits and costs are difficult to quantify), taking into account alternative forms of regulation and the need to tailor regulation to impose the least burden on society, consistent with obtaining regulatory objectives.

Supreme Court Terminates Review of Early Termination Fees Case

Do early termination fees (ETFs) included in wireless service contracts fall under the category of wireless "rates" or under "other terms and conditions"? That's the question that was presented to the U.S. Supreme Court in Sprint v. Ayyad, a class-action lawsuit involving California customers charged ETFs for terminating their wireless service contracts. But the Supreme Court took a pass on answering that question, issuing an order denying certiorari on November 7.

The case was an appeal of a decision by the California Court of Appeals that held that, at least under the facts of the case, non-prorated ETFs charged by Sprint were not intended to be an element of the rates charged by the carrier for service but were instead intended as a liquidated damages clause to reduce churn. The California Appeals Court applied a presumption against preemption and found that, as a liquidated damages clause, the ETFs constituted "other terms and conditions" subject to California common-law remedies. As one may recall, in 1993 Congress amended the Communications Act by providing in Section 332(c)(3)(A) that states are preempted from regulating the entry of or rates charged by wireless carriers while states can continue to regulate other terms and conditions of wireless services.

The class action plaintiffs' attorneys were confident enough in their position in Sprint v. Ayyad that they waived their right to respond to Sprint's petition to the Supreme Court. However, there are weighty arguments to me made on both sides. Without addressing them in detail, it's worth recognizing that the handful of trial courts across the country that have considered the question of whether Section 332(c)(3)(A) have reached contrary conclusions. Even the California Court of Appeals acknowledged that:

It is certainly possible that elimination of ETF's may indirectly affect Sprint's rates to the extent that Sprint incurs costs in pursuing alternative remedies for contractual breach or that it would reserve for losses attributable to a potentially higher level of customer defaults. Sprint would presumably factor actual or projected lost revenue into its rate structure.

By declining to hear Sprint v. Ayyad, lower courts will likely continue to make contrary rulings as to whether or under what circumstances federal law preempts ETFs. And for its part, even the California Court of Appeals' decision left standing may offer lower courts little guidance due to the facts of that case. As a general matter, wireless carriers now universally include grace periods and prorated ETFs in their wireless services contracts.

The Supreme Court's order denying review might have been influenced by pending petitions seeking an FCC declaratory ruling that ETFs are "rates charged" under federal law. However, as the California Appeals Court noted in its ruling, "[i]t appears safe to say that any action by the FCC on this issue is not imminent."

Willful Denial and First Amendment Jurisprudence

With the submission of briefs to the Supreme Court in FCC v. Fox Television Stations (a.k.a. "the FCC indecency case"), I have been thinking, as I often do, about the Federal Communications Commission and the First Amendment.

The issue in the Fox Television case is whether the FCC's determination that three different broadcasts violated the agency's indecency policy is consistent with the First Amendment. Two of the broadcasts concern the use of "fleeting" expletives, and the other, "fleeting" nudity. If you want more graphic details, you can go to the briefs, or to the original broadcasts.

For my purposes here it is unnecessary to dwell on the specifics of the broadcasts, or my sense as to whether or not the broadcasts comport with my own standards of decency. What I want to do instead is to use the occasion to once again call attention to the need for a new First Amendment jurisprudence that treats all media the same. By that, I mean a First Amendment jurisprudence that accords all media, including broadcasters and cable television and satellite operators, the same robust First Amendment protection accorded to the print media.

In the case now before the Supreme Court, the Court of Appeals for the Second Circuit held unconstitutional the FCC's new context-based indecency policy on the basis that it is impermissibly vague. "Void for vagueness," as the constitutional doctrine goes. It is quite possible, perhaps more likely than not, that the Supreme Court will decide the case on this vagueness point.

But Fox and other broadcasters explicitly are asking the Court more broadly "to overrule Pacifica and recognize that broadcasters have the same First Amendment protections as other media." To the same effect, a distinguished group of former FCC commissioners and staff officials filed a brief declaring:

In today’s media environment, the distinctions drawn by Pacifica between broadcast and other electronic media are unsustainable. Viewers can access the same content across broadcast, cable, satellite, and the internet or can subvert the Commission’s enforcement efforts by simply switching channels or turning on a computer. This reality makes plain that the Commission’s efforts to impose a separate standard on broadcasters is woefully under-inclusive. The First Amendment cannot tolerate discrimination against one of several like speakers. It is time for this Court to declare that the same First Amendment principles apply to all media.

