DIRECTV, DISH to Join Forces in Battle for Video Subscribers

Today DIRECTV announced its plans to acquire EchoStar's video programming distribution platforms – the DISH TV direct broadcast satellite (DBS) service and the Sling TV virtual multichannel video programming distributor – to more effectively compete in a rapidly evolving marketplace increasingly dominated by streaming alternatives.

This is not the first time that the two DBS operators have attempted to combine. In October 2002, the FCC effectively blocked their proposed merger by designating their application for a full evidentiary hearing, concluding that "the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits."

Source: directv.com

But over the last 22 years, the widespread deployment of broadband Internet access has turned the video distribution competitive landscape on its head. As I have documented, most recently in a July 2024 post to the FSF Blog, for many years traditional MVPDs – cable operators and DBS providers – have been losing subscribers, financial quarter after quarter, while streaming competitors have been growing by leaps and bounds. By contrast, back in 2002, Netflix – which reported 278 million global streaming subscribers at the end of the second quarter of this year – was still solely in the business of mailing out DVDs. And Hulu, Amazon Prime Video, Disney+, Apple TV+, and Paramount+ did not exist at all.

Given the undisputable dramatic changes that have occurred in the marketplace since DIRECTV and DISH TV first sought to combine, this transaction must be evaluated in an entirely new context. Specifically, by providing DIRECTV with the additional scale needed to compete effectively, it seems that it will generate undeniable pro-consumer benefits. And given the relatively dominant position of streaming alternatives, it certainly doesn't appear to present any competition concerns.

In all, DIRECTV enumerates three specific benefits that will result:

• It "will allow DIRECTV to better meet consumers' demands for smaller packages at lower price points"
• It "[p]ositions DIRECTV to provide better integration of direct-to-consumer services"
• It "[i]mproves EchoStar's financial profile to continue the deployment of its 5G Open RAN wireless network"

With regard to "smaller packages at lower price points," an August 21, 2024, open letter written by DIRECTV Chief Content Office Rob Thun argued that, absent "fundamental change" to the way that traditional MVPDs are able to package their services, "costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer."

In today's press release, DIRECTV Chief Executive Officer Bill Morrow is quoted as saying that "[w]ith greater scale, we expect a combined DIRECTV and DISH will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers' interests."

Jim Tozzi and the Center for Regulatory Effectiveness

 Over the past couple of years there's been much change in administrative law, and much of it positive in my view. The Supreme Court's adoption of the Major Questions Doctrine in West Virginia v. EPA, the overturning of the Chevron deference doctrine in Loper Bright Enterprises v. Raimondo, and the limitation on the SEC's ability to seek civil penalties in SEC v. Jarkesy are examples of recent decisions reorienting administrative law to check overly aggressive administrative agencies.

Periodically I like to remind readers of the sometimes overlooked contributions of Jim Tozzi. Among other accomplishments, Jim played a leading role in the 1970s and 1980s as a senior official of the Office of Management and Budget in establishing centralized review of proposed regulations of the executive agencies and requiring cost-benefit analyses. These were early steps in the direction of formalizing processes intended to promote increased efficiency, effectiveness, transparency, and accountability in agency policymaking initiatives.

If you want to learn more about Jim Tozzi -- one of the more interesting, but lesser known Washington legends  -- and Jim's contributions of the development of administrative law, along with his take on some current issues, I recommend a visit to his Center for Regulatory Effectiveness website. Or if you happen to encounter Jim, just ask him about the "early days" of regulatory reform and you'll be in for a treat!

 

Court Hears Arguments on Challenges to FCC's Digital Discrimination Order

On September 25, the U.S. Court of Appeals for the Eighth Circuit heard oral arguments in the case of Minnesota Telecom Alliance v. FCC. The case involves several legal challenges against the FCC's November 2023 Digital Discrimination Order. One of those challenges is to the Order's imposition of unintentional disparate impact liability on broadband Internet service providers (ISPs). Section 60506 of the Infrastructure Investment and Jobs Act of 2021 authorizes the Commission to adopt rules prohibiting intentional digital discrimination of access to broadband Internet services based on one's membership in a protected class. However, the Order exceeds the agency's statutory authority by imposing unintentional disparate impact liability on ISPs.

