U.S. House Votes Unanimously to Modernize Music Copyrights

On April 26 – World IP Day – the U.S. House of Representatives passed the Music Modernization Act (H.R. 5547) by a 415-0 vote. This welcome news follows closely on the unanimous vote of approval by the House Judiciary Committee on April 11.

FSF President Randolph May and I emphasized the merits of H.R. 5547 in our April 21 op-ed published at The Hill: "World IP Day – An Opportune Time to Modernize Music Copyright Protections." In short, the bill includes important updates to federal copyright law that would better secure copyright protections and royalty payments for recording artists, songwriters, and other music professionals. If passed by the Senate and signed into law, theMusic Modernization Act would: (1) secure to copyright holders of sound recordings made before 1972 federal copyright protections for public performances of their recordings via digital audio transmission; (2) establish a streamlined process for producers, mixers, and sound engineers to directly receive royalty payments via SoundExchange; and (3) enable more timely and accurate payment of songwriter "mechanical license" royalties and also provide blanket licenses for digital streaming services. 

For more on the Music Modernization Act, read our World IP Day op-ed in The Hill. Prior blog posts also analyze music copyright reforms from previous bills that have since been combined in H.R. 5547.  

Connecting All of America

FCC Proposes To Eliminate Unnecessary Cable TV Lineup Listing Rules

At its April 17 public meeting, the FCC adopted a notice of proposed rulemakingthat would eliminate rules requiring cable operators maintain at their local office and on their public inspection files a current listing of the cable TV channels that they deliver to their subscribers. The local office channel lineup rule was originally adopted in 1972.

The Commission's NPRM tentatively concludes that "the requirement to maintain a channel lineup locally is outdated, unnecessary, and inconsistent with the Commission's recent efforts to improve access to information about regulated entities by making this information available online." Indeed, "information about the channel lineups of individual cable operators is now available through other sources" such as cable operator websites, on-screen program guides, and more. Accordingly the Commission believes "few, if any, consumers interested in channel lineup information currently access this information by visiting an operator’s local office as other sources of channel lineup information can be viewed far more quickly and easily." For similar reasons, it's also doubtful that listing channel lineups in cable operator public inspection files is helpful for informing consumers or necessary for consumer protection. 

The Commission's proposal to eliminate cable channel lineup listings is a sensible deregulatory measure that deserves to be adopted. The NPRM is the latest of several deregulatory proposals to arise out of the FCC's Media Modernization Initiative. The Commission deserves credit for identifying and eliminating old rules that are often costly but offer no practical benefit to consumers. 

FSF President Randolph May and I recommend an approach for reducing legacy cable and DBS regulation in our Perspectives from FSF Scholarspaper "A Proposal for Reforming the FCC's Video Competition Policy."

Time Warner CEO says AT&T/Time Warner Merger Needed to Compete With Internet Giants

The trial over the Department of Justice’s antitrust challenge to the AT&T/Time Warner merger appears to be nearing its end. U.S. District Judge Richard Leon is presiding over the trial in federal court in the District of Columbia.

This week, Time Warner Chief Executive Jeff Bewkes defended his company’s planned merger with telecoms firm AT&T as necessary to compete for on-line advertising revenues with Internet giants like Google and Facebook.

This argument should sound familiar. Mark Cuban made the same point almost a year and a half ago in his testimony before a Congressional Committee:

The idea that TV is the dominant content delivery mechanism no longer is valid. Instead, we fill our time by consuming content from Facebook, Instagram, Snapchat, Messenger, WhatsApp and slowly from Virtual Reality companies like Occulus Rift. Combined, these apps reach more than 1.5 billion users a month. They can deliver any kind of content, in any manner the consumer would like to receive it, be it message, video, VR, post, ad, you name it, to populations around the world in a manner that dwarfs TV…. 

Apple, Google, Amazon, MicroSoft, and Facebook are 5 of the 7 most valuable companies by market cap in the world. All have established their dominant positions in the app and content worlds by making important, strategic content acquisitions. That is exactly what the Time Warner acquisition is for AT&T, an important strategic content acquisition. Alone, it will be very difficult, if not impossible for either AT&T or Time Warner to compete with any of the companies I've mentioned. Together it will be still be difficult, but a combined entity at least gives them a chance to battle the dominant players in the market. 

