Satellite and Webcasting Royalty Payments at Issue in Copyrighted Music Case

On August 16, a lawsuit was filed for a case called SoundExchange, Inc. v. Sirius XM Radio Inc. Plaintiff SoundExchange's complaint alleges that Sirius XM underpaid royalties for public performance of copyrighted music recordings on its satellite digital audio radio service (SDARS). SoundExchange is a non-profit entity that collects digital performance royalties from statutory license users and distributes them to artists and copyright owners.  

Royalty rates are set by the Copyright Royalties Board (CRB). The CRB separately sets royalty fees for satellite radio and commercial webcasters under the statutory license. As explained in SoundExchange's complaint, regulations provide that "royalties for webcasting are calculated on a per-performance basis rather than as a percentage of gross revenues: the webcasting royalty is assessed for each transmission of a sound recording to a listener, while the SDARS royalty is assessed as a percentage of the revenues the service generates." 

SoundExchange alleges that Sirius XM improperly allocated excessive amounts of revenue to its webcasting service – which requires lower royalty payments – thereby reducing royalties payable for its satellite radio service. Additionally, SoundExchange alleges that an independent audit revealed Sirius XM underpaid royalties, and that regulations require that amount owed – as determined by the auditor – be paid. According to SoundExchange's complaint: "To date, Sirius XM already has unjustifiably withheld more than $150 million in royalties owed to artists and copyright owners under the SDARS statutory license."

The case is likely to be a one-off because Sirius XM is the only provider of SDARS and music webcasting services. But given that Sirius XM has approximately 34 million subscribers and generates significant public performance royalties – not to mention the $150 million in unpaid royalties figure alleged in the complaint – a legal resolution will be tremendously important for copyright owners. 

That said, copyrighted sound recordings are valuable property and it is the role of Congress -- and its delegated authorities at the Copyright Royalty Board -- to provide clear boundary rules defining the scope of exclusive rights and expectancy interests in copyrighted property. Clear rules are a necessary foundation for ensuring that copyright owners can maximize the value and returns for their labors and investment. If nothing else, the case may furnish occasion for more clearly specify for future purposes how revenues and royalties are allocated between SDARS and webcasting services. 

 

This blog post does not express a position on the correct prospective outcome in SoundExchange, Inc. v. Sirius XM Radio Inc. The case is only at its beginning in the U.S. District Court for the Eastern District of Virginia. Sirius XM has not yet filed any detailed pleadings in response to those SoundExchange allegations. Stay tuned. 

Video Subscriber Updates Underscore Ongoing Shift to Streaming

In a July 2023 Perspectives from FSF Scholars, I took aim at the core assumption underlying calls to expand the definition of a "Multichannel Video Programming Distributor" (MVPD) to include virtual substitutes streamed over the Internet (vMVPDs). Contrary to what proponents might have you believe, subscribers cutting the physical cord are not switching en masse to online alternatives. Instead, they're migrating primarily to streaming platforms like Netflix, Hulu, and Amazon Prime.

The latest video subscriber numbers provide further evidence that both facilities-based MVPDs (cable, Direct Broadcast Satellite (DBS), telco TV) and vMVPDs are weathering the impact of a seismic shift in consumer preferences away from the monolithic video "big bundle" to a self-curated collection of more targeted offerings.

Some key data points:

• According to the Leichtman Research Group (LRG), the top cable operators lost 925,532 subscribers during Q2. The two DBS providers, DIRECTV and DISH TV, combined shed nearly 600,000 customers. And Verizon FiOS saw its total drop by 70,000. Overall, LRG found that traditional MVPDs lost 1.61 million customers.
• Wells Fargo analyst Steven Cahall reported even higher traditional MVPD declines: 1.72 million customers, representing 7 percent of the total.
• Overall, LRG saw vMVPD subscriber totals decline in Q2 by 115,000 – despite an estimated 200,000 additional YouTube TV customers. (Note that not all vMVPDs release subscriber data to the public.)
• Steven Cahall, meanwhile, saw vMVPDs add just 8,000 subscribers in Q2.
• Netflix, on the other hand, added 1.17 million customers in the United States and Canada during Q2, for a total of 75.57 million.
• And Hulu added 300,000 subscribers in Q3, for a total of 44 million subscribers.