The Free State Foundation's March 2023 public comments in the Commission's digital discrimination proceeding addressed the legal authority conferred on the Commission:

The text of the Infrastructure Act requires an intent-based definitional standard for digital discrimination. Section 60506(b) authorizes the Commission to adopt rules that prevent digital discrimination "based on" the specific categories of income level, race, ethnicity, religion, or natural origin. The Infrastructure Act's inclusion of the words "based on" in connection with suspect or prohibited classifications and – most significantly for purposes of statutory interpretation – the absence of any broader catchall terms such as "results in" or "otherwise adversely [a]ffects" indicates that proof of intent is a necessary element of any successful claim of "digital discrimination." 

When Congress enacted the Infrastructure Act, it was aware of Supreme Court precedents regarding the use of such catchall terms. Yet Congress declined to include such catchall terminology in Section 60506. 

 

Oral arguments before the Eighth Circuit also addressed the claim that the Order's overreach upon overreach contravened the Supreme Court's Major Questions Doctrine. The Free State Foundation's April 2023 reply comments concluded that the FCC's expansive interpretation of Section 6506 – including the imposition of disparate impact liability, in particular – makes it likely that the order would run afoul of the Major Questions Doctrine. According to the Supreme Court’s decisions in West Virginia v. EPA (2023) and Biden v. Nebraska (2023), there are certain "extraordinary cases" involving decisions of such "political and economic significance" that a "clear congressional authorization" by Congress is required for the agency to exercise the powers it claims. However, Section 60506 does not contain clear congressional authorization authorizing the FCC to subject seemingly every facet of broadband ISPs business and deployments to unintentional disparate impact liability. 

Charter, Comcast, and Broadcom Partner on Faster DOCSIS 4.0 Chipsets

At this week's Society of Cable Telecommunications Engineers® (SCTE) TechExpo 2024, cable operators Charter Communications and Comcast announced an agreement with chipmaker Broadcom Inc. to develop chipsets compatible with both versions of the DOCSIS 4.0 specification: Full Duplex DOCSIS 4.0 (FDX) and Extended Spectrum DOCSIS 4.0 (ESD).

Network hardware and modems incorporating Unified DOCSIS chipsets eventually will enable downstream speeds up to 25 gigabits per second (Gbps) over existing hybrid fiber-coaxial (HFC) broadband facilities. In addition, they will leverage Artificial Intelligence and machine learning to improve network management and security.

T-Mobile/UScellular Merger Likely to Benefit Wireless 5G Consumers

On September 13, T-Mobile filed a public interest statement with the FCC in support of its proposed merger with US Cellular. If approved, the T-Mobile/UScellular transaction likely would produce pro-competitive results. The merger would benefit UScellular subscribers by giving them access to a 5G mobile wireless network with faster speeds and higher data capacity. It also would enhance residential broadband competition by expanding consumer access in UScellular's service regions, especially in rural areas. On its face, the proposed combination does not appear to pose any significant competitive harm. The Commission should conduct a timely review of the T-Mobile/UScellular merger and issue its decision within the agency’s 180-day shot clock.

The proposed T-Mobile/UScellular deal reportedly would result in T-Mobile acquiring UScellular's wireless operations, subscribers, and about 30% of its spectrum licenses for $4.4 billion. UScellular is a multi-regional wireless provider that serves about 4.5 million subscribers – or about 1% of the nation’s mobile wireless services market. Its subscribership has been declining in recent years. Strong competition from cable hybrid wireless mobile virtual network operators (MVNOs) Spectrum Mobile and Xfinity Mobile partly account for US Cellular's declines. Moreover, UScellular has lagged behind AT&T, T-Mobile, and Verizon – the three major nationwide mobile wireless providers in 5G network deployment.

