Cable Mobile Wireless MVNOs Set Record With New Subscribers

On October 27 and 28, Comcast and Charter Communications each released their third quarter results for 2022. Both Comcast's Xfinity Mobile and Charter's Spectrum Mobile posted record numbers of net subscriber additions for their cable mobile virtual network operator (MVNO) wireless services. Comcast reported 330,000 wireless net subscriber additions during the third quarter, bringing Xfinity Mobile's total subscribership to 4.95 million. And this last week Xfinity Mobile announced that it has surpassed 5 million subscribers. Meanwhile, Charter reported 396,000 net subscriber additions, bringing the total number of Spectrum Mobile subscriber lines up to 4.7 million. 

Cable MVNO services – which include Altice – combine cable network facilities, including Wi-Fi hot spots, with spectrum leased from Verizon Wireless. This hybrid model enables cable MVNOs to serve subscribers outside of their respective traditional cable video geographic footprints. As described in the Free State Foundation's July 2022 comments to the FCC for its forthcoming 2022 Communications Marketplace Report, these mobile wireless offerings by cable MVNOs are an increasingly important source of intermodal competition, giving consumers an attractively-priced wireless alternative to mobile wireless carriers. Cable MVNO wireless offerings include 5G wireless, and they also are offered to consumers in bundles with fixed broadband as well as with cable video. 

As observed in my May 2 blog post, cable wireless MVNOs are continuing to pursue strategies for offloading mobile wireless traffic onto their own licensed spectrum in select geographic areas, creating cost savings from reduced reliance on leased spectrum. The future prospects for cable MVNOs appear to remain strong, and American consumers stand to benefit from their innovative and competitive offerings. 

FCC Approves Inquiry Into 12.7 GHz Spectrum Use for Next-Gen Networks

At its public meeting on October 27, the FCC voted to adopt a Notice of Inquiry "seek[ing] information on the current use of the 12.7 GHz band, how the Commission could encourage more efficient and intensive use of the band, and whether the band is suitable for mobile broadband or other expanded use." The Commission has an obligation to ensure that spectrum dedicated to commercial use – over which the agency has oversight – is put to efficient use and that its value to the American people is maximized. And it is widely recognized that the spectrum pipeline needs to be replenished for commercial and other private uses, including by next-generation networks. The Commission's adoption of its Notice for the 12.7 GHz band furthers these important ends. 

The FCC's Notice contemplates the suitability of the 12.7 GHz band for 5G and for as-yet-undeveloped 6G technologies. Hopefully, the Commission's Notice will yield useful to the agency regarding how incumbents are using their spectrum allocations in the band so that the Commission could, at some point, enable commercial wireless use of the 12.7 GHz band and address the current operations and reliance interest of incumbent users in a responsible and judicious manner. 

Streaming Services Surpass Cable in Total Viewing

Just-released video consumption numbers from Nielsen hammer home a point to which Free State Foundation scholars repeatedly return: streaming is the 800 lb. gorilla in a marketplace distorted by one-sided, outdated regulations that inappropriately hamstring cable operators and other traditional multichannel video programming distributors (MVPDs) – and thereby deny consumers the full benefits of competition.

In "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a recent Perspectives from FSF Scholars, I drew a stark contrast between (1) the latest evidence of steady traditional MVPD subscriber losses, and (2) a watershed moment in the battle for eyeballs between streaming, broadcast television, and cable: in June 2022, streaming for the first time surpassed the one-third of total usage threshold.

Nielsen data covering the last three months underscores the zero-sum rivalry between the new and old guards. From June to September, streaming's share climbed an additional 3.2 percent, to 36.9 percent. Over the same period, cable's share fell 1.3 percent, to 33.8 percent. Critically, streaming's share surpassed that of cable in July – and, by September, that gap had grown to 3.1 percent.

The following chart illustrates these recent developments:

As Free State Foundation President Randolph May and Director of Policy Studies and Senior Fellow Seth Cooper argued persuasively in Reply Comments filed in GN Docket No. 22-203:

The legacy video regulatory landscape bears no resemblance to 2022's marketplace in which consumers increasingly favor a dynamic, self-curated mix of subscription streaming services accessed on consumer-owned devices over traditional MVPD services. Thus, the Commission should identify legacy regulation of MVPD services based originally on a lack of competition and eliminate, modify, or recommend congressional repeal of such regulation.