And I have long argued the same point. In a 2009 law review article published in the Charleston Law Review, I ended this way:

Hopefully sooner rather than later, the Court will revisit Red Lion, Pacifica, and Turner in order to establish a new First Amendment paradigm for the electronic media, one that is much more in keeping with the founders’ First Amendment vision. It may even move in this direction this Term upon its Fox Television decision. Perhaps it was predictable, maybe even likely, that the First Amendment’s protections would be limited substantially during the twentieth century’s Analog Age that tended towards a monopolistic or oligopolistic communications marketplace. But now, in the face of proliferating competitive alternatives attributable to profound marketplace and technological changes, it ought to be considered predictable and yes, even likely, for the Court to establish a new First Amendment jurisprudence befitting the media abundance of the twenty-first century’s Digital Age.

Of course, on the first trip up to the Supreme Court for the FCC's indecency decisions now on review, the Court did not confront the constitutional issues now before it. Instead, in Fox Television Stations, Inc. v. FCC (2009), it remanded the case to the appeals court, sustaining the FCC's actions on administrative law grounds, thereby avoiding a decision on the broadcasters' First Amendment claims. Notably, Justice Thomas, in a concurring opinion citing my Charleston Law Review article, invited reconsideration of Red Lion and Pacifica, the two principal cases that provide the foundational sanction for according broadcasters less First Amendment protection than other media. Justice Thomas stated: "The extant facts that drove this Court to subject broadcasters to unique disfavor under the First Amendment simply do not exist today."

Many, if not most, of the readers of this space are familiar with the posture of the Fox Television Stations II case now before the Court and with the First Amendment jurisprudence to which I have alluded. But many may not be familiar with one of the more eloquent calls ever for a new First Amendment jurisprudence, certainly one of the most eloquent delivered by an FCC commissioner. An FCC commissioner who suggested the FCC ought to relinquish, as a matter of constitutional duty, authority to regulate broadcast content. I have in mind then-commissioner Michael Powell's June 1998 address entitled, "Willful Denial and First Amendment Jurisprudence."

At the time I first read it, I found Mr. Powell's address a stirring, prescient declaration of free speech principles, with which I was in full sympathy. I pull out the speech from a ragged old folder to re-read from time to time. As the Supreme Court prepares to hear argument on, and decide, Fox Television Stations II this term, I suggest you too may find the address by Mr. Powell, now President and CEO of NCTA, worth reading, or re-reading.

Here are a few excerpts to whet your appetite:

This leads me to the heart of my remarks today. Though I consider the constitutionality of proposed broadcast regulation last when I work through such issues under the public interest standard, at least I do work through it. I have observed that while changes in technology, the law, markets and consumer preferences often ignite discussion about the impact of changed circumstances on broadcaster's public interest obligations, such changes rarely initiate an equally serious examination of their constitutional protections. I believe that any attempt to consider how changes in technology and the regulatory environment affect public interest obligations, necessarily must include a review of the underpinnings of current First Amendment jurisprudence. There is a symbiotic relationship between the scope and content of public interest duties and the Constitution. The greater the protection afforded by the latter the less intrusive the government can be with respect to the former.

***

I submit that the time has come to reexamine First Amendment jurisprudence as it has been applied to broadcast media and bring it into line with the realities of today's communications marketplace. As far back as 1984, the Supreme Court indicated in the League of Women Voter's case, that it would await "some signal from Congress or the FCC that technological developments have advanced so far that some revision of the system of broadcast regulation may be required." I believe we should be getting those signal fires ready.

***

With scarcity and the uniqueness of broadcasting such demonstrably faulty premises for broadcast regulation, one is left with the undeniable conclusion that the government has been engaged for too long in willful denial in order to subvert the Constitution so that it can impose its speech preferences on the public -- exactly the sort of infringement of individual freedom the Constitution was masterfully designed to prevent.