Revenue reductions resulting from subscriber losses, as well as the burdens of servicing $2.9 billion in debts, are limiting its resources for future network investment. If UScellular were to continue operating as a standalone mobile provider, its competitiveness would probably diminish further.

T-Mobile's public interest statement presents a prima facie case that its proposed merger with UScellular will bring public interest benefits that outweigh any potential competitive concerns. Today's dynamic wireless market provides the analytical context for the proposed T-Mobile/UScellular merger. As explained in the Free State Foundation’s June 2024 public comments to the FCC for its forthcoming 2024 Communications Marketplace Competition Report, there is effective competition among the mobile wireless segment of the broadband market. In 2022 and 2023, the three nationwide wireless providers significantly upgraded and expanded their 5G network coverage. Additionally, aspiring national provider EchoStar (which recently acquired DISH Network) announced in March of this year that its 5G network covers over 70% of the U.S. population. The large footprints of Xfinity Mobile and Spectrum Mobile also support competitive 5G wireless services to at least 16 million subscribers and counting.

Moreover, the T-Mobile/UScellular merger is unlikely to reduce wireless competition. T-Mobile faces little challenge from UScellular due to its small market share, with a footprint that spans only about 10% of the nation's geographic territory. T-Mobile is the second-largest wireless provider, with nearly 126 million total subscriptions versus UScellular's 4.5 million. T-Mobile makes its pricing and service terms on a nationwide basis, and thus UScellular's presence in a given area is unlikely to impact T-Mobile's price offerings. According to the public interest statement, T-Mobile and UScellular do not have an overlapping competitive presence in only about 37% of the Cellular Marketing Areas (CMAs) that are implicated by the proposed merger.* If the transaction is approved, most consumers would continue to have choices among nationwide providers T-Mobile, Verizon, and AT&T, and many consumers also would have choices among DISH Wireless and a cable wireless MVNO. 

Furthermore, T-Mobile's analysis indicates that the proposed acquisition of 30% of UScellular's spectrum portfolio would not trigger the FCC's spectrum screen analytical trigger in any cellular marketing area. This presumes that T-Mobile completes planned sales of certain spectrum licenses that it currently holds in the 800 MHz and 3.45 GHz bands. 

Under the terms of the proposed T-Mobile/UScellular merger, UScellular subscribers would have the option of staying on their existing rate plans. T-Mobile estimates that at least some of UScellular's subscribers would experience a price decrease by changing to comparable plans offered by T-Mobile. If correct, and given existing competition in the market, the transaction would not likely cause rates to increase for consumers. 

The transfer of spectrum licenses contemplated in the proposed T-Mobile/UScellular merger triggers the FCC's review of the transaction under its public interest standard. The Commission's merger review process includes opportunity for public comments that could shed added light on the proposed transaction. The agency will undertake its examination of the representations made in the public interest statement – including information redacted from public view – and it will more closely examine the potential effects in local markets. However, at this stage of the proceeding, the T-Mobile/UScellular transaction appears to be a strong candidate for approval. 

Importantly, the Commission should complete its merger review within the agency's informal 180-day shot clock. Delays in merger reviews can accelerate subscriber losses in small providers and have other harmful impacts.

(*12/19/2024 - a correction is made in this post to the percentage of CMAs in which the parties have an overlapping presence)

Internet Archive's Fair Use Defense Fails Again at Appeals Court

On September 4, the U.S. Court of Appeals for the Second Circuit issued its decision in Hachette Book Group, Inc. v. Internet Archive. The Second Circuit panel affirmed a District Court's March 2023 entry of summary judgment against Internet Archive for infringing the copyrights of four book publishers in 127 books.  