Recording Music Revenues Up: Stronger Copyrights Would Increase the Pot

Late September of this year, the Recording Industry Association of America (RIAA) released its "Mid-Year 2022 RIAA Revenue Statistics." RIAA's report reveals many interesting and positive trends and data points for the U.S. recorded music market. The report also ought to serve as a reminder that the sound recording industry is copyright intensive and that Congress can bolster copyrights for owners of music recordings by passing the American Music Fairness Act.

According RIAA's report, during the first half of 2022, retail revenues for the U.S. sound recording industry grew to $7.7 billion, up from $7 billion during the first half of 2021. And wholesale revenues rose to $4.9 billion during the first half of the year, up $300 million compared to the first half of the prior year. 

Streaming is overwhelmingly the dominant source of revenue for the sound recording industry, as about 84% of its revenues during the first half of 2022 came from streaming services. Of the $6.5 billion generated by streaming during the first half of the year, about 78% or $5 billion came from paid streaming subscription services. Meanwhile, revenues from digital downloads of single tracks and albums declined 20% to $256 million, amounting to only 3% of total revenues for the recorded music industry. As RIAA's report shows, paid subscriptions have continuously increased in recent years and have now reached the 90 million subscriber mark.

 

Conversely, RIAA reported declines in revenues from digital and customized radio services such as SiriusXM and Internet radio stations. Total revenues from that category of services dropped 3%, down to $556 million. Notably, U.S. copyright law does not secure a public performance right for sound recording owners when AM/FM terrestrial radio stations broadcasts their music. As a result, direct revenues to the music recording industry from airplay on terrestrial radio is effectively zero. 

In terms of revenues from retail sales of physical products, revenues from CD sales declined 2% to $200 million. CD sales constitute 26% of physical revenues. Yet revenues from vinyl records continue to grow. According to RIAA's report, "[r]evenues from vinyl albums grew 22% to $570 million, and vinyl's share of the physical market increased from 68% to 73%."

Having noted these overall positive trends in music recording revenues, there are things that Congress can do to help promote the music marketplace and grow the pie bigger for recording artists and music fans. Perhaps the most immediate thing Congress can do is pass the American Music Fairness Act – H.R. 4130 and S. 4932. 

As previously mentioned, current copyright law exempts terrestrial AM/FM radio stations from having to pay royalties to owners of copyrighted sound recordings when their music is played on the air. This means that commercial AM/FM stations can profit off of copyrighted sound recordings by broadcasting them to attract audiences and then draw revenue from running ads. 

The American Music Fairness Act would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners.

 

So long as the U.S. exempts American AM/FM stations from paying royalties to American sound recording owners, foreign stations have no obligation to pay royalties for broadcasting copyrighted sound recordings owned by Americans. But by passing the American Music Fairness Act into law, Congress would open up royalty revenue streams from foreign radio stations and American copyright owners would receive revenues that they rightfully deserve. Importantly, the legislation includes a low, flat royalty rate for smaller commercial stations as well as for non-profit stations. 

As discussed in my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," H.R. 4130 has received a hearing in the House Judiciary Committee. And S. 4932 was introduced in September of this year. There is still time in the 117th Congress for the American Music Fairness Act to become law. Congress ought to make it so. 

Ookla Report Shows U.S. Progress in 5G Mobile Wireless Speeds

The boost to mobile wireless speeds from 5G networks – and increasing use of C-band spectrum for 5G – are reflected in Ookla's Speedtest Global Index for the United States for the third quarter of 2022. According to Ookla: 

T-Mobile had the fastest median 5G download speed in the U.S. at 193.06 Mbps during Q3 2022, a slight increase over Q2 2022. Verizon Wireless remained second, and saw a slight increase to 119.80 Mbps in Q3 2022. AT&T remained third at 81.22 Mbps — a slight increase from Q2 2022.