***

In sum, I submit that it is time to reexamine the defensibility of maintaining a separate First Amendment jurisprudence. We must take the truth about scarcity for broadcast media out of the closet. Rather than continuing to engage in willful denial of reality, the time has come to move toward a single standard of First Amendment analysis that recognizes the reality of the media marketplace and respects the intelligence of American consumers.

Recall that these excerpts are from a speech delivered in 1998, more than twelve years ago. Surely, it is time for the "willful denial" of First Amendment rights, of which the then-FCC commissioner Michael Powell so eloquently spoke, to end. It is time, as I said in my 2009 Charleston Law Review article, for the Supreme Court "to establish a new First Amendment jurisprudence befitting the media abundance of the twenty-first century’s Digital Age." This means a jurisprudence that willfully provides full First Amendment protection to broadcasters, cable and satellite operators, Internet service providers, print purveyors, and other media alike.

Internet Political Speech Should Be Reclaimed from Regulation, Not Disclaimed

The Federal Election Commission (FEC) is receiving public comments through November 14 on aspects of its Internet speech regulations. The FEC's request for comments stems from recent requests by Google and Facebook for exemptions from federal campaign speech disclaimer regulations for limited-character online text ads. Specifically, the FEC is deciding whether and how it should revise – and possibly make exceptions to – its regulations regarding disclaimers on online advertisements, such as banners, popups, and short text ads.

The short answer to the FEC is that it should, at minimum, adopt an exception for character-limited ads. If anything should qualify for "small items or impracticable" exceptions, it's online ads containing less than 160 characters. But the FEC's prospective action also provides occasion to reflect more generally on the regulation of political speech on the Internet. Do we need federal regulation of political speech on social networks, blogs, and other Web sites? The interactive and information-rich nature of the Internet as well as the fact that such disclaimer statements directly burden online speech suggests that the federal government should consider retreating from regulating Internet communications.

As explained in its Advance Notice of Proposed Rulemaking, published in the Federal Register, the Bipartisan Campaign Reform Act of 2002 ("BCRA") expanded and made more specific disclaimer requirements for certain "public communications." Disclaimers are required for public communications that: (1) are made by a political committee; (2) expressly advocate election or defeat of a clearly identified federal candidate; or (3) solicit a contribution. Under BCRA and FEC regulations, a "disclaimer" statement must appear on such communications, identifying who paid for it and whether a candidate authorized it.

The FEC "adopted its current rules governing Internet communications in 2006 in response to the decision of the U.S. District Court for the District of Columbia in Shays v. FEC [2004] ("Shays I"). There the District Court ruled, among other things, that "[w]hile all Internet communications do not fall within [the scope of 'any other form of general public political advertising'], some clearly do." The District Court left it to the Commission to determine "what constitutes 'general public political advertising' in the world of the Internet," and thus should be treated as a "public communication."

Disagreement among FEC Commissioners resulted in the FEC not appealing the District Court's ruling regarding the FEC's prior exclusion of all Internet communications from the definition of "public communication." Instead, following Shays I, the FEC added "Internet communications placed on another person's Web site for a fee" to the regulatory definition of "public communication." This definition swept in all potential forms of Internet advertising, such as banners, streaming videos, popups, and directed search results. And by including Internet communications placed for a fee on another person's Web site in the definition of "public communication," those Internet communications became subject to BCRA's disclaimer requirement.

As mentioned earlier, Google and Facebook recently requested exemptions from FEC regulations relating to disclaimers for short-character text ads. Google asked the FEC if it could sell search engine-generated text ads of around 95 characters to candidates and political committees if those ads didn't include disclaimers. The FEC issued an Advisory Opinion, concluding such ads were not in violation of BCRA, although the Commissioners could not reach agreement on the grounds of their ruling. Facebook subsequently asked the FEC if its ads limited to 160 characters qualified for either the "small items" or "impracticable" exceptions to the disclaimer requirements. But FEC Commissioners could not reach agreement and never issued an advisory opinion in response to Facebook's request.

That the FEC could not even agree to exempt Facebook ads and that its Notice suggests imposing alternative disclaimer requirements on small online ads through the use of required hyperlinks, micro bars, or buttons, suggests the agency might favor a pro-regulatory approach for dealing with online political ads in the future. At this point, a FEC general exemption for character-limited online ads is no sure thing.