Internet Archive created unauthorized digital copies of those books as part of its "Free Digital Library" and mostly. Beginning in 2018, the Internet Archive made digital copies of those copyrighted books available online to the public. Starting in 2020, the Internet Archive provided the public access to those copyrighted books on a one-to-one owned-to-loaned ratio under a practice that the Internet Archive called "Controlled Digital Lending" or "CDL." The District Court found that all of the elements for infringement were established by the publishers, and the court rejected Internet Archive's fair use defense.

The Second Circuit's decision mostly tracked with the District Court's decision, concluding that "IA's lending of its 'own' digital books that 'are commercially available for sale or license in any electronic text format'" is not fair use. 

According to the appeals court, "because IA's Free Digital Library primarily supplants the original Works without adding meaningfully new or different features that avoid unduly impinging on Publishers' rights to prepare derivative works, its use of the Works is not transformative." Although the Second Circuit differed from the District Court in concluding that the alleged fair use was not commercial in nature, it nonetheless held that "because the Works in Suit are 'of the type that the copyright laws value and seek to protect,' the second fair use factor favors Publishers." The court determined that copying and posting the entirety of the work was not secondary to some other use that would offer significant functional benefits not associated with the original works and that "not only is IA's Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests it is intended to achieve that exact result." 

 

The Second Circuit further determined that "IA has not met its 'burden of proving that the secondary use does not compete in the relevant market[s]' and that “[i]ts empirical evidence does not disprove market harm, and Publishers convincingly claim both present and future market harm." The court concluded that "[a]ny short-term public benefits of IA's Free Digital Library are outweighed not only by harm to Publishers and authors but also by the long-term detriments society may suffer if IA's infringing use were allowed to continue." And it found that all of the fair use factors favored the copyright owners. 

 

Aside from its loss in Hachette, Internet Archive faces additional troubles due to alleged infringements of copyrighted music recordings." My September 2023 Perspectives From FSF Scholars, "Internet Archive to Face the Music for Mass Copyright Infringement," analyzes copyright infringement claims raised in UMG Recordings v. Internet Archive. At issue in that case is Internet Archive's "Great 78 Project," which allegedly copied, stored, distributed, and publicly performed thousands of copyrighted pre-1972 music recordings without authorization. 

 

The decision in Hachette may offer persuasive insights for the District Court in UMG Recordings, insofar as Internet Archive again relies on fair use as an affirmative defense to infringement claims. For starters, the "Great 78 Project" involves no apparent transformative use or significant functional new benefit not inherent in the original works themselves. Scratches or analog background noises from digital recordings of vinyl copies of pre-72 recordings being played on turntables are hardly transformative. Expect FSF scholars to have more to say in the future about the ongoing case of UMG Recordings v. Internet Archive.

Media Advisory - FSF Files Comments on FCC's Propose Rules for AI Generated Content in Political Ads

Media Advisory

September 19, 2024

Contact: info@freestatefoundation.org

Free State Foundation President Randolph May and Seth Cooper, Director of Policy Studies and Senior Fellow, submitted comments today in the Federal Communications Commission’s proceeding proposing to require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political ads that contain content generated by artificial intelligence (AI). These comments demonstrate that the Commission lacks statutory authority to adopt its proposed regulation of the content of political ads using AI and that, in any event, it would constitute unsound policy to do so.

The complete set of the Free State Foundation comments, with footnotes, is here.

 

Immediately below are the "Introduction and Summary" to the comments, without the footnotes.

Introduction and Summary

These comments are submitted in response to the Commission’s Notice proposing to require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political ads that contain content generated by artificial intelligence (AI). They also would be required to include a notice in their online political files disclosing the ad’s use of AI. The Commission’s rush to adopt a novel AI political ad regulation is a misguided power grab – a combination of bad law and bad policy. The Commission should not adopt the proposed rule.