As I concluded in "With Pay-TV on the Wane, Legacy Regulations Should Follow," the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them:

Put simply, the issue is not that the definition of an MVPD is not sufficiently broad, it's that pay-TV companies confront a marketplace that is dramatically changed…. To fully harness for consumers the benefit-generating engine that is competition, it is time for regulators (and regulations) to step aside and let the marketplace drive optimally efficient outcomes.

AT&T Launches 5G Fixed Wireless Access Service

On Tuesday, AT&T announced the introduction of AT&T Internet Air, its 5G fixed wireless access (FWA) home Internet service, in 16 markets including Los Angeles, Philadelphia, and Detroit. Previously offered only to existing digital subscriber line (DSL) customers in certain areas, the expanded offering of AT&T Internet Air represents yet another milestone in the rapid rise of FWA as a viable competitive alternative to traditional wireline high-speed home Internet access.

In "Fixed Wireless Access Is Boosting Rural Broadband and Consumer Choice," an April 2022 Perspectives from FSF Scholars, FSF Director of Policy Studies and Senior Fellow Seth L. Cooper touted not only FWA's ability "to connect several million Americans in rural and small markets," but also to compete with wireline providers for home Internet customers in more populated markets. This announcement that AT&T is targeting major cities with its FWA service, along with the rapid FWA subscriber gains of T-Mobile, Verizon, and U.S. Cellular, confirm both of those predictions.

Source: AT&T Blog

In a blog post earlier this month, Mr. Cooper highlighted second-quarter FWA subscriber numbers from T-Mobile (509,000 net additions, for a total of 3.7 million), Verizon (384,000 net additions, for a total of 2.3 million, and U.S. Cellular (over 100,000 total subscribers). Notably, these services did not exist prior to 2021.

According to the Leichtman Research Group, T-Mobile and Verizon combined have added over 800,000 FWA subscribers for 5 quarters in a row. In the second quarter of 2023 alone, they added almost 900,000 subscribers – compared to less than 10,000 new cable broadband subscribers and a loss of nearly 62,000 by the top wireline phone companies.

In Comments filed in the FCC's 2022 Communications Marketplace Report proceeding, Free State Foundation scholars argued that the Commission should:

[C]ease its exclusively piecemeal evaluation of broadband marketplace competition that continues to rely on "siloed" service definitions. Instead, it should evaluate competition with a broader "broadband market" definition that takes into account fiber, cable, mobile, FWA, and satellite platforms. This broader outlook would more accurately reflect market realities and be a better guide to formulating Commission policy.

Court Adopts Pro-Competition, Pro-Innovation Standard on Cell Siting

On July 14, the U.S. Court of Appeals for the Third Circuit issued its decision in Cellco Partnership v. White Deer Township Zoning Hearing Board. The court held that the Zoning Board's denial of Verizon's application to build a cell tower had "the effect of prohibiting the provision of personal wireless services" contrary to the Telecommunications Act of 1996. The Third Circuit's decision is significant because the court applied a pro-competition and pro-innovation interpretation of the "effective prohibition" requirement that the FCC made in a 2018 order. 

At issue in the case was a local zoning board's decision that denied Verizon's application for a zoning variance for purposes of constructing a cell tower. Verizon alleged that the denial of its application was contrary to Section 332(c)(7)(B)(i)(II) of the Telecommunications Act, which states that a local government's actions "shall not prohibit or have the effect of prohibiting the provision of personal wireless services." Verizon prevailed at the District Court, and the zoning board appealed.

 

The Third Circuit concluded that the local zoning board's decision was unlawful under the court's pre-existing APT Pittsburg test for claims that a local government's action violated the "effective prohibition" requirement. Under the APT Pittsburg test: "First, the provider must prove there is a significant gap in wireless service and, second, the provider must show it is filling that gap in the least intrusive manner." 

 

But that did not end the court's analysis. The Third Circuit observed: 

In a declaratory ruling, the Federal Communications Commission (FCC) criticized the APT Pittsburgh test and others like it for being too narrowly focused on coverage gaps and reflecting "an outdated view of the marketplace." Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Inv., 33 FCC Rcd. 9088, 9106-07 [paragraph 40] (2018). Instead, it interpreted the statute to prohibit government action that "materially limits or inhibits the ability of any competitor or potential competitor to compete in a fair and balanced legal and regulatory environment." Id. at 9102 [paragraph 35].