For the third quarter of this year, Ookla found that the median download/upload speeds for mobile wireless broadband in the U.S. – encompassing 5G as well as earlier generation networks – was 68.34 Mbps/8.56 Mbps and the mean speeds were 141.54 Mbps/15.48 Mbps. Ookla's report also includes comparative evaluations of latency and video support capabilities by the three competing nationwide mobile wireless providers.

 

Again, speed and other performance figures can be expected to continue to improve by the end of this year and well into 2023 – particularly for 5G – as AT&T and Verizon continue to phase-in their licensed C-band spectrum for 5G services and T-Mobile brings online additional licensed spectrum in the 2.5 GHz band that it has acquired through the FCC's Auction 108. 

Privacy Recap: Regulatory Developments in California, Colorado

As the promising-but-flawed American Data Privacy and Protection Act awaits a House floor vote and the revised deadline for comments on the FTC's highly problematic privacy Advance Notice of Proposed Rulemaking looms, state activity continues to fill the federal void.

In California, the only state where a comprehensive data privacy law has gone into effect, enforcement is underway – while, simultaneously, efforts to adopt rules implementing the Golden State's second privacy statute near the finish line. And in Colorado, the rulemaking process relating to its privacy law is just getting started.

In August, California Attorney General Rob Bonta announced a $1.2 million settlement with Sephora, Inc. regarding several alleged violations of the California Consumer Privacy Act (CCPA), which became valid law at the beginning of 2020.

According to the complaint, Sephora "did not tell consumers that it sold their personal information," "did not provide consumers with an easy-to find 'Do Not Sell My Personal Information' link," and did not configure its website "to detect or process any global privacy control signals, such as the 'Global Privacy Control' (GPC)."

As explained in the GPC website FAQs, the GPC "is a proposed specification designed to allow Internet users to notify businesses of their privacy preferences, such as whether or not they want their personal information to be sold or shared. It consists of a setting or extension in the user's browser or mobile device and acts as a mechanism that websites can use to indicate they support the specification."

Under the CCPA, the enabling of a universal opt-out mechanism such as the GPC has the same legal effect as clicking on a "Do Not Sell My Personal Information" link.

While the Sephora settlement is the first of its kind, it is by no means the only enforcement action undertaken by the California Attorney General's office. As noted in the Press Release, "[s]ince July 1, 2020, the Attorney General has issued notices to a wide array of businesses alleging noncompliance with the CCPA. Notices to cure have been issued to major corporations in the tech, healthcare, retail, fitness, data brokerage, and telecom industries, among others."

In addition, and as I detailed in "California Voters Approve the California Privacy Rights Act: A Detailed Analysis of Its Requirements and Impact," a November 2020 Perspectives from FSF Scholars, the Consumer Privacy Rights Act of 2020 (CPRA), which builds upon and modifies the CCPA, created the California Privacy Protection Agency (CPPA), the nation's first (and, at present, only) state agency dedicated to consumer privacy.

Once established, the CPPA assumed privacy-related rulemaking responsibilities from the office of the Attorney General. On May 27, 2022, the CPPA released draft CPRA regulations. Publication of a Notice of Proposed Rulemaking on July 8, 2022, formally started the process. The comment period closed on August 23, 2022.

On October 17, 2022, the CPPA released a modified draft of the CPRA regulations, as well as an explanation of the modified text. The CPPA Board will discuss, and potentially adopt some or all of the proposed rules, at virtual meetings this Friday and Saturday.

Per the CPPA's website, "[t]he proposed regulations (1) update existing CCPA regulations to harmonize them with CPRA amendments to the CCPA; (2) operationalize new rights and concepts introduced by the CPRA to provide clarity and specificity to implement the law; and (3) reorganize and consolidate requirements set forth in the law to make the regulations easier to follow and understand."

Colorado was the third state out of five so far – the others are California, Virginia, Utah, and Connecticut – to adopt a comprehensive data privacy statute. I summarized the major provisions of the Colorado Privacy Act (CPA) in an April 2021 post to the Free State Foundation's blog.