 

The agency lacks statutory authority for its proposed regulation of the content of political ads using AI. The Notice of Proposed Rulemaking cites Section 303(r) and other provisions of Title III of the Communications Act regarding the agency’s power to make rules and regulations necessary to carry out the Act’s provisions in the “public interest.” But the Commission has no traditional regulatory authority over the content of political ads on broadcast radio or TV, and none of those provisions cited in the Notice contain language that reasonably may be interpreted to authorize disclaimer and disclosure mandates for political ads featuring AI-generated content.

Moreover, the FCC’s proposal is likely to run afoul of the Major Questions Doctrine (MQD) as articulated in West Virginia v. EPA (2022) because it involves a question of “vast economic and political significance.” Proposing for the first time to regulate the use of AI in connection with political advertisements appears to be a paradigmatic case meeting the MQD criteria. As such, and because Congress has not clearly granted the FCC authority to adopt the rule it proposes, it’s very unlikely to survive judicial review.

 

By contrast, the Federal Elections Commission (FEC) is given much more explicit statutory authority to regulate significant aspects of political campaign ads under the Federal Election Campaign Act. This includes the FEC’s “exclusive jurisdiction with respect to the civil enforcement” of the Act. To date, however, the FEC has never determined it has jurisdiction to regulate political ads with AI-generated content under its “materially deceptive” statute – and the FEC may lack such authority. If the FEC lacks authority to regulate political ads with AI-generated content, then a fortiori the FCC certainly lacks similar authority under Communications Act provisions regarding broadcast, cable, and satellite services. 

Even if the FCC had the requisite legal authority, the proposal constitutes bad policy because it would apply to ads with AI-generated content that are not materially deceptive, likely causing many viewers to distrust the ads solely or primarily because of the boilerplate disclaimer or simply to “tune out” the disclaimers. Also, it would apply only to ads that are broadcast or transmitted by FCC-regulated services – and not by Internet outlets that garner an increasing share of political ads. Requiring disclaimers on ads shown by broadcast, cable, and satellite services when those same ads may be posted online to wider audiences without disclaimers will add to the confusion, especially since materially deceptive ads are more likely to appear online. Moreover, broadcasters (and cable and DBS operators) do not have inside knowledge about how given political ads were created; yet under the proposed regulation, apparently they would shoulder the burden of having to discern when generative AI was used. By focusing on broadcasters of political ads rather than the creators, the proposed regulation deviates from a more reasonable focus on ad creators that is taken in many nascent state laws regulating the use of AI in elections.

 

Additionally, the proposal would put the Commission in the untenable position of making judgments about “credible third parties” who raise complaints about ads, a matter in which the agency has no expertise. Government should not assume any role in designating third parties as “credible” or not credible for purposes of deciding whether political ads should be disclaimed, disclosed, or taken down. If it were to do so, it would inevitably, and justifiably, invite suspicion that its decisions are politically motivated. The proposed overly broad definition of “AI-generated content” likely would result in broadcast, cable, and satellite services requiring disclaimers for all or nearly all political ads as a regulatory risk aversion measure, rendering such disclaimers unhelpful, if not meaningless.

A PDF of the complete set of Free State Foundation comments, with footnotes, is here.

Survey Shows Sharp Increases in Mobile Data, Growth in 5G Home Broadband

On September 10, CTIA released its 2024 Annual Survey. The Survey Highlights report is available online. It shows the strong growth in mobile wireless connections, data usage, cell sites, and 5G Home connections during the year 2023.  

CTIA reported that wireless data traffic in the U.S. grew, as U.S. wireless networks supported 100 trillion MB of traffic last year, up from the nearly 74 trillion MB from the year before. Additionally, nearly 40% of wireless devices were 5G devices, for 216 million total active 5G devices in 2023, and the 558 million total wireless connections were up from 523 million from the year prior. Also, the total number of cell sites in the U.S. grew to 432,469 – up 24% from 2018. This continued growth was supported by annual wireless investment totaling $30 billion in 2023. Regarding 5G Home Broadband – or fixed wireless access (FWA) services – CTIA reported: "Over the past two years, 95% of net new broadband subscribers chose 5G home service—and importantly, 1 out of 5 net 5G home adds were entirely new home broadband subscribers." More stats are contained in the 2024 Annual Survey Highlights.