The court expressly adopted the FCC's "materially inhibit" standard, concluding that the agency's interpretation is entitled to Chevron deference. In doing so, court noted that the FCC has applied the "materially inhibit" standard to Section 253(a) since its 1997 California Payphone Association Order. Section 253(a) applies to effective prohibitions of "telecommunications services." Based on the canon of statutory construction that identical words in neighboring provisions of the same statute should have the same meaning, the court determined that the "materially inhibit" standard also should apply to the "effect of prohibiting" language found in Section 332(c)(7)(B)(i)(II). 

 

Moreover, upon reviewing the FCC's 2018 order and various court decisions that the order referred to, the Third Circuit derived a few key points: (1) "a prohibition does not need to be complete or 'insurmountable' to run afoul of' § 332"; (2) "local government action which either imposes unreasonable fees or requires a provider to accept unreasonable costs materially inhibits wireless services"; and (3) the "materially inhibit" standard requires us to consider the totality of the circumstances" – meaning that "[a] legal requirement that imposes a reasonable cost on one tower in one jurisdiction may constitute an effective prohibition when aggregated across many towers, or many wireless facilities, in several jurisdictions." 

 

The Third Circuit also recognized the implications of the FCC's "materially inhibit" for wireless competition policy: 

The "materially inhibit" standard is more consistent than the APT Pittsburgh test with the TCA's goals of "promoting competition, securing higher quality services for American telecommunications consumers and encouraging the rapid deployment of new telecommunications technologies." 33 FCC Rcd. at 9105 (quoting Preamble to the Telecommunications Act of 1996, Pub. Law No. 104-104, § 202, 110 Stat. 56 (1996)) (ellipses and brackets omitted). Coverage-gap-based tests are "incompatible with a world where the vast majority of new wireless builds are going to be designed to add network capacity and take advantage of new technologies, rather than plug gaps in network coverage." Id. at 9107-08 (quotation marks and citation omitted). 

Additionally, the Third Circuit acknowledged that the FCC's "materially inhibit" standard constitutes an improvement over the court's pre-existing test for claims that a local government action constitutes an "effective prohibition" on wireless services: 

This case reveals the inadequacy of the APT Pittsburgh test. The Zoning Board plausibly argued that requiring Verizon to remove the property's existing structures or to purchase the property might be less intrusive on the values that the township's set-back requirements sought to serve. But it would be unreasonable for the Zoning Board to require such extreme measures. The APT Pittsburgh test does not clarify how much a local government can reasonably require a provider do to avoid intruding. We think that the "materially inhibit" better answers this question.

The Third Circuit also set forth the implications of the FCC's "materially inhibit" standard for network upgrades to next-generation technologies: 

In light of our decision to adopt the "materially inhibit" standard, not only does "insufficiency in coverage" ordinarily entitle a provider to a variance but so does insufficiency in network capacity, 5G services, or new technology. In the TCA, Congress recognized that "[t]he telecommunications interests of constitutions are . . . statewide, national and international." 33 FCC Rcd. at 9110. Local zoning boards, like White Deer Zoning Board, are prohibited from preventing providers from meeting those broader interests.

The decision in Cellco Partnership v. White Deer Zoning Hearing Board constitutes binding precedent in the Third Circuit. And its reasoning ought to be persuasive to courts in other jurisdictions that face legal challenges to local government denials of wireless infrastructure citing permits.  

 

For additional background on the FCC's 2018 order at issue in Cellco Partnership v. White Deer Zoning Hearing Board, see my September 2020 blog post "Court Decision Will Advance 5G Network Deployment" as well as a June 2022 Perspectives from FSF Scholars, co-authored with Andrew MagLoughlin, "The FCC Should Preserve and Expand Its Broadband Infrastructure Reforms." 

Support Grows for Extending the Affordable Connectivity Program

The number of households participating in the Affordable Connectivity Program (ACP) has surpassed 20 million – up from over 17 million just three months ago. Fortunately, the chorus of voices urging Congress to replenish the ACP's dwindling coffers, which could run dry early next year, simultaneously grows louder.