Hopefully, the FEC will recognize that disclaimer requirements are especially burdensome when it comes to online advertising along the lines of Facebook updates, Tweets, and other social networking services. Space and character length come at a premium in such cases, increasing the likelihood that disclaimer messages will interfere with ad purchaser messages. To the extent that disclaimer restrictions make innovative kinds of online advertising less attractive to ad buyers, it can also lessen the ability of online content companies to rely on ad sales to monetize their services and be able to offer them to the public for free. After all, typical online services from Google, Facebook, Twitter, and the like are ad-supported and cost nothing for regular consumers to sign up for and use.

Moreover, nothing in Shays I expressly or impliedly requires limited character ads on the Internet to be swept into the FEC's regulatory sweep. So the FEC has reason enough to grant an exemption.

Yet for those who appreciate the transformative effect of the Internet on media and speech communications, the FEC's dabbling with online ads and disclaimer requirements brings to the surface broader questions about whether the federal government should even be regulating Internet communications.

For starters, a regulatory approach to online political speech fails to appreciate the Internet's low barriers to entry. Users can offer ideas and counter other ideas without having to own a complex media empire, let alone a broadcast station, channel, or program. Blogs, streaming video such as YouTube, and social networking services have made increasingly simple and inexpensive the avenues for public participation in the marketplace of ideas, political debates, and political elections.

Federal regulation of online political speech also has a paternalistic cast to it, as if Internet users are too easily taken in by online ads advocating a particular political viewpoint or somehow insufficiently able to exercise independent judgment, seek verification, or consult contrary viewpoints. Internet users have near total control over the kinds of content they wish to access or receive. And Internet users enjoy the benefit of easy access to further sources of information concerning the contents of online ads, political or otherwise.

Much more could be said regarding regulation of political speech online – or regulation of political speech made through all other modern media platforms, for that matter. But disclaimer requirements for political speech in modern media platforms, such as the Internet, burden speakers' ability to convey their own message. In particular, this aspect of disclaimer requirements renders them more burdensome than filing periodic reports with the FEC pursuant to campaign finance disclosure requirements.

In the years since BCRA and Shays I, legislation has percolated through Congress – such as the proposed Online Freedom of Speech Act – that would exclude all Internet communications from BCRA's definition of "public communication" and hence from its disclaimer requirements. The idea of subjecting short-character Internet ads to disclaimer requirements, now before the FEC, should cause the Congress and the general public to be concerned about the whole idea of regulating Internet communications.

Striking the Right Balance on Licensed and Unlicensed Spectrum

FCC Commissioner Robert McDowell provides a timely take on spectrum issues in his November 7 remarks to the Global Fund in Brussels, "The Promise of Unlicensed Cognitive Networks." In his remarks, Commissioner Robert McDowell offers insight into the interplay between licensed and unlicensed spectrum use and also offers up a sensible policy perspective on spectrum allocation and auction.

New and emerging utilization of TV white spaces with unlicensed cognitive network technologies has the potential to repeat or even surpass the success of the FCC's 1995 allocation of the 2.4GHz band for unlicensed use in 1995. As Commissioner McDowell recounts: "Among other ubiquitous devices such as digital cordless telephones, utility metering devices, fire and security alarm systems, wireless bar code readers, wireless local area networks and baby monitors, entrepreneurs deployed 'wireless fidelity' or 'Wi-Fi' in the 2.4 GHz band."

Importantly, Commissioner McDowell makes clear the the conditions that make unlicensed use of spectrum desirable. As he explains with regard to the TV white spaces:

Permitting use of the TV white spaces on an unlicensed basis maximizes the efficiency of these smaller scraps of spectrum, which would be difficult, if not impossible to auction. Why? Because the rights to these small patches are not clearly defined, exclusive or easily transferable. Given these parameters, potential bidders would lack the incentive to spend the money necessary to invest in a license and construct a network, comply with FCC regulations, or offer commercial service.