The CPA, which is scheduled to go into effect on July 1, 2023, authorizes the Colorado Attorney General to craft rules generally "for the purpose of carrying out" the CPA as well as a specific rule regarding "the technical specifications for one or more universal opt-out mechanisms that clearly communicate a consumer's affirmative, freely given, and unambiguous choice to opt out of the processing of personal data for purposes of targeted advertising or the sale of personal data."

On October 10, 2022, Colorado Attorney General Phil Weiser's office published a Notice of Proposed Rulemaking (NPRM). Comments are due on or before February 1, 2023 – but earlier deadlines apply if they are to "inform the stakeholder meetings" scheduled for November 10, 15, and 17, or are to be considered at the rulemaking hearing on February 1, 2023.

Specific topics addressed in the NPRM include: the substantive requirements for privacy notices, the scope of the consumer rights established by the CPA and the processes by which those rights are exercised, specifications for universal opt-out mechanisms, the duties of businesses ("controllers") that collect personal information, and the method by which consent is obtained ("including the prohibition against obtaining agreement through the use of Dark Patterns").

Jonathan Turley Comes to the Defense of Free Speech

The July 2022 issue of the Harvard Journal of Law & Public Policy features an incisive article by George Washington University Law Professor Jonathan Turley titled "Harm and Hegemony: The Decline of Free Speech in the United States." In his 132-page article, Professor Turley looks at the growing and regrettably successful anti-free speech movement spearheaded by academics, politicians, and major corporations – particularly "Big Tech" companies. He examines and critiques the rising anti-free speech movement's "harm principle" for rationalizing crass censorship and the suppression of opposing viewpoints in public venues – including universities and the Internet – where freedom of speech previously has been widely affirmed as good in itself and vital to a free society of free people.  

Professor Hurley proposes ways to protect free speech through legislation. He writes: "There is a role for the government in reinforcing traditional enclaves for the exercise of the freedom of expression in our society. Indeed, with the rise of massive private systems of censorship, free speech may now depend on the government more than at any time in our history." Regarding physical marketplaces, Professor Turley's recommendations include legislation to protect public political expression from violent threats and actions by third parties that intend to prevent their exercise of free speech by incentivizing engagement by state law enforcement – or perhaps by federal law enforcement in the event that local law enforcement fail to arrest or prosecute third parties that engage in such violence. 

As for virtual marketplaces, Professor Turley observes the significant extent to which online companies such as Facebook, Twitter, and YouTube (Google) have embraced suppression of speech on the Internet. According to Professor Turley: "The expansive view of harmful speech on the Internet has led to one of the largest censorship systems in history." This rings true for anyone who has been paying attention to the behavior of major social media platforms and it should be disturbing to anyone who has valued freedom of speech on the Internet. To address the problem of online censorship and overt bias by dominant social media platforms, he recommends legislation to recognize some form of public forum protections for users of those platforms –perhaps by tying legal immunity protections for content moderation to case law protecting speech from government restrictions or by establishing a basic viewpoint neutrality requirement.

Underlying Prof. Turley's thoughtful approach is a close reading of First Amendment decisions –such as Miami Herald Publishing Co. v. Tornillo (1974), Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston (1995) Rumsfeld v. Forum for Academic & Institutional Rights, Inc. (2006) – from which he draws a distinction between government improperly "compelling" private speakers to speak messages with which they disagree from government permissibly "coercing" free speech forums of content neutrality and protection. Writes Professor Turley: 

The focus should be on preserving neutral forums on the Internet such as social media sites rather than forcing companies to publish a balance of views. This is the difference between a focus on limiting viewpoint censorship and the compulsion of viewpoint expression.

Notably, in NetChoice, LLC v. Paxton (2022), the U.S. Court of Appeals for the Fifth Circuit deduced from Tornillo, Hurley, Rumsfeld, and several other First Amendment decisions the same basic distinction identified by Professor Turley. In NetChoice, the court wrote that "the State may not force a private speaker to speak someone else's message… [b]ut the State can regulate conduct in a way that requires that private entities to host, transmit, or otherwise facilitate speech." (Free State Foundation President Randolph May offered his view of the Fifth Circuit's decision in his September 28 Perspectives from FSF Scholars, "Thinking Clearly and Speaking Freely – Part 12: Shining a Spotlight on Big Tech's Section 230 Immunity.")