The ACP provides eligible households with a one-time subsidy (up to $100) to purchase a connected device and as much as $30 per month ($75 on qualifying Tribal lands) to apply to a broadband service subscription. It was created by Congress in 2021, which appropriated $14.2 billion in a one-time lump sum.

In "FCC Votes to Increase Broadband Subsidy in High-Cost Areas," a recent post to the FSF Blog, I pointed out that the Commission's 4-0 vote at the August Open Commission Meeting to increase the monthly stipend in certain expensive-to-serve areas to as high as $75 will accelerate the date upon which the ACP doles out its last dollar. Likewise, the roughly 3 million additional households that have enrolled in the ACP since May place greater financial stress on the finite funds available.

Calls to extend the ACP's lifespan through additional appropriations have come from multiple directions:

• In a letter last week, 45 members of Congress – 29 Democrats and 16 Republicans – urged House and Senate leadership "to include full funding for the [ACP] in the upcoming government appropriations bill to ensure that households can access the broadband they desperately need" – and concluded that "[f]ailure to extend funding would not only leave millions of families without access to the internet but also hinder our long-term competitiveness as a nation."
• In an August 1, 2023, letter to House Speaker Kevin McCarthy, Office of Management and Budget Director Shalanda D. Young wrote that "the Administration … believes that the Congress must act quickly to ensure continued funding for programs that lower costs for families, such as expanded access to affordable, high-quality child care and high-speed internet."
• In a June 2023 blog post, I highlighted a letter from eight Republican Senators encouraging President Biden to "repurpose a portion of unobligated emergency COVID relief funds to ensure the continuity of funding for [the ACP], while we explore alternative sustainable funding mechanisms and updated parameters."
• At a June oversight hearing held by the House Energy and Commerce Committee's Communications and Technology Subcommittee, FCC Chairwoman Jessica Rosenworcel reportedly described the ACP as "the best program we have ever developed to [address affordability], and we've got to make sure it continues…. If Congress were to fail to appropriate new funds for the Affordable Connectivity Program, we would … cut families off." And in the August 14, 2023, press release marking the 20 million+ ACP enrollment milestone, she stated "[w]e've made too much progress in helping families get online to turn back now."

Free State Foundation President Randolph May also has vocalized his support for the ACP on several occasions (here, here, and here), arguing that Congress should extend it but also "revise the program's eligibility requirements to target its limited resources to those most in need."

Early Activation of Extra Licensed C-band Spectrum Will Enhance 5G Services and Competition

On August 14, Verizon announced that it has gained access to all of the C-band spectrum that it acquired through the FCC's spectrum license auction in March 2021. And today, August 16, it is reported that AT&T has doubled its available licensed C-band spectrum for 5G deployment. Apparently, the C-band spectrum for both providers was cleared ahead of schedule. Consumers will benefit from the network coverage and performance improvements enabled by the activation of valuable C-band (3.7 GHz) spectrum. And this development should enhance the overall competitiveness of the wireless market.

In an October 2022 blog post, I noted findings by OpenSignal that activation of C-band spectrum was leading to improved speeds for Verizon's and AT&T's respective 5G network services. And now with additional C-band spectrum available for use, Verizon and AT&T will significantly boost the speeds and capacity of their 5G service offerings. According to a Verizon press release:

Verizon won C-Band licenses for between 140-200 MHz in all available markets, and began deploying 60 MHz in the first 46 areas in 2022. As the additional spectrum has been cleared by satellite companies outside of the first 46 areas, Verizon has been able to deploy 5G Ultra Wideband using a portion of its licensed bandwidth in many more markets coast to coast. Now, with final clearance from the satellite incumbents, Verizon will be able to use the entirety of its licensed C-band spectrum, an average of 161 MHz coast to coast with some markets accessing a full 200 MHz. Verizon has been deploying equipment that is capable of the full 200MHz of bandwidth, so with a mere software update, customers will start to see the effects of this dramatic increase in bandwidth in the immediate next few days and weeks.

And as observed a news article in FierceWireless, AT&T combines C-band spectrum with 3.45 GHz spectrum nationwide, and its 5G mid-band network now covers over 175 million people, and its nationwide 5G network, including low-band spectrum, covers approximately 290 million people. 

