Registration Now Open! FSF's Fifteenth Annual Policy Conference on March 28

FREE STATE FOUNDATION Fifteenth Annual Policy Conference

REGISTER NOW OPEN! WHAT: FSF's Fifteenth Annual Policy Conference   WHERE: National Press Club, Washington, DC   WHEN: Tuesday, March 28, 2023 – 9:00 AM - 2:30 PM   The Free State Foundation will hold its Fifteenth Annual Policy Conference on Tuesday, March 28, 2023, at the National Press Club in Washington, DC. This annual conference is widely acknowledged to be one of the nation's premier law and policy events. As in previous years, a truly outstanding lineup of senior officials and prominent experts from the FCC, FTC, other government agencies, industry, academia, and think tanks will discuss and debate the most important communications and Internet policy issues of the day, as well as competition policy and other issues.    REGISTRATION IS COMPLIMENTARY, INCLUDING CONTINENTAL BREAKFAST AND LUNCH.   BUT YOU MUST REGISTER TO ATTEND. REGISTER NOW HERE!   #FSFConf15

On Intermodal Competition for Broadband, the FCC's Competition Report Falls Short

On January 24, Free State Foundation published Senior Fellow Andrew Long's Perspectives from FSF Scholars, "On Video, the FCC's Competition Report Falls Short." In that incisive paper, Mr. Long focuses on the 2022 Marketplace Competition Report's treatment of the competitive market and Commission policy for video programming distribution. The evidence of video programming distribution market transformation brought about by the observable ongoing subscriber declines for multi-channel video programming distributor (MVPD) services and by continuing increases in subscriptions for Internet-based alternatives is overwhelming. This transformation has uprooted the perceived analog cable distribution bottleneck upon which the legacy video regulatory apparatus depended. Yet many outdated restrictions on MVPD services remain firmly in place. And Mr. Long makes a strong case that the FCC's report is not fully compliant with the RAY BAUM's Act of 2018's requirements that the Commission identify laws and regulations that pose barriers to competitive expansion of existing providers of communications services and that the agency lay out an agenda for addressing those challenges.

But there is another area in which the FCC's 2020 report comes up short: assessing intermodal competition in the broadband Internet services market. As acknowledged by the report, the RAY BAUM's Act states: "As part of its evaluation, the Commission must consider all forms of competition, including 'the effect of intermodal competition, facilities-based competition, and competition from new and emergent communications services.'" Yet the report never engaged in any substantive assessment of the effects of competition across different broadband technology platforms. Perhaps the closest the report gets is in paragraph 157, which touches on wireline/wireless substitutability:  

Many households continue to subscribe to both fixed and mobile broadband service, suggesting that these separate services offer benefits that are either complementary or independent of each other. Technological innovation in and increased deployment of both the mobile wireless and fixed broadband services markets have broadened consumers’ possible choices of how to access the Internet. 

This shortcoming of the 2022 report is the subject of Commissioner Brendan Carr's statement partially approving and partially concurring in the report: 

When we adopted the Commission’s prior Communications Marketplace Report in 2020, I voted to approve in part and concur in part because, in my view, we could have gone further in recognizing the converged market for connectivity. I continue to have that view this go around. 

FSF's comments to the FCC for its 2020 Communications Marketplace Report also called for a shift away from the siloed approach to discrete service technologies and toward a more serious intermodal competition assessment. To that end, FSF scholars recommended that the Commission adopt a product market definition that encompasses different technologies that provide broadband Internet services. (Those same views were expressed in short form in comments filed by FSF for the 2022 report.) FSF's comments for the 2020 report regarding intermodal competition assessments could double as a critique of the 2022 report, as competition from and among fiber, 5G, FWA, and cable MVNOs continues to increase. 

Save the Date! March 28, 2023 - FSF's Fifteenth Annual Policy Conference

 

FREE STATE FOUNDATION Fifteenth Annual Policy Conference

SAVE THE DATE!   WHAT: FSF's Fifteenth Annual Policy Conference   WHERE: National Press Club, Washington, DC   WHEN: Tuesday, March 28, 2023 – 9:00 AM - 2:30 PM   The Free State Foundation will hold its Fifteenth Annual Policy Conference on Tuesday, March 28, 2023, at the National Press Club in Washington, DC. This annual conference is widely acknowledged to be one of the nation's premier law and policy events.   As in previous years, a truly outstanding lineup of senior officials and prominent experts from the FCC, FTC, other government agencies, industry, academia, and think tanks will discuss and debate the most important communications and Internet policy issues of the day, as well as competition policy and other issues.    PLEASE MARK YOUR CALENDAR FOR MARCH 28, 2023!

