TMT with Mike O'Rielly – Ep 14: Role & Treatment of Media Industries

Episode 14 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 29. In this episode, titled "The Role and Treatment of Today's News and Media Industries," Mr. O'Rielly has a conversation with guest Danielle Coffey, President & CEO, News/Media Alliance. Streaming video of the episode is now available: 

Small Claims Board Providing Copyright Owners Access to Justice

On October 22, the U.S. Copyright Office released a "Key Statistics" report on the Copyright Claims Board. The Board was established under the Copyright Alternative in Small-Claims Enforcement Act (CASE Act), passed by Congress in December 2020 and signed into law by President Donald Trump. The Board serves as a voluntary, virtual forum for resolving disputes over alleged copyright infringement claims where the damage amount in controversy is $30,000 or less. Both sides must agree to resolve their dispute at the Board, and its decisions are enforceable in federal court.  

According to the information provided by the Copyright Office, as of September 2024, nearly 1,000 claims have been filed with the Copyright Claims Board. Also, 63% of such claims involved self-represented individuals, and 46% of the cases were for smaller damages of less than $5,000. 

 

The Board appears to be performing a useful function by providing copyright owners with a cost-effective venue to protect and enforce their intellectual property (IP) rights in creative works, such as photos, movies, and music recordings. For a copyright owner to hire an attorney and bring an infringement case in federal court, he or she typically must be willing to spend tens of thousands of dollars.  

 

Free State Foundation President Randolph May and I recommended the creation of such a small claims venue in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Webinar Panel Weighs FCC's Proposed AI Political Ad Regulation

On October 7, Free State Foundation President Randolph May moderated a webinar, "The FCC's Proposal to Regulate Political Ads Using Artificial Intelligence." Video of the webinar is now available online. The Federalist Society-hosted webinar featured a panel discussion on the Commission's proposed rulemaking that would require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political candidate and political issue ads that contain content generated using artificial intelligence (AI). The proposed rulemaking also would require notice filings in online political files regarding ad usage of AI, and impose obligations on broadcasters (and cable and DBS operators) to act when informed by "credible third parties" that the ads being transmitted contain AI-generate content. 

The FCC's novel regulation of political ads with AI-generated content raises important questions about the scope of the agency's authority and the policy merits of the proposal. Those topics are ably tackled by the webinar panel, consisting of FCC Commissioner Brendan Carr, Public Knowledge President Christopher Lewis, as well as Prof. Bradley Smith, a former FEC Chairman. To learn more, check out the webinar video. 

On September 19, the Free State Foundation filed initial comments in the FCC's novel AI political ad regulation proceeding. And FSF filed reply comments on October 7. text

Maine Satellite Plan Casts Doubt on BEAD Program Approach

As reported by Broadband Breakfast (subscription required), the Maine Connectivity Authority (MCA) has announced that it will allocate upwards of $5 million toward the purchase of Starlink terminals for every remaining "unserved" location in the state. What's more, the contract with Starlink "is expected to include capacity guarantees to ensure that the state-purchased terminals can connect to internet service at the newly established speed benchmark of 100/20 Mbps."

Universal access? Check. Speeds that satisfy the FCC's recently updated "broadband" benchmark? Check. A price tag roughly one-twentieth that of fiber? Check. So why, then, will the MCA spend an additional $278 million in federal subsidies from NTIA's Broadband Equity, Access, and Deployment (BEAD) Program to connect "underserved" locations to fiber?

Despite their marketplace-proven ability, technologically speaking, to deliver the speeds that consumers demand – and that the Infrastructure Investment and Jobs Act, the statute that created the BEAD Program, specifies – from day one NTIA has discouraged the use of BEAD Program subsidies to deploy non-fiber broadband distribution platforms.

As I pointed out in "BEAD Program Technological Neutrality 'Fix' Falls Short," an August 2024 Perspectives from FSF Scholars, even recent changes to NTIA's BEAD Program rules approving the use of satellites and unlicensed spectrum do so only under very limited circumstances – to be specific, when the price tag for fiber exceeds a state-specified price ceiling aptly labeled the Extremely High Cost Per Location Threshold (EHCPLT).