Commissioner McDowell describes the complementary role that unlicensed spectrum can provide to licensed spectrum in delivering and enhancing innovative services:

Unlicensed use provides today's entrepreneurs with a means to develop new and exciting products without the high barrier to entry posed by licensed spectrum use. In addition, unlicensed Wi-Fi has become an important tool for licensed carriers. Cisco recently reported that IP traffic carried over Wi-Fi alone is expected to surpass the amount of traffic carried over wired networks by 2015. A 2011 Juniper Research report states that, by 2015, 63 percent of traffic generated by mobile devices will transfer onto the fixed network via unlicensed Wi-Fi and femtocell technologies. Furthermore, unlicensed networks will pick up 90 percent of this offloaded data at some point in transit.

In addition to calling for the allocation of additional spectrum for commercial use, Commissioner McDowell touches on the ongoing debates over consolidating TV channels and using a voluntary auction process to make more spectrum available for auction. His opposition to the idea "that Congress or the FCC should set aside a large contiguous swath of spectrum within the 700 MHz Band for exclusive unlicensed use" is based on the following considerations:

• "At this early stage, it is not apparent that we should stop the progress well under way in the white spaces arena to create a solution for a problem --an alleged shortage of unlicensed spectrum in the 700 MHz Band --that may never exist."

• "[A] a contiguous swath of spectrum would be clearly defined, exclusive and easily transferable -- everything the white spaces are not."

• "Given today's unprecedented budget deficits, I question whether the U.S. can afford not to auction any and all spectrum recovered in this band."

• "[S]uch designation may jeopardize U.S. efforts to harmonize this band internationally and to reap the associated beneficial economies of scale."

Given the explosive growth in demand wireless services in the last several years and projections for future growth of wireless network traffic, making more spectrum available should be the top policymaking imperative. But it is auctioned, licensed spectrum that can and should serve as the anchor and primary driver of economic growth and technological innovation.

When considered in its complementary context, unlicensed spectrum can enhance wireless network performance and bring added benefits to consumers. The wiser course is to give unlicensed cognitive network use in the TV white spaces a chance to flourish rather than turn over auctionable spectrum for unlicensed purposes. Lead with licensed spectrum and let unlicensed use follow.

City's Misleading "Fact-Sheet" on Cell Phone Safety Fails Fact-Check and First Amendment

On October 21, TRDaily reported on a Danish study published by the British Medical Journal that "found no link between long-term mobile phone use and tumors of the central nervous system." According to TRDaily, "[t]he study of 358,403 mobile phone subscription holders examined the prevalence of tumors between 1990 and 2007. And researchers concluded in the study that "there were no increased risks of tumours of the central nervous system, providing little evidence for a causal association." So the best evidence continues to confirm the safety of handset devices and undermine claims to the contrary.

Just a few days later, a federal district court in California ruled that a San Francisco ordinance mandating wireless retailers and carriers issue certain city-written health warnings to consumers about health risks posed by radio-frequency (RF) emissions from cell phones was almost entirely constitutional. On October 27, Judge William Alsup ruled that San Francisco's so-called "fact-sheet," poster and sticker requirements were unconstitutional under the First Amendment.

Judge Alsup bluntly called the fact sheet "misleading" for two reasons. First, the fact sheet falsely gave the impression that cell phones are dangerous and the FCC somehow failed to regulate in the area of radio frequency (RF) emissions from wireless devices. According to Judge Alsup, "[t]hat impression is untrue and misleading, for all of the cell phones sold in the United States must comply with safety limits set by the FCC." "[E]ven worse," the judge observed, "the poster and the fact-sheet cite to the FCC's own website as if, should it be consulted, the overall misimpression would be confirmed. Once consulted, however, the FCC's message is very much the opposite."

Second, the fact sheet hinged on a World Health Organization's (WHO) listing of wireless devices as a "possible carcinogen," without explaining that classification's significance—or lack thereof. To put things into perspective, WHO lists 107 substances as "Carcinogenic to humans," 59 substances as "Probably carcinogenic," and 267 substances as "Possibly carcinogenic." As Judge Alsup pointed out, the WHO lists things such coffee and pickled vegetables along with RF electromagnetic fields in its broad "Possibly carcinogenic" category. Judge Alsup also cited a WHO fact-sheet statement that: "A large number of studies have been performed over the last two decades to assess whether mobile phones pose a potential health risk. To date, no adverse health effects have been established as being caused by mobile phone use." "[I]t does not take much to list something as 'possible,' wroge Judge Alsup, but "[t]he uninitiated will tend to misunderstand this as more dangerous than it really is."