If the reading of First Amendment case law by Professor Turley and by the Fifth Circuit hold, federal or state legislation establishing public forum protections for users of major social media platforms likely will pass constitutional muster so long as social media platforms are not compelled to speak and legislation focuses on promoting the speech of their users. Indeed, the viability of the distinction between compelling and facilitating speech may come down to a future decision by the Supreme Court, should it end up reviewing the Fifth Circuit's decision in NetChoice and the Eleventh Circuit's decision regarding Florida's law regulating social media. 

Law professors should be among the first ranks in defending the First Amendment as well as the freedom to speak without bullying by angry mobs or social media companies. After all, their vocation vitally depends on the ability to freely speak and publish. One should hope and expect that years spent dedicated to the study of law would lead legal academics to treasure the freedom of speech as a pillar of American constitutionalism and as a blessing to the people of America. Yet genuine affirmations of the importance of freedom of speech and rebukes against censorship seem to be rare. Thankfully, Professor Turley has stepped up to call out the dangers from the anti-speech movement and posit some constructive proposals for protecting the freedom of speech. 

Report Shows Digital Piracy Spiked in 2022 in the U.S. and Worldwide

Muso's October 2022 report "Piracy Data Overview January 2022 to August 2022" indicates that Internet user visits to digital piracy websites increased 22% compared to a year earlier. That amounted to a staggering 141.7 billion visits to piracy sites for all industries – movies, TV, publishing, music sound recordings, and software. And according to Muso, "the United States accounts for 10.9% of piracy between Jan-Aug 2022" – the highest of any country – with nearly 15.5 billion visits by Internet users in the U.S. to unlicensed streaming, torrent download, web download, and stream-ripping websites. To put those piracy traffic numbers into perspective, the U.S. share of digital piracy reportedly was more than 87% higher than second-place Russia. India and China rank third and fourth among countries for visits to piracy sites.  

The report by Muso – a U.K. data research company that monitors and measures global piracy – compared piracy traffic between January and August 2022 with piracy traffic between January and August 2021. Another stunning finding by Muso is that film piracy traffic grew almost 50% during the period examined in 2022. Piracy traffic involving published content grew close to 40% during that same period. 

 

Digital piracy is wrong and harmful to copyright owners. It unfairly undermines the value of their intellectual property, seriously curbing copyright owners' opportunities to make honest gains on their creative labors. My June 2021 Perspectives from FSF Scholars, "Fighting Online Piracy Will Boost American Economy and Jobs," identified policy priorities that ought to guide Congress and the Biden Administration in combatting online piracy of Americans' copyrighted works. Some of those actions include: (1) insisting on stronger copyright provisions in foreign trade agreements and proactively seeking enforcement of those provisions when foreign countries fail to adequately protect copyrights; (2) prosecuting mass-scale piracy operators for criminal copyright violations; (3) revising the DMCA to establish a "notice-and-stay down" system that would more strongly protect copyrights from online infringements in an era of high-speed broadband and mass social media user uploads. 

 

Private initiatives as well as targeted law enforcement efforts also remain important for disrupting and dismantling the lucrative online advertising streams that fund online piracy websites. For more on that subject, see my August 2021 Perspectives, "Online Ads Supporting Copyright Piracy Need to Be Stopped." And as spotlighted in a blog post from September 19 of this year, malvertising on online piracy websites pose significant cybersecurity dangers to Internet users.  

State Court Strikes Down Maryland's Digital Ad Tax

On Monday, a Maryland judge held the nation's first – and, to date, only – digital ad tax, H.B. 732, to be both unconstitutional and inconsistent with federal legislation. The Free State statute, which became law only after a General Assembly override of Governor Larry Hogan's veto, imposed a sliding-scale levy on certain providers of digital advertising – but not on all, and not on traditional advertisers – that required large digital platforms (such as Google and Facebook) to remit up to 10 percent of annual gross revenues derived from "digital advertising services."