The Latest on State Cable Bill Prorating Requirements

There have been two recent developments of note regarding legal challenges to state-level requirements that cable operators prorate customers' last-month bills – obligations that, as I argued in "State Cable Bills Prorating Requirements Clearly Are Preempted," an April 2021 Perspectives from FSF Scholars, constitute a form of rate regulation preempted by the 1984 Cable Act, not an otherwise permissible customer service standard or consumer protection law.

Both Maine and New Jersey require that cable operators – but not any of the countless other distributors of video programming, whether facilities-based (such as the two Direct Broadcast Satellite operators, DIRECTV and DISH Network, or telco TV providers, like Verizon FiOS) or streamed over the Internet (Netflix, Hulu, Amazon Prime Video, Disney+, and so on) – bill canceling customers on a per-day basis during their final month of service.

In "Maine Cable Law, Ignoring Competition, Is 'Unambiguously Preempted'," an October 2020 Perspectives, I reported that the U.S. District Court for the District of Maine had found the Maine statute to be "unambiguously preempted." The Court of Appeals for the First Circuit, however, reversed that decision on January 4, 2022. For more information, please see "First Circuit Wrongly Concludes Maine's Prorated Billing Requirement Is Not Unlawful."

And last week, on January 9, 2023, the U.S. Supreme Court announced that it had denied Charter Communications' petition for certiorari.

New Jersey's "virtually identical" rule likewise, and for similar reasons, was deemed preempted by the Superior Court of New Jersey, Appellate Division, in an October 15, 2021, unpublished opinion. I discussed this decision in "NJ State Court Concurs: Requirement to Prorate Cable Bills Equals Preempted Rate Regulation," a contemporaneous post to the Free State Foundation blog.

The New Jersey Board of Public Utilities and Division of Rate Counsel appealed to the New Jersey Supreme Court, which held oral arguments on Tuesday (subscription required). Should the lower court decision be reversed, this case potentially could make its way to the Supreme Court.

A decision is expected as early as late next month.

Report Spotlights Economic Value and Jobs Created by U.S. Copyright Industries

On December 14, the International Intellectual Property Association (IIPA) published "Copyright Industries in the U.S. Economy: The 2022 Report." The report analyzes the contributions to the U.S. economy between 2018 and 2021 by "core copyright industries" whose primary purpose is to create, produce, distribute, or exhibit copyrighted materials.

According to IIPA's 2022 report:

• In 2021, core copyright industries added over $1.8 trillion in value to the U.S. gross domestic product (GDP), amounting to 7.76% of the U.S. economy. 
• Core copyright industries employed 9.6 million workers in 2021, comprising 5.53% of total private employment in the U.S. 
• Between 2018 and 2021, core copyright industries grew at an aggregate annual rate of 6.15%, an amount three times higher than the average annual 1.76% growth rate of the entire U.S. economy during that four-year timespan. 
• Core copyright industries accounted for 52.26% of the U.S. digital economy in 2021.
• Sales of U.S. copyright products in "selected" core industry sectors – recorded music; motion pictures, TV, and video; software publishing; and non-software publications including newspapers, books, and periodicals – amounted to $230.3 billion in 2021, an increase. 

IIPA's 2022 report also estimates the value of economic contributions by "total" copyright industries in the U.S., including industries in which copyrighted goods are only an aspect of their businesses as well as industries that facilitate the creation and production of copyrighted works and industries that develop computers and other devices that support usage of copyrighted goods. According to the report, the value added to GDP by total copyright industries was more than $2.9 trillion, or 12.52% of the U.S. economy. 

In our book, Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (Carolina Academic Press, 2020), Free State Foundation President Randolph and I credit the wisdom of the American Founders in according copyright protections to authors and other creative artists in the U.S. Constitution's Article I, Section 8 Copyright Clause. As we explain in chapter 3 of our book, those constitutional protections rest on a foundational understanding of copyrights as unique forms of private property that can be used and exchanged in a free market setting. IIPA's 2022 report shows that the American public, including the creators who make their living by creating, performing, and selling copyrighted content, continue to benefit greatly from the Founders' constitutional policy favoring copyright protections.  