 

My July 30, 2023, blog post spotlighted CTIA's 2023 Annual Survey Highlights.

 

To fully realize the benefits of 5G connections, more spectrum will need to be available, especially licensed spectrum for commercial wireless uses. In January 2024, Free State Foundation President Randolph May published "Communications Law and Policy Priorities for 2024." One of those priorities is to "Reopen the Spectrum Pipeline and Act to Fill It." As FSF President May explained in a Media Advisory from March of this year, one constructive proposal for doing that is the Spectrum Pipeline Act of 2024 (S.3909).

 

Also, legislation for streamlining and speeding up permit processes for wireless infrastructure construction would help foster continued growth in wireless services and improve as well as increase connections for Americans. My blog post from August 7 identified one measure worth considering, the Accelerating Broadband Permits Act (S.4281), which is intended to help ensure the timely processing of permits for building new wireless infrastructure on federal lands. 

House Commerce Hearing Critiques NTIA's Handling of BEAD Program

As I previewed in a Monday post to the Free State Foundation blog, the House Energy and Commerce Committee's Subcommittee on Communications and Technology the following day held a hearing on the status of the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) Program. Participants had much to say about NTIA's management of the program, particularly with respect to timing, clarity, and the approval process.

Committee Chair Cathy McMorris Rodgers (R-WA) in her opening remarks focused on "NTIA's decision to pressure states to regulate the rates charged for broadband service," "unnecessary workforce and climate-related requirements," "an expensive fiber-first agenda," and "unnecessary delays in NTIA's approval process."

Subcommittee Chair Bob Latta (R-OH) touched on similar topics in his opening remarks – and expressed concern that "NTIA continues to add requirements that are contrary to Congressional intent and make this program less attractive and more expensive to the broadband providers needed to deploy to unserved and underserved communities."

In a Written Statement, Misty Ann Giles, Director of the Department of Administration and Chief Operating Officer for the State of Montana, characterized navigating the BEAD Program process as "akin to building a plane while flying it without having the necessary instructions to be successful" and complained that "Montana has often received conflicting or even new and changed guidance after submitting our plans or beginning a previously approved NTIA operational process."

One specific example provided relates to NTIA's recent guidance regarding "alternative technologies" such as satellites and unlicensed wireless. Many, including Committee Chair Rodgers and Subcommittee Chair Latta, support the use of these and other non-fiber distribution platforms in areas where the deployment of fiber would be prohibitively expensive. But Giles, echoing an argument I made a month ago in "BEAD Program Technological Neutrality 'Fix' Falls Short," a Perspectives from FSF Scholars, pointed out that "[w]hile much of the guidance is helpful and needed, it has come at the 11th hour for Montana."

Shirley Bloomfield, NTCA – The Rural Broadband Association CEO, testified that "several concerns, if not adequately addressed, could deter small, community-based providers from participating in BEAD." They include: the accuracy of the FCC's National Broadband Map, prohibitively large project areas, preferences based upon fund-matching ability, higher-than-expected costs and longer-than-expected permitting processes, and the uncertain fate of the Universal Service Fund.

Video of the hearing is available here.

USF Surcharge Rate Hike – Now Up to 35.8%

On September 11, the FCC's Office of Managing Director announced that the Universal Service Fund (USF) contribution factor for the fourth quarter of 2024 will be 35.8% This appears to be an all-time high and serious concern for voice consumers who bear the burden of paying for USF surcharges. Absent any unlikely intervention by the FCC's Commissioners, the proposed rate will soon go into effect.

Functionally, USF surcharges are taxes paid by voice consumers on the long-distance portion of their monthly voice service bills. The USF tax money collected by the voice carriers goes to the Universal Service Administrative Company (USAC), a corporation established by the FCC, which is the administrator of the USF program and distributes the money to program recipients. For additional background on the recent history of persistent and worrisome increases in the USF surcharge rate, see Free State Foundation President Randolph May's June 14, 2024 blog post, "The Telephone Tax Rises Again – Now 34%." 