As Free State Foundation President Randolph May and I explained in "Maryland's Proposed Digital Advertising Tax Would Do Harm," a March 2020 blog post, H.B. 732 not only was vulnerable to legal challenges under the Permanent Internet Tax Freedom Act, the First Amendment, and the Commerce Clause, it also imposed higher prices on local businesses that depend on online advertising to reach their customers and, by direct extension, consumers themselves.

"Anne Arundel County Courthouse June 2005" by Wikipedia user Something Original

is licensed under CC BY-SA 3.0.

A group of impacted Comcast subsidiaries and Verizon Media (now Yahoo) sought judicial relief in the form of a Declaratory Judgment in April 2021. Yesterday, Judge Alison L. Asti of the Anne Arundel County Circuit Court, ruling from the bench, granted their Motion for Summary Judgment.

As expected, Judge Asti reportedly found that H.B. 732 impermissibly interferes with interstate commerce, thereby implicating the Commerce Clause; runs afoul of the Permanent Internet Tax Freedom Act's prohibition on discriminatory taxes; and, because it is "not viewpoint neutral," violates the First Amendment.

Comcast and Verizon Media are not the only ones to have challenged Maryland's digital ad tax in court. As I noted in a contemporaneous post to the FSF Blog, a group of trade associations filed a Complaint for Injunctive and Declaratory Relief with the U.S. District Court of Maryland Northern Division on February 18, 2021. Oral arguments on the parties' motions for summary judgment are scheduled to take place at the end of next month.

Supreme Court Hears Oral Arguments Copyright Case on "Transformative" Works

On October 12, the U.S. Supreme Court held oral arguments in Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith. The case involves a series of prints and illustrations by the late Andy Warhol that are based on a copyrighted 1981 photo of the late music artist Prince. One image from that series was published – without authorization of the owner of the photo – on a magazine cover in May 2016. At issue in the case is the fair use doctrine and the nature or role of "transformative" works in fair use analysis. 

The Petitioner, Andy Warhol Foundation, presented  the question to the Court in a hedged manner: 

Whether a work of art is "transformative" when it conveys a different meaning or message from its source material (as this Court, the Ninth Circuit, and other courts of appeals have held), or whether a court is forbidden from considering the meaning of the accused work where it "recognizably deriv[es] from" its source material (as the Second Circuit has held). 

Fair use is an affirmative defense to copyright infringement, and it consists of four non-exclusive factors that are to be considered in evaluating whether the use of a copyrighted work is "fair:" (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work. Under Supreme Court precedents such as Campbell v. Acuff-Rose Music, Inc. (1994), courts typically analyze the first factor according to the degree to which the use is "transformative" – that is, "whether the new work merely supersedes the objects of the original creation, or instead adds something new, with a further purpose or different character, altering the first with new expression, meaning, or message." 

 

However, Section 106(2) secures to copyright owners the exclusive right to prepare "derivative works" based upon the copyrighted work. According to Section 101:

A "derivative work" is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted." A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole represent an original work of authorship, is a "derivative work."

Some insightful commentaries have been published about Andy Warhol Foundation v. Goldsmith, and Free State Foundation scholars likely will address the case more definitively once the Supreme Court has issued its decision. Until then, a general observation here is that the Petitioner's seeming overemphasis on an artist's subjective intent or interpretation of a copyrighted work as rendering a secondary work "transformative" and thus a fair use would, if adopted by the Court, encroach significantly on a copyright owner's exclusive right to prepare derivative works. During the oral arguments, Justice Amy Coney Barrett appeared to make this point – or at least a similar point – when she stated to the Petitioner's counsel: "And it seems to me like your test, this meaning or message test, risks stretching the concept of transformation so broadly that it kind of eviscerates Factor 1 and puts all of the emphasis on Factor 4." 

Additionally, I second FSF President Randolph May in commending the Committee for Justice for its amicus curiae brief in this case. As explained in his August 18 blog post, CFJ's amicus brief skillfully sets forth the conceptual underpinnings of copyright law as it pertains to the fair use doctrine. And their brief applies that background understanding to the transformative works claims being made in Andy Warhol v. Goldsmith.