FCC Submits Report to Congress on Robocalls and Caller ID Scams

On December 23, the FCC submitted to Congress the latest version of its Report on Robocalls and Transmission of Misleading or Inaccurate Caller Identification Information. The annual report is required by the TRACED Act. It contains data regarding informal consumer complaints to the FCC regarding robocalls, Commission enforcement actions, and an overview of private efforts to combat unwanted and harmful robocalls.  

The report cites data indicating 37,736 informal consumer complaints were filed at the FCC regarding robocalls during the first eleven months of 2022. Thus, it appears likely that informal complaints about robocalls were slightly lower in all of 2022 compared to a year prior. There were 46,189 such complaints in 2021. Also, the report cites data indicating that 37,752 informal complaints regarding caller ID spoofing were filed in the first eleven months of 2022, indicating that yearly total for such complaints was notably less than the 57,075 complaints filed in 2021. (Note: A single filed complaint can involve more than one reported instance of an illegal robocall or a call from a spoofed ID.)

 

Among the actions taken by the FCC in 2022 to combat unwanted and illegal robocalls – many of which originate from foreign countries – the report acknowledged the Commission's 2022 Gateway Provider Order. The order requires gateway providers to respond to traceback requests within 24 hours, block calls that clearly are conduits for illegal voice traffic, and implement "known your upstream obligations." Under the order, gateway providers are required to apply STIR/SHAKEN caller ID authentication technology to all unauthenticated foreign-originated session-initiated protocol (SIP) calls with U.S. North American Numbering Plan (NANP) numbers by June 30, 2023. 

 

Regarding private efforts to combat robocalls and caller ID spoofing, the report provided an overview of the progress of the Industry Traceback Group to identify the path and origin of illegal robocalls in order to stop them. According to the report:

[B]etween January 1, 2022 and November 21, 2022, the Industry Traceback Group initiated over 2,600 tracebacks, a traceback initiation rate which is 10% higher than in 2021 and 20% higher than in 2020. The Industry Traceback Group also played a key role in combating the scourge of illegal robocalling campaigns from foreign-based providers. In addition to identifying 146 U.S.-based providers suspected of originating apparently illegal robocalls, the Industry Traceback Group also identified 82 foreign-based originating providers and 145 U.S. gateway providers. 

Additionally, the report notes that the Industry Traceback Group is working with providers to incorporate STIR/SHAKEN into the traceback process.  Hopefully, the expanded implementation of STIR/SHAKEN and traceback efforts will further curb illegal robocalls. 

However, it ought to be recognized that STIR/SHAKEN's utility is likely limited to the context of voice calls made using NANP numbers – and that it is not a technology that ought to be imposed by administrative agency rule on providers of text messaging services. 

That basic point is made in my January 4, 2023 Perspectives from FSF Scholars, "Innovation Will Protect Consumers From Illegal Text Messages Better Than New FCC Rules." As explained in that paper, the FCC has proposed a blocking and caller ID requirement on wireless providers for text messaging services despite the fact that there does not appear to be any solid evidence that text messages from invalid, unallocated, or unused numbers are a problem for wireless consumers. Wireless providers already provide up-front vetting for would-be senders of mass text messages. It is unlikely that such a costly mandate actually would reduce the volume of illegal robotexts and protect consumers. And although the Commission's notice of proposed rulemaking appears to favor requiring the STIR/SHAKEN to combat illegal texts, even the agency acknowledges that the technology doesn't exist for text messaging services. Voice and text messaging technologies are different, and so it should be no surprise that the best solutions to combatting illegal robocalls and robotexts also are different. For more details, see my Perspectives.

Google's YouTube Scores Rights to NFL Sunday Ticket

Late last year, it was announced that, beginning with the 2023 National Football League season, Google's YouTube will be the exclusive home of the NFL Sunday Ticket game package. This represents a watershed moment in the rapidly transforming video programming distribution marketplace.

For the past 28 years, the NFL Sunday Ticket has been available only to subscribers of the DIRECTV Direct Broadcast Satellite (DBS) service, a traditional, facilities-based multichannel video programming distributor (MVPD). And for much of that time, it served as a potent customer-acquisition tool for DIRECTV, a key product differentiator vis-à-vis other traditional MVPDs (cable operators, DISH Network, telco TV providers) well worth the $1.5 billion in licensing fees DIRECTV reportedly paid annually.