Bewkes also testified that the Justice Department is wrong about AT&T being reluctant post-merger to license Time Warner’s TV and movie content to rivals in order to win over new customers to AT&T’s programming distribution services, DirecTV and U-Verse. Bewkes called that argument by the DOJ “ridiculous,” and added: “If our channels are not in distribution we lose lots of money.”

For a substantive analysis of the merger, including an assessment of behavioral and structural relief in vertical merger cases, see my February 8, 2018 Perspectives from FSF Scholars entitled “The Proper Context for Assessing the AT&T/Time Warner Merger.”

FCC Adopted NPRM to Streamline Licensing Procedures for Small Satellites

On Wednesday, the FCC adopted a Notice of Proposed Rulemaking (NPRM) that would streamline licensing procedures for small satellites. This proposal would expedite the application process and reduce fees for deploying small satellites, which have relatively short duration missions compared to large satellites and therefore should not be regulated in the same manner. The proposal also identifies a variety of frequency bands that are useful for small satellite operations.

It is commendable that the Commission is taking a nuanced approach to reducing the barriers to satellite broadband deployment by specifically identifying how different sized satellites require different regulations and frequency bands. As Free State Foundation Senior Fellow Seth Cooper stated in a March 2018 blog, satellite broadband will enhance competition and help reach new consumers, which is why it is important that the FCC continue to reduce regulatory barriers that stand in the way. And I discussed in a March 2018 Perspectives from FSF Scholars how the increasing capabilities of satellite broadband have enabled it to become a viable alternative for residential broadband in rural areas and could be an important technology for closing the gap of the digital divide.

U.S. Leadership Must Continue in 5G Wireless Deployment

This week two reports were published that show why the United States’ leadership in 5G wireless deployment will be vital for the U.S. and global economies. The first report by Recon Analytics is titled “How America’s 4G Leadership Propelled the U.S. Economy,” and it emphasizes the sizeable economic benefits generated by the United States’ leadership in 4G wireless deployment.

The second report by Analytics Mason is titled “Global Race to 5G – Spectrum and Infrastructure Plans and Priorities,” and it finds that the United States has fallen narrowly behind China and South Korea in terms of 5G readiness.

These two reports show why U.S. leadership in 5G deployment is important for global trade and address how additional licensed spectrum and smart infrastructure policies will help advance U.S. 5G leadership.

Here are some of the key findings from the Recon Analytics report regarding the economic benefits that resulted from America’s 4G wireless leadership:

• U.S. leadership in 4G accounted for nearly $100 billion of the increase in annual GDP by 2016 as the trajectory of the wireless industry’s contribution to U.S. GDP shifted from a projected $350.3 billion in 2016 to a realized $445 billion.

• The launch of 4G in the U.S. increased total wireless-related jobs by 84% from 2011 to 2014.

• U.S. 4G leadership also meant roughly $125 billion in revenue to American companies that could have gone elsewhere if the U.S. hadn’t seized 4G leadership. U.S. 4G leadership also resulted in more than $40 billion in additional app store revenue flowing to U.S. companies and app developers.

The second report by Analytics Mason measures countries by their 5G “readiness,” which takes into account the amount and timeline of 5G spectrum availability, policies aimed at easing 5G infrastructure deployment, industry network and equipment trials, and industry commitment to 5G deployment. The report finds that the United States is third in 5G readiness behind China and South Korea and just ahead of Japan, the U.K., and Germany.

It is important that U.S. policymakers continue to promote policies that would enable the U.S. to lead the world in 5G readiness because the quicker 5G is deployed, the quicker U.S. consumers will experience the economic benefits of 5G - including improvements to healthcare, transportation, law enforcement, e-commerce, and education. Although 4G brought significant economic benefits, 5G, with at least ten times faster speeds than 4G, is projected to create $275 billion in investment, 3 million jobs, and $500 billion in additional economic activity.

As Free State Foundation President Randolph May wrote in a blog earlier this week, the “race to 5G” is not a zero-sum game. Americans benefit when other countries deploy next-generation wireless infrastructure in an efficient and timely manner. When more countries are connected, it increases the prospect of additional global communications and trade. But because the U.S. was a leader in 4G, it should continue to be leader in 5G not only to bring economic benefits to Americans, but also to encourage other countries to upgrade their wireless networks to 5G. At the global level, 5G is projected to create $12.3 trillion in economic activity in 2035 and support 22 million jobs worldwide.