Verizon's press release states its 5G services currently are available to over 222 million people in 359 markets. It also is reported in FierceWireless that Verizon will be operating its 5G network using C-band spectrum at full power in the vicinity of airports. Free State Foundation President Randolph May and I wrote about the FAA's questionable late-in-the-game attempt to halt full use of licensed C-band spectrum by Verizon and AT&T in a November 2021 Perspectives from FSF Scholars, "The FAA Should Stop Interfering With 5G in the C-Band." The FCC has "unified jurisdiction and regulatory power" over commercial spectrum, not the FAA. And that midnight hour dispute regarding C-band spectrum near airports almost certainly would have been avoided had the FAA been more engaged earlier in the Commission's C-band proceeding, when it had ample opportunity to do so. Interagency disputes over spectrum have been too numerous in recent years, and the effect of those disputes is detrimental to the full use of valuable spectrum and timely deployment of next-generation wireless services. As President May and I also wrote a February 2022 Perspectives from FSF Scholars, "Congress Should Require Better Agency Coordination of Spectrum Policy."

Research on 5G and Radar in Lower 3 GHz Spectrum Band Supports Commercial Use

Today, August 15, CTIA released a fascinating short paper that makes the case for authorizing commercial use of the 3.3-3.45 GHz band at full power and on an exclusive licensed basis. The paper, "Successful Military Radar and 5G Coexistence in the Lower 3 GHz Band: Evidence from Around the World," summarizes research from GSMA, CCS Insight, and DLA Piper regarding the co-existence of 5G services with U.S. military radars in the lower 3 GHz band in foreign countries such as Germany, Japan, Mexico, South Korea, and Taiwan.

According to CTIA's paper:

This real-world evidence demonstrates how proven coordination methods are already facilitating simultaneous use of the band by 5G and military radars. Segmenting the band at 3.3 GHz with commercial wireless operating above and military radars tuning below can facilitate near-term coexistence. Coordination techniques—such as retuning, compression, and frequency coordination—provide assurance that 5G networks can be deployed in the U.S. at full power in lower 3 GHz spectrum while maintaining the ability to meet critical government missions that depend on radar systems.

The U.S. needs more mid-band spectrum for commercial use, particularly on an exclusive licensed basis, and to help meet those needs, Congress and the NTIA should prioritize the repurposing spectrum in the lower 3 GHz band. For more on this, see my February 2021 Perspectives from FSF Scholars, "Fast Action on the Lower 3 GHz Band Will Secure America's 5G Future." The coexistence of 5G and U.S. military radar operations in foreign countries identified in CTIA's paper persuasively favors repurposing the 3.3-3.45 GHz band for private commercial use. If 5G and military radar coexist in other countries, they can and should be made to coexist in the U.S. 

 

Also, in order to put lower 3 GHz band spectrum into the hands of private commercial providers of 5G services, the FCC's authority to conduct spectrum license auctions needs to be restored. The House of Representatives should promptly pass H.R. 3565 – the Spectrum Auction Reauthorization Act of 2023. If it becomes law, H.R. 3565 would restore that authority to the Commission. 

Blog Post Provides Update on Legal Battle in Blackbeard's Pirate Ship Case

An August 10 blog post by Stephen Carlisle catches up with the continuing case of Cooper v. Allen, following the Supreme Court's 2020 decision that ruled the Eleventh Amendment barred copyright infringements against states under the Copyright Remedy Clarification Act of 1990. The blog post is titled "State Attempts to Sink Blackbeard Infringement Case by 'Deep Sixing' the Law They Passed to Claim the Copyrights." At issue in the case is the State of North Carolina's unauthorized use of copyrighted video footage created by Mr. Rick Allen of efforts to salvage the pirate Blackbeard's ship, Queen Anne's Revenge.

I first wrote about Cooper v. Allen in an October 2019 Perspectives from FSF Scholars, "States Have No Right to Infringe Copyrights: The Supreme Court Should Enforce the Copyright Remedy Clarification Act." But the Supreme Court saw things differently, concluding that the CRCA's blanket abrogation of state immunity was not proportional or congruent to any proven problem of copyright infringements by states that amounted to unconstitutional injuries. The court's decision left open the door to Congress passing a future statute that is more narrowly targeted to intentional and reckless infringements by states. Language in the court's decision suggested that intentional or at least reckless infringement could come within the reach of the Fourteenth Amendment's Due Process Clause.