In "Pixel by Pixel, Video Streaming's Ascension Comes Into Focus," a September 2021 Perspectives from FSF Scholars, I noted that two other Big Tech titans, Amazon and Apple, had emerged as potential bidders for the NFL Sunday Ticket and recounted the significance of that package in the pre-streaming era:

When most consumers subscribed to one – and only one – package of primarily live, linear cable and broadcast channels from a facilities-based MVPD, DIRECTV's longstanding exclusive agreement to distribute the NFL Sunday Ticket was seen as the quintessential example of "must-have" content, a crown jewel able to win customers from rival distributors. So much so that in 2014, AT&T's offer to acquire DIRECTV for $48.5 billion hinged upon the DBS provider's ability to renew its deal with the NFL.

By early 2020, however, the landscape had changed dramatically, thanks in large part to the immense popularity of streaming video. DIRECTV had lost more than 4 million subscribers over the previous two years, the NFL Sunday Ticket had become a "money loser," and AT&T was looking to exit the video distribution business altogether – a step it took in August 2021.

The agreement between the NFL and Google provides further evidence of the steady consumer migration away from traditional MVPDs and toward video streaming in all of its forms: beginning next fall, the NFL Sunday Ticket will be offered, not by a DBS, cable, or telco TV provider, but rather by a virtual MVPD (vMVPD) – YouTube TV – and an Online Video Distributor (OVD) – YouTube Primetime Channels.

Cox Mobile Gives Consumers Another Choice for Wireless Services

On January 5, Cox Communications announced the launch of Cox Mobile. The mobile virtual network operator (MVNO) service is available to its Internet subscribers in Cox's geographic markets. It is reported that Cox Mobile harnesses over 4 million Cox Wi-Fi hot spots in combination with Verizon's 5G cellular network.

As pointed out in blog posts from May, September, and October 2022, consumer adoption of cable wireless MVNO services that are bundled with fixed residential cable broadband Internet access services continues to grow. The launch of Cox Mobile is another indicator of the competitiveness of the wireless marketplace. Consumers living in Cox's footprint will now gain an additional choice for mobile wireless services. 

Notably, these hybrid-model cable wireless MVNOs are not mere resellers. They rely, in substantial part, on their own network facilities. And it is widely expected that these competitive cable wireless MVNOs will put more of their own licensed spectrum into use and thereby reduce their business costs for leasing wholesale access to mobile cellular networks. In 2023, it will be interesting to watch the technological development of these emergent services as well as consumer responses.  

Congress Grants Short-Term Extension on FCC's Spectrum Auction Authority

On December 29, President Joe Biden signed into law H.R. 2617, titled the "Consolidated Appropriations Act, 2023." The bill is known to many as the enormous 1,400+ page, $1.7 trillion omnibus spending bill that was pushed through at the tail end of the 117th Congress. Putting aside judgment about whether the bill is good, bad, or ugly, page 774 of the 1,653-page pdf document of the H.R. 2617 contains a provision that is directly relevant to federal communications policy:

TITLE IX—EXTENSION OF FCC AUCTION AUTHORITY 

SEC. 901. EXTENSION OF FCC AUCTION AUTHORITY. 

Section 309(j)(11) of the Communications Act of 1934 (47 U.S.C. 309(j)(11)) is amended by striking "December 23, 2022" and inserting "March 9, 2023".

This stopgap measure for extending the FCC's authority to prepare and conduct spectrum license auctions certainly is better than letting that authority lapse. But the 118th Congress now has an important task before it. As pointed out in a blog posts from July and October of 2022, spectrum is a valuable economic resource, and significantly more spectrum – particularly in the mid-band range – needs to be repurposed for commercial wireless use. Congress has an obligation to maximize the efficient usage of the spectrum that currently remains under federal control. And it can carry out that important obligation by granting a long-term extension of the Commission's authority to auction spectrum licenses for commercial use by private market providers – and also by directing the Commission, in coordination with the NTIA, to auction spectrum in the 3.1-3.45 GHz band. 

In 2023, expect FSF scholars to have more to say on FCC auction authority and the repurposing the lower 3 GHz band for commercial use.  