As I discussed in a recent Perspectives from FSF Scholars, the FCC has adopted a handful of pro-consumer spectrum initiatives over the last year that will assign and allocate licensed spectrum for commercial use. Most recently, the FCC voted to adopt a proposal on spectrum frontiers auctions “to promote the development of 5G wireless.” Moreover, the adoption of Commissioner Brendan Carr’s March 2018 proposal to reduce regulatory burdens and costs will create an estimated additional $1.5 billion in 5G investment.

The FCC should continue to assign and allocate more licensed spectrum and reduce regulatory barriers that stifle 5G deployment in order for the United States to remain a leader in the 5G revolution. U.S. leadership in 5G deployment will create billions of dollars in economic benefits for Americans and also will encourage other countries to upgrade their wireless networks, increasing the prospect of additional global trade.

The Race for 5G and Why It's Important

Two new reports relating to 5G deployment have just been released that deserve much attention.  The first, by Analysys Mason, is titled, “Global Race to 5G – Spectrum and Infrastructure Plans and Priorities.” The second, by Recon Analytics, is titled “How America’s 4G Leadership Propelled the U.S. Economy.” Both reports were commissioned by CTIA.

Given the importance of the development of next generation, high capacity 5G networks to the nation’s social and economic well-being, these two new reports warrant a deep dive. We expect that over the coming weeks and months we’ll come back to them often.

Based on a quick look, here are a few key takeaways:

• China and South Korea presently are leading the U.S. in the race to develop and deploy 5G networks, but their lead is slim.

• America’s wireless industry still leads other nations in making commercial investments that are necessary for 5G deployment, so this bodes well for our nation’s prospects.

• The research shows that the race, or competition, if you will, to deploy 5G networks matters because the U.S. leadership in deploying 4G led to economic growth and employment gains that otherwise would have gone to other countries. Presumably, the same will be true for 5G.

All of this is not to say that the 5G “race” is a zero-sum game. Of course, other nations will benefit – and should – as they get ready to deploy 5G networks. But it is to say that the U.S. stands to gain much – from increased investment in infrastructure to new jobs in new fields to yet-to-be imagined “Internet of Things” technologies and services -- by maintaining its leadership in the wireless space. Just as America did with 4G.

So, again, the two new reports are worthy of careful consideration. It is not necessary to vouch for every estimate or projection in the reports – we don’t really know now whether ultimately 5G networks will add $500 billion to our economy or $450 or $550 billion! – to appreciate the importance of the coming of 5G. The scale of 5G’s ultimate impact is clear.

And so it follows, as night follows day, or 5G follows 4G, that it is crucial that our nation’s policymakers, in Congress, at the FCC, in the Trump Administration, put in place proper policies to ensure adequate spectrum availability and infrastructure deployment.  

Music Copyright Omnibus Bill Receives Unanimous Vote by House Committee

The Music Modernization Act – H.R. 5447 – was passed by a 32-0 vote of the House Judiciary Committee on April 11. This new omnibus reform bill was the subject of my recent blog post, "House Committee Advancing Bill to Modernize Music Copyright." 

As previously noted, the new Music Modernization Act combines three previously introduced bills and would: (1) provide copyright holders of sound recordings made prior to 1972 would receive federal copyright protections for public performances of those recordings via digital audio transmission; (2) set up a process for producers, mixers, and sound engineers to directly receive royalty payments via a collective entity, SoundExchange; and (3) enable more timely and accurate payment of songwriter "mechanical license" royalties and also streamline blanket licenses for digital streaming services. 

The unanimous vote on H.R. 5447 by the House Judiciary Committee reflects the wide base of support for the music copyright reforms contained in the bill. Surely, H.R. 5447 deserves a fast-track vote on the merits by the full House.

Maryland Should Reform Its Occupational Licensing Regime

This week, the Mercatus Center at George Mason University published a new study titled “Changes in Occupational Licensing Burdens across States.” Authors Matthew Mitchell and Anne Philpot used data from 2012 to 2017 to measure the breadth – the number of occupations that each state licenses – and the burden – the stringency of occupational licensing requirements in each state – to determine how occupational licensing has changed over the last five years. Unfortunately, Maryland had the greatest increase in the breadth and burden of occupational licensing over that span.

Maryland’s breadth and burden of occupational licensing increased 29% from 2012 to 2017 and the state regulates five more occupations than it did in 2012: animal breeders, athletic trainers, and three types of gaming occupations. Maryland's occupational licensing fees increased by an average of 6%, and the days lost to education and experience requirements by Maryland entrepreneurs increased by 3%.