In the Face of Inflation, Prices Fall for Internet and Wireless Services

On October 13, the U.S. Bureau of Labor Statistics released Consumer Price Index (CPI) data for September 2022. The overall CPI for September 2022 showed a sharp year over year increase of 8.2%, as Americans continue to be battered by inflation. However, CPI data for September 2022 shows significantly smaller increases or even slight decreases for communications and multi-channel video programming distributor (MVPD) services. Residential landline services have risen 3.6% year over year, and satellite and cable TV subscription services have gone up just 2.2%. Meanwhile, prices for internet services actually decreased 0.01% year over year, and prices for wireless services decreased 1.1% over that same timespan. 

One cannot reasonably or honestly deny that Americans are facing serious hardships due to high inflation. But the fact that communications and MVPD services are outperforming the bad inflationary trends – and even holding the line in the face of those trends for Internet and wireless services – is a testament to the strong private network investment and the competition in those markets. As USTelecom has reported, broadband providers' capital expenditures reached $86 billion in 2021. And CTIA reported that wireless providers' capital expenditures totaled $35 billion last year. Those investments have increased fixed and wireless broadband network capacities and geographic reach, giving overwhelmingly most consumers competing choices across platforms.
 

To help ensure pro-consumer pricing trends continue in fixed and mobile broadband Internet access services, the FCC should continue adhering to the light-touch regulatory framework that it applies to those services under Title I of the Communications Act. The Commission should maintain its reforms that bar unreasonable local permitting process delays for constructing wirelines and wireline infrastructure facilities as well as for making minor modifications and upgrades. And the Commission should act as quickly as it reasonably can to repurpose more spectrum for licensed commercial wireless use, including in the lower 3 GHz band. Promoting market investment and competition offer the best practical means for the Commission to ensure broadband availability and affordability. 

 

P.S. For an examination of broadband pricing trends against a longer timeframe, see Free State Foundation Senior Fellow Andrew Long's June 30 blog post, "2022 USTelecom Broadband Pricing Report: Further Proof that Competition is Benefiting Consumers. 

Report Finds C-Band Spectrum is Speeding Up 5G Services

OpenSignal released a report on October 12 titled "How C-Band is jump-starting AT&T and Verizon's 5G experience." According to the report, AT&T users' average 5G download speeds increased by 34.6% between March and September, going from 50 Mbps up to 67.3 Mbps. And during that same time span, Verizon users' 5G download speeds increased 15.8%, going from 70.3 Mbps up to 81.4 Mbps. As the OpenSignal report observes, during that seven-month timeframe, both mobile broadband providers boosted their use of licensed C-band spectrum in providing 5G services, with AT&T's use of C-band rising to more than 30% of user 5G readings while Verizon's use of C-band grew to almost 50% of user 5G readings.

The OpenSignal report findings reflect the importance of C-band spectrum for realizing the full potential of 5G wireless networks to enhance broadband market competition and offer value to consumers. As C-band increasingly is put into use, one can expect the performance metrics to show further significant improvements in speeds as well as capacity. 

The report also ought to serve as a reminder of the necessity of making more mid-band spectrum available for commercial use. There are presently three mid-band spectrum candidates for repurposing: the 3.1-3.45 GHz band, the 4.4-4.49 GHz band, and the 7.125-8.46 GHz band. Together, these three swaths comprise over 1,400 MHz of spectrum that potentially could be licensed for commercial wireless use, to the benefit of consumers, industry, and the American economy. Congress should pursue legislation to authorize the FCC to repurpose those bands for competitive bidding spectrum license auctions, and require NTIA and other executive branch agencies to coordinate efforts to address incumbent user needs and technical complexities that will need to be addressed in order to bring those auctions to fruition. 