Thus, in a July 2020 Perspectives from FSF Scholars, "Congress Should Stop States From Infringing Copyrights," I wrote that the "Congress should craft a statute that will abrogate the sovereign immunity of states from being sued in federal court when they intentionally or recklessly infringe copyrights." To date, no legislation has been introduced in Congress to address intentional and reckless copyright infringements by states. However, in August 2021, the U.S. Copyright Office released a policy study on "Copyright and State Sovereign Immunity." The study explored possible legal bases for addressing infringements by states that may remain for copyright owners following the decision in Cooper v. Allen, such as due process and takings claims. 

 

Despite Mr. Allen's loss on infringement claims against the State of North Carolina in Cooper v. Allen, his takings claims and other claims remain alive in U.S. District Court. Mr. Carlisle's blog post summarizes those claims and describes the "spend your opponent into the ground" litigation strategy that the North Carolina Attorney General and Department of Justice – seemingly aided by the North Carolina General Assembly – appear to be using against a copyright owner who was wrongly denied the exclusive right to use his property and financially harmed by that state. Read Mr. Carlisle's excellent blog post for more. And Godspeed to Mr. Allen in his pursuit of justice. 

Bill on Agency Relocation Costs Could Help Put Spectrum Into Private Use

At a July 12 hearing, the House Communications & Technology Subcommittee passed, on a voice vote, H.R. 3430, the Spectrum Relocation Enhancement Act. H.R. 3430 is bipartisan measure that is sponsored by Rep. Doris Matsui and co-sponsored by Rep. Randy Weber. The substitute bill for H.R. 3430 that was approved by the House Subcommittee is available via the Subcommittee's website.

H.R. 3430 sets forth basic eligibility criteria for federal agency users of spectrum to receive reimbursement from the Spectrum Relocation Fund (SRF) for relocation or sharing costs. The bill sets forth processes by which those agencies may receive payment. And it expands the NTIA's oversight role in approving disbursements of payments from the SRF to federal agencies to ensure proper use. 

 

On many, many, many occasions, Free State Foundation scholars have stressed the importance of freeing up more spectrum for private commercial use – including shared use by incumbent federal agency users and private users as well as exclusive licensed use by private users. In both scenarios, the federal agencies tasked with relinquishing their use or amount of use of spectrum may incur significant costs and need additional financial resources to resume agency operations utilizing less spectrum or spectrum located in different bands. Any measure that streamlines payments to such federal agency users and gives them improved financial incentives to act in a cooperative and timely manner should be welcome. H.R. 3430 appears to fit this purpose.

 

The House Energy and Commerce Committee ought to give H.R. 3430 prompt consideration. That being said, good governance bills regarding spectrum reallocations won't mean much if the spectrum pipeline stays empty and the FCC's spectrum license auction authority remains lapsed. Accordingly, the House should take up and pass H.R. 3565 – the Spectrum Auction Reauthorization Act of 2023. If it becomes law, H.R. 3565 would restore the Commission's auction authority and it would direct the NTIA to conduct feasibility studies for making spectrum available in the 4 GHz and 7/8 GHz bands. 

Commissioner Carr to Congress: Renew FCC's Auction Authority

As reported by Christopher Cole in Law360 (subscription required), Commissioner Brendan Carr seized the moment at the FCC's August Open Meeting and urged Congress to renew the agency's spectrum auction authority.

In a recent post to the Free State Foundation's blog, I once again noted the importance of the FCC's auction authority, which was allowed to lapse in March of this year. (I first addressed this topic in "Extending FCC Spectrum Auction Authority Is Essential to the 5G Race," a February 2023 Perspectives from FSF Scholars.)

Before voting to approve a Notice of Inquiry regarding non-federal spectrum usage, Commissioner Carr made a similar plea:

I'd be remiss if I didn't note today, while we have a number of some of the top congressional staffers in the room, to reiterate the call for Congress to reauthorize the FCC's spectrum auction authority. So I know it's August recess, Congress isn't in session, but if, over the August recess, you happen to find some good spectrum auction authority somewhere, we would be happy to put it to good use.

Chairwoman Rosenworcel responded by thanking him for "the shameless plug."

To view this interaction, please click here.