Regarding the city's poster requirement, Judge Alsup determined it to be similarly misleading but also "not reasonably necessary and would intrude on retailers' wall space." In addition, Judge ruled that "[t]he 'sticker' requirement is also unconstitutional," since "[t]he stickers would unduly intrude upon the retailers' own message." Judge Alsup therefore upheld "the retailers' own right to speak to customers."

Judge Alsup did give the city the chance to re-write its fact-sheet. But under the judge's ruling, the poster and the sticker are out.

For those interested in administrative law and regulatory policy, the judge's ruling was interesting with regard to the standard of scrutiny to be applied in these kinds of cases. Judge Alsup suggested the U.S. Supreme Court's decision in Industrial Union Department, AFL-CIO v. American Petroleum Institute (1980), an OSHA case, is "of interest because it is one of the few occasions a court has addressed the public policy rationale at issue." In Judge Alsup's words, the case "does suggest the question whether, before the government can burden the speech interests of commercial retailers in the way here proposed, should the government be required to find that it is more likely than not that the substance is harmful."

A commitment to data-driven policymaking, as well as common sense, should prompt regulators to at least find it more likely than not that a substance is harmful before imposing speech-burdening regulations. By contrast, precautionary principle approach would treats an unproven harm as a harm by default, putting the burden of proving a negative on commercial retailers.

Judge Alsup ultimately applied a highly deferential standard to the city's ordinance. The judge analyzed the ordinance "on the presumption that San Francisco may require disclosure of accurate and uncontroversial facts as long as the disclosure requirements are reasonably related to its interest in alerting the public to a possible public health risk and to its interest in suggesting precautionary steps to mitigate the risk." It turns out that the city's misleading cell phone health warning ordinance was almost entirely a flop under that highly deferential standard, for the reasons mentioned earlier.

The bottom line here is that the best evidence continues to show that cell phones are perfectly safe to use and local governments or citizens who still have concerns should direct them to the FCC, which has regulatory jurisdiction over RF emissions.

Reforming the FCC's Regulatory Process

Representative Greg Walden, Chairman of the House Commerce Committee's Subcommittee on Communications and Technology, and Senator Dean Heller, a member of the Senate Commerce Committee's Subcommittee on Communications, Technology, and the Internet, have just introduced two bills that, in important ways, would reform the Federal Communications Commission's regulatory processes.

The bottom line is that, together, the two pieces of legislation would require the FCC to operate in a more transparent, more efficient, less reflexively regulatory, and more market-oriented manner. In today's dynamic, competitive communications environment, this will serve American consumers well.

The "Federal Communications Commission Process Reform Act of 2011" (H.R. 3309) contains various provisions that would, on the whole, improve the way the agency operates. The "Federal Communications Commission Consolidated Reporting Act of 2011" (H.R. 3310), as its name implies, would require consolidation of various separate annual reports the FCC is now required to produce. This consolidated biennial report would focus, in a comprehensive fashion, on the state of intermodal (cross-technology platform) competition, the deployment of communications to unserved communities, and the elimination of unnecessary regulatory barriers.

Testifying at a hearing before the House Subcommittee on Communications and Technology on June 22, 2011, on the draft bill upon which the two new bills are closely modeled, I supported most of the proposed reforms, while not necessarily endorsing all of them. I won't repeat here what I said in my testimony about all of the various aspects of the proposed reforms because you can read the testimony.

What I want to do instead is simply highlight a few points that may be worthy of note as the process moves forward.

• ·      In answering post-hearing follow-up questions, I suggested consolidating the various reports identified in H.R. 3310 into one "marketplace report." The bill accomplishes this very nicely. The requirement that the Commission examine cross-platform marketplace developments and competitive alternatives in a comprehensive, holistic way should lead not only to less duplication of effort at the agency and by the private sector, but, more importantly, to sounder decisions. For example, the holistic approach ought to be more difficult for the agency to ignore the fact that wireless service is substitutable for wireline service, or that the video distribution market is highly competitive.