As I wrote in a July 2015 blog, Maryland’s occupational licensing regime harms consumers by restricting competition, which subsequently leads to higher prices. Importantly, unnecessary occupational licensing harms the poorest residents in the state, who are unable to afford the fees and training required with such licensing, therefore stifling upward mobility for poor entrepreneurs. 

In the blog, I stated:

Because consumers ultimately pay higher prices as a result of the restricted competition, the increase in prices is disproportionately harmful to the poorest consumers. The higher a person’s income, the more willing that person is to adapt to price increases. Therefore, artificial increases in prices through occupational licensing have a large negative marginal impact on the poorest consumers. For example, pawnshops in Maryland, which can provide inexpensive goods, additional income, or short-term loans to poor individuals, are charging higher prices and interest rates than they would be able to charge if workers were not required to have an occupational license.

But the poorest individuals also experience the greatest burden on the other side of the market – as workers. Poor people often do not have the resources to acquire the mandated training, take the required tests, or pay for the licensing fees. This pushes them out of a labor market in which they may be skilled enough to compete. For example, a licensed plumber in Maryland must complete 3,700 hours in training. But a poor person with only 1,000 hours of training may be perfectly capable of fixing a toilet. It is not illegal for him/her to do so, but it is illegal to accept money for the service.

The Hogan Administration has done a good job reducing the overall burden of regulations over the last few years. As FSF President Randolph May and I noted in a January 2016 Perspectives from FSF Scholars, the Regulatory Reform Commission’s initial report recognized that Maryland’s occupational licensing regime was overly burdensome and was not protecting consumers. In a January 2017 Perspectives from FSF Scholars, we commended the Regulatory Reform Commission for identifying many occupational licenses that were unnecessary, outdated, or overly burdensome. And Governor Larry Hogan accepted all of the recommendations put forth by the Commission.

However, the data presented in the Mercatus Center study shows that there is more work to be done in Maryland. Although the 2018 legislative session has ended, occupational licensing reform should be a goal for the 2019 Maryland General Assembly. If Maryland wants to continue to produce economic growth and business investment throughout the state, it should lessen the burden of occupational licenses and enable more entrepreneurs to enter the labor market.

FSF Panelists Address Policies for "Connecting America"

The Free State Foundation hosted its Tenth Annual Telecom Policy Conference on March 27. The conference’s first All-Star panel offered policymakers and the audience forward-looking insights befitting the panel’s title: “Solutions for Connecting America and Closing Digital Divides.”

Dr. Nicol Turner-Lee succinctly framed the challenge of connecting digitally excluded people in America: “[W]hen you look at the digital divide, there is still about 11% of Americans who do not have access.” She cited reports by Pew Research indicating that many digitally disconnected persons are over 65, lack a high school diploma, are rural residents, and are poor. Dr. Turner-Lee declared, “they still deserve to be connected in a way that is meaningful or they risk the chance of becoming digitally invisible… that invisibility has consequences over the long run if we do not get this right.”

The panelists stressed the importance of even-handedly promoting investment and of deploying different network technologies – whether fiber, 5G, Wi-Fi, or satellite – in order to provide broadband Internet access services to unserved Americans. Indeed, they emphasized that, at this time, there is a convergence of technological solutions that facilitates use of a mix of different network facilities in providing Internet access to unserved Americans. 

Importantly, the panel addressed several policies that all play a role in promoting a multiplicity of next-generation broadband Internet network pathways – all of which are part of the discussion regarding the goal of “connecting all of America.” Some key points are collected here, but please don’t neglect to watch the entire panel discussion on the C-SPAN video beginning around the 38:00 mark.

Make more licensed spectrum available for commercial use.

You heard Chairman Pai this morning talk about two of the higher spectrum bands [28 GHz and 24 GHz] that he wants to see go to auction starting later this year, which is great. We need to keep that going with other bands that the FCC has identified for auction. We need to get those auctions scheduled as well, and it’s the high-band [Chairman Pai identified the above 24 GHz and above 95 GHz bands], its mid-band… in the 3.4-4.2 gigahertz range... Internationally, those bands are getting a lot of attention and it’s important that we harmonize as much as we can around the world. That helps with scale; that helps the people making the devices and making the chips reduce their costs, which means you can have faster and more efficient deployment. -- Tom Power, CTIA 

Make more unlicensed spectrum available.