FCC Votes to Increase Broadband Subsidy in High-Cost Areas

At this morning's Open Commission Meeting, the FCC approved by a 4-0 vote a Sixth Report and Order increasing the Affordable Connectivity Program (ACP) monthly benefit from $30 to as much as $75 in high-cost areas where the broadband service provider is able to demonstrate a "particularized economic hardship."

As a direct consequence, the date upon which the $14.2 billion appropriated by Congress will run dry, which is expected to arrive at some point next year, likely will come even sooner. As Free State Foundation President Randolph May wrote in an April op-ed, Congress therefore should "extend it, while mending it."

The ACP was created in 2021 by the Infrastructure Investment and Jobs Act (IIJA). It provides up to $100 dollars toward the purchase of a connected device and a monthly subsidy of $30 ($75 on qualifying Tribal lands) to eligible lower-income households. As of May 2023, over 17 million households were participating in the ACP.

Mr. May first wrote about the ACP in an October 2022 Perspectives from FSF Scholars. He concluded that "a fiscally responsible, targeted American Connectivity Program represents the preferred, marketplace-based approach to subsidizing broadband service." He therefore urged Congress to "extend the lifespan of the ACP through legislation that appropriates additional dollars" – and at the same time "revise the program's eligibility requirements to target its limited resources to those most in need."

In "The Affordable Connectivity Program: Time Is of the Essence for Congress to Act," a Perspectives published in March of this year, Mr. May took note of the accelerated predictions regarding when the ACP will run out of money – according to one observer, that could happen as soon as "early next year" – and in response repeated his "call for Congress to act without further delay to extend and revise the ACP."

The action taken by the FCC today, which will increase the monthly subsidy by up to $45 in certain high-cost areas, will place even greater strain on the dwindling, finite pool of money available.

Specifically, and as required by the IIJA, the Sixth Report and Order defines "particularized economic hardship" – that is, where "a provider is unable to cover the costs of maintaining the operation of all or part of its broadband network at the standard discount level in a high-cost area where the provider seeks to offer the high-cost area benefit" – and establishes implementing rules and processes pursuant to which increased subsidies will be made available.

In a June 2023 post to the FSF Blog, I highlighted a letter from a group of eight Republican Senators to President Biden proposing the redirection of unused COVID-19 relief dollars to the ACP "while we explore alternative sustainable funding mechanisms and updated parameters." While that might serve as a short-term fix, ultimately Congress must take direct action to ensure that the ACP continues on an ongoing, fiscally responsible basis.

Cable MVNOs and FWA Continue to Gain Subscribers in 2023

One of the most intriguing facets of today's communications marketplace is the intermodal competition enabled by cable wireless mobile virtual network operators (MVNOs) and fixed wireless access (FWA) residential broadband services offered by mobile wireless providers. In late July, both cable MVNOs and FWA providers released positive quarterly reports for the second quarter of 2023, providing an updated picture of these increasingly popular services.

During the second quarter of this year, the gains continued for cable MVNO Charter's Spectrum Mobile. According to its quarterly report that was released on July 31, Spectrum Mobile added 648,000 lines during the end of the quarter. That brought Spectrum Mobile's total to more than 6.6 million mobile lines. And Comcast's Xfinity, which released its quarterly report on July 27, had 316,000 net wireless line additions during the quarter. Xfinity now has just under 6 million wireless lines. 

 

Meanwhile, T-Mobile released its quarterly report on July 27. T-Mobile had 509,000 net subscriber additions for FWA high-speed Internet service, and it ended the quarter with 3.7 million FWA subscribers. Also, Verizon released its quarterly report on July 25. Verizon had 384,000 net additions for its FWA service, bringing its FWA subscriber total up to almost 2.3 million. Notably, U.S. Cellular reported on August 1 that it has surpassed 100,000 subscribers to its FWA service. 

 

Both cable wireless MVNO and FWA services depend on spectrum – both unlicensed and licensed. Right now, the most pressing need is more licensed spectrum to support 5G wireless services, including FWA. The best thing that Congress can do to fill this need is to pass H.R. 3565, the Spectrum Reauthorization Act of 2023. For more on this legislation, see FSF Senior Fellow Andrew Long's July 21 blog post, "Congress Should Reinstate the FCC's Spectrum Auction Authority."