 

My August 9 Perspectives from FSF Scholars, "Court Ruling on USF's Unconstitutionality Should Spur Reform in Congress" explained that the Fifth Circuit’s decision holding the USF contribution scheme unconstitutional in Consumers' Research v. FCC should serve as a catalyst for Congress to promptly undertake fiscal reforms of the USF program and put it on stronger constitutional footing.  

FCC Opens New Inquiry into the State of Broadband Deployment

On September 6, the FCC announced that it was opening its eighteenth inquiry on the state of broadband in the U.S., which is expected to culminate in the next iteration of the Commission’s Section 706 report. Under Section 706(b) of the Telecommunications Act of 1996, the Commission is required to annually determine "whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." In other words, for the upcoming report, the Commission is required to assess whether broadband Internet access service – an advanced telecommunications service under the statute – is being timely deployed to all Americans.

Earlier this year, the Commission initiated a proceeding for its forthcoming Communications Marketplace Competition report – a different report that includes an assessment of the broadband market over the previous two years. In public comments filed in June of this year, Free State Foundation scholars wrote: "In 2022 and 2023, overall conditions in the broadband Internet services market were effectively competitive, in many instances even more so than in 2020 and 2021 when this was already the case." FSF's comments cited publicly available data points, including broadband provider quarterly reports and analyst estimates, about fiber deployments, cable broadband network upgrades and footprint expansion, nationwide 5G network upgrades and new deployments, 5G fixed wireless access (FWA) entry in the residential broadband market, cross-platform competition from cable-hybrid wireless providers, and improvements in satellite broadband capabilities to support that conclusion. 

 

The pro-deployment trends from 2022-2023 identified on FSF's comments in the 2024 Communications Marketplace Competition Report proceeding appear to support an affirmative answer to the question that the Commission is addressing in its upcoming Section 706 report. Yet the Commission's just-opened Section 706 proceeding will provide a forum for considering more recent data about availability and deployment progress and enable a more definitive determination about the current state of ongoing broadband deployment. 

 

Expect Free State Foundation scholars to have more to say this year about the state broadband deployment to all Americans. FSF's public comments from December 2023 that were filed in the Commission's previous Section 706 report proceeding can be found on FSF's website.

House Commerce Subcommittee to Hold Hearing on BEAD Program

Tomorrow the House Energy and Commerce Committee's Subcommittee on Communications and Technology will hold a hearing titled "From Introduction to Implementation: A BEAD Program Progress Report."

In the hearing announcement, Committee Chair Cathy McMorris Rodgers (R-WA) and Subcommittee Chair Bob Latta (R-OH) state that the "hearing will serve as an opportunity to hear about how the implementation of the program is going, better understand the impact of NTIA's rules, and what to expect going forward as states begin to award funds."

Regarding rate regulation and the statutorily mandated "low-cost broadband service option," a concern Free State Foundation President Randolph May addressed in a Perspectives from FSF Scholars published earlier today, the accompanying Majority Staff Memo asserts that "NTIA is responsible for reviewing and approving these low-cost options and has used this requirement as a way to regulate rates. The Committee considers these rate regulated approvals to be a violation of the IIJA's rate regulation prohibition."

Other topics teed up by the Majority Staff Memo include the disconnect between the clear congressional goal of technology neutrality and NTIA's "fiber-first" bias; the need for permitting reform; and the implementation impact of labor, letter of credit, and Buy America requirements.

The following witnesses are scheduled to testify:

• Misty Ann Giles, Director and Chief Operating Officer, Montana Department of Administration
• Basil Alwan, Chief Executive Officer, Tarana Wireless
• Shirley Bloomfield, Chief Executive Office, NTCA – The Rural Broadband Association
• Blair Levin, Policy Analyst, New Street Research and Non-Resident Fellow, Metropolitan Policy Project, Brookings Institution

The hearing will begin at 10:30 am.