Constitutional Challenge to USF's System for Subsidy Fees Filed in the 11th Circuit

On October 3, a constitutional challenge to the Universal Service system of surcharge fees – which are effectively taxes on voice consumers – was filed in the U.S. Court of Appeals in the Eleventh Circuit. The plaintiffs in Consumers' Research v. FCC raise several non-delegation claims in their petition based on Article I, Section 1 of the U.S. Constitution. Additionally, the plaintiffs challenge the statutory authority of the Universal Service Administrative Authority (USAC) to administer the subsidy fee system, and they also raise an alternative claim against the USAC's authority pursuant to the Appointments Clause in Article II, Section 2 of the Constitution. Plaintiffs also challenge the USF Tax Factor for failure to comply with the Administrative Procedures Act regarding rulemakings and for failure to be published in the Federal Register.

The claims raised in the plaintiffs' petition to the Eleventh Circuit in Consumers' Research v. FCC are similar to claims raised in pending cases in the Fifth and Sixth Circuits. The Free State Foundation and FSF President Randolph May have joined amicus curiae briefs filed by the Competitive Enterprise Institute (CEI) in both the Fifth and Sixth Circuit cases. The amicus brief joined by FSF and FSF President May was the subject of a blog post from April 19 of this year. And the other amicus brief was filed in the Sixth Circuit on September 29. Many thanks go to CEI. According to court docket records, the Fifth Circuit has tentatively scheduled oral arguments for December 5, 2022.

The constitutional and statutory challenges raised by Consumers' Research and others to the Universal Service Fund's system for imposing and administering surcharge fees are principled, thoughtful, and deserving of careful consideration by the judiciary. 

 

P.S. For recent takes on the need for Congress to modernize the Universal Service system, be sure to check out FSF President Randolph May's August 2022 Perspectives from FSF Scholars, "The FCC's USF Report: Unprecedented Broadband Funding Requires Fundamental Universal Service Reforms" as well as FSF Senior Fellow Andrew Long's August 30 blog post, "A True Assessment of the USF's Future Relevance Demands a Full Accounting of Broadband Subsidies."

After FCC Auction Authority Extension, Senate Should Pass Spectrum Bill

Today, October 3, the Senate passed the H.R. 6833, the "Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023." The bill, which is expected to be signed into law, contains a two-and-a-half-month extension on the FCC's authority under Section 309(j)(11) of the Communications Act of 1934 to conduct spectrum license auctions. Leaving aside opinions about the rest of the bill, H.R. 6833 gives the 117th Congress an additional window of opportunity to take up and pass H.R. 7624, the Spectrum Innovation Act of 2022, before the end of its session.  

If passed by Congress and signed into law, the Spectrum Innovation Act would extend the FCC's spectrum license auction authority to March 2024. Additionally, the Act would direct the Commerce Secretary to identify 200 MHz in the lower 3 GHz band for "non-Federal use, shared Federal and non-Federal use, or a combination thereof." And it would direct the FCC to conduct an auction for licenses in the lower 3 GHz band.

There remains a pressing need for more commercially licensed mid-band spectrum, and the lower 3 GHz band is a prime candidate for repurposing. Indeed, Accenture's late September 2022 report observed that the federal government is the primary user for 3,300 MHz of spectrum between 3 GHz and 8.4 GHz. That amounts to 61% of the lower mid-band spectrum range, with a large percentage of the remainder dedicated to unlicensed use, and only 270 MHz currently available for commercial licensed wireless use. And in a September 22 blog post, Free State Foundation Senior Fellow Andrew Long spotlighted an AnalysysMason report that found the U.S. lags behind its global competitors France, Japan, and the U.K. in the amount of licensed mid-band spectrum available for commercial use by an average of 530 MHz. 

 

In order to effectively repurpose 200 MHz in the lower 3 GHz band, the FCC must retain its power to conduct licensed spectrum auctions and transfer licenses to winning bidders. And successful spectrum license auctions require regulatory certainty in order to draw the interest of auction participants and to maximize auction proceeds. 

As mentioned in a blog post from this summer, the House of Representatives passed the Spectrum Innovation Act on July 27. A joint announcement by the bipartisan leaders of the House Energy & Commerce Committee has highlighted the strong and widespread base of support for the Act and urged the Senate to take prompt action on the bill. The table is now set for H.R. 7624, and the Senate should make passage of the bill a top priority.