• ·      H.R. 3309's provision ("Transaction Review Standards") reforming the agency's merger review process is certainly one of the bill's most important features. In acting on a transaction application, the FCC could impose a condition on its approval only if the condition is narrowly tailored to remedy a harm that arises as a result of the specific transaction on review and only if the Commission possesses authority to impose a similar requirement outside of the merger review context. This provision would limit, at least to some extent, the Commission's tendency to use the merger review process to adopt regulatory requirements unrelated to alleged transaction-specific harms and that should be imposed, if at all, only in a generic rulemaking proceeding. I first urged these same reforms to the merger review process – the elimination of "regulation by condition" – back in 2000 in this Legal Times piece.

• ·      The provision in H.R. 3309 ("Nonpublic Collaborative Discussion") that would allow, notwithstanding the existing Sunshine Act strictures, a bipartisan group of FCC commissioners to meet collaboratively is another key reform. Allowing more than two commissioners to meet together, rather than relying on a series of ongoing round-robin meetings or staff gatherings for communication with each other, would be more efficient. But more importantly, it would foster greater collegiality and collaboration among the commissioners, increasing at least somewhat the likelihood of sounder decisions. I have been advocating reform of the Sunshine Act along these lines since shortly before Genesis. Here is my law review piece from 1997 reporting on an effort to revise the Sunshine Act by a special committee of the Administrative Conference of the United States that I chaired.

• ·      There is much to commend several of the various other process reforms that would, for example, prevent last-minute data dumps in rulemaking proceedings, require "shot clocks" for certain proceedings so decisions are reached on a timely basis, and require release of draft orders before public meetings and final orders promptly thereafter.

• ·      One of the most important parts of H.R. 3309 would require, for rules that may have an "economically significant impact," that the FCC's order identify and analyze the specific market failure, actual consumer harm, burden of existing regulation, or failure of public institutions, that warrants adoption of the rule. And for these major rules with an economically significant impact, the agency also would be required to conduct a form of cost-benefit analysis. Compliance with these analytical requirements should make it more difficult for the Commission to adopt regulations that are unnecessary or which are unduly costly or burdensome. The draft bill did not restrict the requirement to perform the specified analyses to any subset of rules. At the June hearing, I agreed with some of the draft bill's critics that it may be appropriate to narrow the application of the analytical requirements so they do not apply to all proposed rules, no matter how limited the projected economic impact. In my view, however, H.R. 3309 now goes too far in the other direction. This is because economically significant impact rules are defined in the bill generally as those with an annual effect on the economy of $100 million or more. In my post-hearing responses, I agreed it might be impractical and unnecessary to apply the analytical requirements to all proposed FCC rules, but I suggested they be applied to those with a projected annual economic impact, say, of $10 - $20 million or more. I said: "A relatively low threshold such as this will ensure that most economically significant rules are subject to cost-benefit analysis, but exclude those with little or no impact, including rules, such as those barring racial or religious discrimination, that do not lend themselves to cost-benefit analyses." I understand the $100 million figure has been used in the various executive orders governing regulatory review. But I still believe a threshold considerably less than a $100 million annual impact is appropriate for the FCC, an agency with an historic tendency to over-regulate in the face of the development of competition. After all, in 2010, according to the government's “Regulatory Plan and the Unified Agenda of Federal Regulatory and Deregulatory Actions,” the FCC had 147 rules in various stages of development. Only 7 of these 147, or approximately 5%, were considered in the "economically significant" category triggered by the $100 million annual impact threshold. These figures are generally in line with those from previous years. Thus, as proposed, the analytical requirements designed to lead to sounder, more rigorous, market-oriented decisions – by requiring consideration of specific market failure, actual consumer harm, the burden of existing regulation, and the costs and benefits of the proposed rule – would not apply to most of the rules considered for adoption by the agency. (For information concerning the FCC's rulemaking activities, as well as much useful information concerning the regulatory activities of agencies throughout the federal government, see the most recent edition of Wayne Crews' "Ten Thousand Commandments" series of reports.)