We do need a balanced approach when it comes to spectrum, both with respect to licensed spectrum, which we make available to meet the needs of 5G, but also to meet the needs of Wi-Fi. When we consider all of these devices that we have that are connecting wirelessly, the fact that 80% of that traffic is going over Wi-Fi, that’s a pretty strong amount of work, and that workload is only going to increase over time, as it will for licensed wireless as well… The problem, as I think we all know, with spectrum is you can’t turn on a dime, you essentially have to deal with incumbent users as you find them and try to plan out a long-range strategy over time. So I think it’s critically important that NTIA and other parts of the federal government really take that long-term view, and really put out what is our national plan with respect to both licensed wireless and unlicensed wireless. -- James Assey, NCTA 

Remove barriers to wireless infrastructure deployment by clarifying siting rules and setting shorter timelines for action on infrastructure applications.

There’s actually a number of efforts pending on the Hill, and bipartisan efforts, I should say…[T]he efforts that Senators Thune and Schatz have undertaken on infrastructure siting is probably the most effective vehicle I’ve seen right now [S.19, the MOBILE NOW Act]. It would do a couple things in terms of making more uniform the siting rules across the country, so that when you apply to site an antenna or a tower in a public right-of-way, you know what the rules are. It would put timelines, deadlines for local governments to act on those siting requests, with the length of time depending on the nature of the installation. It would also ensure the localities are paid their costs that they incur in overseeing this process… so that you don’t have different players paying different costs for getting essentially the same rights of access. -- Tom Power, CTIA 

Remove barriers to wireline infrastructure deployment by further reforming federal policy for pole attachments.

If we want look at places for us to relook at broadband policy, I would say one place that might be fertile territory would be the rules with respect to pole attachments, both to speed up the process by which there is an orderly effort to add new lines to poles, and also maybe to deal with something Congress didn’t deal with in 1996, when it exempted municipal and co-op poles from the federal scheme that we have for poles. I think those would be two places to start. -- James Assey, NCTA

Remove barriers to wireline broadband deployment by reforming digging and siting rules for federal lands.

I had the pleasure of serving on Jonathan Adelstein’s BDAC subcommittee on barriers, and that committee did, I think, a great job of coming together and…coming to agreement on what the barriers to entries were. And a lot of it dealt with federal lands and permitting… Speed to market is really the emphasis there, but it does it very little to address the cost issues. But it’s great getting that moving forward.  -- John Jones, CenturyLink 

Forbear from legacy regulatory barriers to wireline broadband deployment.

If you look at the rules we’re dealing with forbearing from, most ILECs have lost 70% of their market share across the board from a voice and broadband standpoint. And we still have rules that are pretty far back in time… So any rules that can be forborne from that keep our segment of the industry basically still hamstrung in a wide open field running environment of competition would be, at the highest level, what we would ask for. -- John Jones, CenturyLink 

Ensure that broadband subsidy support is targeted to unserved areas.

[A]nother thing that we have hopefully learned from past mistakes is… when we focus on the public subsidy portion of connecting America, to refocus attention on the unserved parts of America, those places that don’t have that broadband to make sure that those scarce resources we have available are not going to basically layer over places we already have built right into private capital. And I’m encouraged by…the omnibus appropriations bill, with respect to the newly created RUS pilot program, that is aimed at ensuring the dollars go to where they’re needed so that we can assess whether these programs are actually working or not. -- James Assey, NCTA

Ensure low-income consumer broadband access by funding Lifeline and preserving eligibility for non-facilities-based providers.

[C]utting the Lifeline program and imposing unnecessary caps will have a detrimental effect on closing the digital divide, especially if the program starts with the assumption that people are trying to outsmart the benefit.
…[S]ome of the assumptions in the Lifeline proposal right now – take the limitations to facility-based providers – regresses on some of the work done over the last couple of years to ensure more competition in the marketplace… I also think that it’s important that we allow USAC to put in the national verifier to reduce some of the redundancies. I think until you actually do some of that stuff it’s very hard to go back in a program that is the only potential lever for people to get online… particularly when you want to talk about closing the digital divide. -- Nicol Turner-Lee, Brookings

To view the panelists’ discussions on those points and on other issues such as Internet freedom and net neutrality regulation, please watch the C-SPAN video of the conference here. The panel on “Solutions for Connecting America and Closing Digital Divides” begins approximately 38 minutes into the video’s run time.

[Note: The quotations by the panel speakers included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]