Congress Should Fully Protect Valuable Copyrighted Music Recordings

On August 29, the Recording Industry Association of America (RIAA) released its "Mid-Year 2024 RIAA Revenue Statistics" report. RIAA's report finds a 4% increase in U.S. recorded music market retail revenues for a total of $8.7 billion during the first half of 2024 compared to $8.4 billion during the first half of the prior year. Digital streaming service subscriptions totaled about 99 million during the first half of this year, and those subscriptions account for almost two-thirds of total revenues. Additionally, the reported $994 million in physical sales during the first half of 2024 was up from $822 million during the first half of 2023, due primarily to a 17% increase in revenues from vinyl record sales. See RIAA's report for more details.

As music recording artists, producers, and the rest of the recorded music industry pursue creative and economic opportunities in 2024, there remains work for the 118th Congress to do to help ensure that valuable copyrighted sound recordings receive full protection under the law. One important thing Congress should do is advance the American Music Fairness Act – S.253 and H.R. 791. 

Under current copyright law, terrestrial AM/FM radio stations have a special exemption from paying royalties to owners of copyrighted sound recordings when those stations play the music on the air. Consequently, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. In other words, the recorded music industry does not generate any direct revenues from radio broadcasts of copyrighted sound recordings. 

But S.253 and H.R. 791 would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do. Passage of the Act would enable U.S. copyright owners to receive royalties from foreign stations. Notably, the Act provides a low flat royalty rate for small commercial and non-profit stations. 

 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings." And for a brief overview of the hearing on H.R. 7910 held by the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet during the summer, see my July 5 blog post "American Copyright Owners Deserve Royalties When Radio Stations Use Their Property."

Lawsuit Challenges FCC Order Subsidizing Wi-Fi Away from Schools and Libraries

On August 29, a petition was filed in the U.S. Court of Appeals for the Fifth Circuit that challenges the legal basis for the FCC's July 2024 Off-Premises Wi-Fi Order. The petition filed in Molak v. FCC states that the Commission's order "unlawfully expands the FCC’s E-Rate Program to subsidize Wi-Fi service and equipment anywhere students might go." E-Rate is part of the Universal Service Fund (USF), which is funded by surcharges – functional taxes – paid each month by voice consumers. The petition alleges that the order’s increase in E-Rate Program outlays will directly increase USF surcharges that the petitioners pay each month. It also alleges that subsidizing Wi-Fi use away from school premises "enabl[es] unsupervised social-media access by children and teenagers."

The unlawfulness of the Commission's Off-Premises Wi-Fi Order is the subject of my August 20 Perspectives from FSF Scholars, "FCC Can't Subsidize Wi-Fi Use Away from Schools and Libraries." As explained therein, Section 254(h) of the Communications Act, the statutory provision that provides the legal basis for the E-Rate Program and upon which the Commission relies for its order, authorizes universal service subsidies only to or for "schools," "classrooms," and "libraries." But subsidies for off-premises Wi-Fi use – potentially anywhere in the world – are not included in the statute.

 

Moreover, the legal challenge to the Off-Premises Wi-Fi Order in Molak v. FCC parallels a prior legal challenge with an identical case name that was filed in the Fifth Circuit last year against the Commission's 2023 School Bus Wi-Fi Order. The prior agency order authorized universal subsidies for Wi-Fi equipment and service on school buses. The unlawfulness of the prior order is the subject of a February 2024 Perspectives from FSF Scholars by Free State Foundation President Randolph May and I, titled "FCC's School Bus Wi-Fi Subsidy Lacks Statutory Support."

 

In both Molak v. FCC cases, the petitioners raise important issues about agency accountability to the law and to the American public. The outcome of these pending legal challenges to administrative agency overreach will have implications for responsible spending of precious dollars collected from the public and for child online safety.