All things considered, both H.R. 3309 and H.R. 3310, if enacted, would substantially improve the FCC's processes. The reforms almost certainly would lead to FCC decisionmaking that is more transparent and efficient than at present. And the reforms likely would lead to adoption of regulations that are less costly and less burdensome than they otherwise would be, or, in some instances, to the rejection of regulations not shown to be justified. The constraints placed on the FCC's pro-regulatory bent, particularly the constraints imposed by the market-oriented analytical requirements, will help spur job and investment growth in a very important, dynamic sector of the economy.

Finally, Chairman Walden seems to have gone out of his way to draft the two reform bills in a moderate way in order to attract support from House and Senate Democrats. It remains to be seen whether his effort in this respect will bear fruit. And it also remains to be seen whether President Obama will be supportive, now that, even if belatedly, he is talking regularly about eliminating unnecessary and unduly burdensome regulations.

In truth, regulatory reform once was a bipartisan undertaking. Reforming the FCC regulatory process ought now to be a bipartisan effort. I hold out hope it will be. 

More Spectrum: A Policy for Preventing 4G Wireless Traffic Jams

"To keep up with demand, U.S. wireless networks have traditionally doubled their capacity every 30 months, but this trend may not keep up with future demand," considering that "the volume of data traffic on U.S. networks is expected to increase by 1,800 percent over the next four years." Such is the outlook for wireless networks and services according to Michael Kleeman of the University of California San Diego's Global Information Industry Center. In an October 2011 paper, "Point of View: Wireless Point of Disconnect," Mr. Kleeman insists that there is now a looming disconnect "between the capacity of wireless networks and the emerging needs of today's customers."

Kleeman's paper provides a concise summary and overview of recent research and estimates of wireless network data traffic trends. Among the various analysts' estimates and data points cited:

• "U.S. mobile data traffic had grown at approximately 120 percent annual rate over the previous two years."

• "[B]y 2014 voice is projected to represent only 2 percent of the total wireless traffic."

• "The average amount of traffic per smartphone in 2010 was 79 MB per month, up from 35 MB per month in 2009."

• "[T]oday 10 percent of mobile users are watching video content on their devices and consuming 38 percent of data volume on mobile networks. By the end of 2011, video content will jump to 60 percent of network data volume."

• "[M]obile data traffic in the U.S. was approximately 6 petabytes per month in 2008, 40 petabytes per month in 2010, and it is expected to reach 451 petabytes per month in 2013."

• "[T]he nation is running out of spectrum and will experience a spectrum deficit starting in 2013."

This last estimate comes from an October 2010 FCC staff technical paper on the need for making more spectrum available for commercial use. Accordingly, Kleeman concludes that "[a]dding new spectrum is the least expensive way to grow capacity because it can utilize much of the same infrastructure, e.g., no new towers, cell sites, generators, etc."

Two other "core strategies to manage this disconnect between wireless infrastructure and demand" are identified by Kleeman. One is active network management. According to Kleeman, "carriers will increasingly need to manage traffic and develop triage and prioritization protocols to ensure users are treated fairly and that users do not degrade the network experience for others."

To this end he also cites the potential for wireless carriers to use pricing-based mechanisms with real time customer feedback to help manage network load" – something that even the FCC recognized regarding wireless in its Open Internet Order (2010) imposing network neutrality regulations. (See also my September 2010 blog post: "FCC Should Take Broadband Pricing Flexibility Seriously.") Unfortunately, many proponents of net neutrality regulation would rather see wireless services subjected to the same controls as wireline broadband access services.

The other core strategy is to enable deployment of supporting infrastructure. Simply put, "[t]he more we consume wireless data, the higher the number of cell sites will be needed to increase the capacity and improve reliability…we must be willing to support this construction." Kleeman is exactly right in insisting "we must be willing to support this construction. This needs to be an explicit choice made by the community." As the FCC has acknowledged in its 2009 declaratory order establishing time-frames for state and local government processing of cell tower and collocation permit applications,"[i]n many cases, delays in the zoning process have hindered the deployment of new wireless infrastructure."

Michael Kleeman's paper sums up the trends in wireless growth and the corresponding need for policymakers to adopt policies to match. Policymakers need to enable the market to innovate and invest to meet the needs of the fast-approaching future. In particular, making additional spectrum available for commercial use should be a most urgent priority of Congress, NTIA, and the FCC.