Letter to Senator John Thune Regarding Oversight of Broadband Subsidies

 

 Free State Foundation President Randolph May sent a letter today to Senator John Thune, former Chairman of the Senate Commerce Committee, in response to Senator Thune's request for responses to a wide-ranging set of questions relating to the implementation of the Infrastructure Investment and Jobs Act (IIJA) and other programs disbursing funds to advance broadband deployment, as well as questions focused more generally on broadband issues. The letter's Introduction is below:

  

Introduction

The Free State Foundation's big-picture position regarding broadband deployment is that the role of marketplace innovation and competition, fueled by over $2 trillion in private capital investments since 1996 and $86 billion in 2021 alone, should be acknowledged, protected, and encouraged. And in those increasingly limited locations where challenging economic realities justify targeted government intervention to close remaining digital divides, marketplace competition should be replicated to the greatest extent possible to maximize overall consumer welfare while promoting fiscal responsibility.

In practical terms, first and foremost, this means that taxpayer dollars should never be used to subsidize the "overbuilding" of existing, privately funded networks that are already meeting consumer needs. Government subsidies should be applied judiciously solely to unserved areas. Then, and only then, should subsidies be directed to areas properly deemed "underserved." And in no event should subsidies be awarded in a manner that artificially tilts the competitive landscape toward government-preferred service providers, whether municipal or cooperative systems, or providers that choose to deploy fiber (or both). In other words, to the maximum extent possible, economic efficiency should serve as the overarching guiding principle so that all Americans can reap the benefits that accrue from the operation of marketplace forces.

In addition, great care must be taken to prevent waste, fraud, and abuse. Unfortunately, the scattershot nature that defines the current multi-agency, multi-program approach to disbursing broadband subsidies inevitably invites such abuse. Meaningful oversight, such as this effort you have initiated, is essential to achieve a coordinated, government-wide approach that helps avoid waste and ensures that taxpayer dollars are expended prudently. Effective oversight also will help inform efforts by law enforcement officials to hold parties accountable for fraud and other abuse of subsidy dollars.

Moreover, it is important that Congress require the FCC to continue to remove obstacles that delay deployment of broadband infrastructure and raise the costs of deployment. This may require granting the FCC more explicit authority to preempt various state and local regulations and practices relating to infrastructure siting that continue to pose unnecessary impediments to rapid deployment of both wireline and wireless services, including small cell 5G broadband facilities. It also may require measures to streamline infrastructure siting on federal lands.

And Congress should require the FCC to complete in a timely fashion its ongoing pole attachment proceeding and ensure that the final rules require prompt resolution of pole attachment disputes. Furthermore, Congress should eliminate the existing exemption from FCC-imposed limits on rates for attachments to poles owned by municipalities and electric cooperatives.

Finally, efforts spearheaded by Congress to expand broadband connectivity should not be allowed to be waylaid by extraneous supposed policy priorities, such as preferences for labor unions, "net neutrality," or various forms of rate regulation, however disguised or denominated. Attempts to impose these controversial extraneous policy preferences through the conditioning of federal broadband subsidies only serve to distract, delay, and drive costs higher. They are even more harmful now given the inflationary pressures currently wreaking havoc on projected price estimates.

 

The End of 3G Wireless Era Enables America's 5G Future

On January 3, Verizon announced that its 3G CDMA mobile network has been decommissioned. The retirement of Verizon's 3G network had been scheduled to take place by December 31, 2021. Now all three nationwide mobile wireless broadband providers now have retired their 3G networks.

As explained in my September 2021 Perspectives from FSF Scholars, "AT&T's 3G Sunset Will Make Way for Speedy 5G Services": "Old 3G networks consume significant amounts of spectrum for a small and fast-shrinking user base. That valuable spectrum needs to be repurposed to timely roll out 5G networks… so that consumers can benefit from their promised speeds and capabilities." And in an August 2021 Perspectives from FSF Scholars titled "T-Mobile's Timely 3G Sunset Will Spur Stronger Services," I wrote that "any regulatory intervention to extend the life of 3G networks would keep wireless services stuck in the slow-speed era to the overall detriment of consumers." Blog posts (here, here, and here) by FSF scholars also tracked the progress of 3G network retirement during 2022.

Fortunately, unjustified regulatory obstacles to 3G retirement appear to have been avoided. When it comes to the deployment of 5G services, every bit of available spectrum helps. The spectrum used to support dwindling 3G legacy services is now available for next-gen 5G services.