Other distribution technologies – cable broadband, fixed wireless access using licensed spectrum, and so on – likewise are eligible for BEAD Program subsidies only if the fiber cost exceeds the EHCPLT.

The MCA's announcement that it will make Starlink terminals available to all 9,000 unserved locations in the state at a cost of just $599 per location, plus free shipping and professional installation, highlights the degree to which NTIA's approach leads to inefficiencies and waste.

Evidence that proves this point can be found in the very same press release announcing the purchase of Starlink terminals: "[i]n 2025, MCA will facilitate the investment of an additional $350 million in broadband infrastructure through the [BEAD] Program to serve the remaining 5% of locations in Maine that currently have slow and unreliable internet service."

According to my back-of-the-envelope math, $350 million in total subsidies works out to almost $12,000 per "underserved" location – that is, locations with Internet access at speeds equal to or greater than 25/3 Mbps but less than 100/20 Mbps. That amounts to a nearly 20X premium for a fiber-based solution as compared to the cost of satellite-based service.

Incidentally, Volume 2 of Maine's Initial Proposal, which was approved by NTIA in June, does not identify a specific EHCPLT. Instead, it indicates that the MCA intends at some point in the future to set the EHCPLT so high that, in virtually all cases, fiber will win the day:

If it is determined that a small number of locations in a given PSA should be served with alternative technologies allowed through the EHCPLT process to ensure maximum impact of BEAD funding, MCA will consider allowing non-fiber service to a minimal number of locations. All other locations in the PSA will otherwise be served by FTTH.

Accordingly, the extent to which satellites and other non-fiber distribution platforms will be eligible for BEAD Program funding likely will be extremely limited.

The BEAD Program's underlying congressional goal is to connect locations still without "broadband" – Internet access at speeds of 100/20 Mbps – in a cost-effective manner. The fact that, in Maine, far more federal taxpayer dollars will be spent on "gold-plated" fiber infrastructure to upgrade "underserved" locations than what is being spent to connect "unserved" locations strongly suggests that NTIA's approach is fundamentally flawed.

TMT with Mike O'Rielly – Ep 13: Changing Satellite Regulatory Environment

Episode 13 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 17. This episode, titled "The Changing Satellite Regulatory Environment," features a conversation between Mr. O'Rielly and guest Tom Stroup, President of the Satellite Industry Association (SIA). Their conversation ranges from market change over the last decade with new entrants and new services such as low-earth orbit (LEO) satellite networks, dramatically improved broadband satellite network capacity and speed capabilities, the importance of access to spectrum for satellite providers – including potential expanded use of the 18 GHz band for satellite services, the 2024 State of the Satellite Industry Report, export reform, broadband subsidy programs and policy, direct-to-mobile (or direct-to-cell) integrated offerings through satellite provider partnerships with terrestrial wireless providers, and more. 

U.S. Broadband Providers Made Strong Capital Expenditures in 2023

Capital expenditures by U.S. broadband providers totaled $94.7 billion in 2023, according to the 2023 USTelecom Capital Expenditure Report. USTelecom's report was released on October 18. 

According to USTelecom, the $94.7 billion figure is the second highest annual industry capex in 22 years. USTelecom's 2023 report indicates that U.S. broadband providers have invested over $2.2 trillion in network infrastructure since 1996. In reports for prior years, USTelecom has noted that its capex estimates likely are conservative because they have not included investment by small U.S. broadband providers or U.S. satellite broadband providers.

Continuing strong investment is a clear indicator of a competitive broadband market environment. On July 6 of this year, the Free State Foundation offered many other data points about the market's vibrancy in public comments it submitted in the FCC's 2024 Communications Marketplace Report proceeding. Additionally, on October 7, FSF submitted public comments to the FCC in the agency’s proceeding for the upcoming Eighteenth Section 706 Report. Those comments include data points supporting the conclusion that broadband service is being reasonably and timely deployed to all Americans. Sustaining that progress in deployment will depend on private market investment remaining high and undeterred by regulatory barriers. 

PRESS RELEASE: The FCC Latest Inquiry Regarding 'Data Caps' Avoids Economics in Favor of Anecdotes

Regarding the FCC’s newly-initiated proceeding to examine so-called "data caps" imposed by broadband providers, Free State Foundation President Randolph May issued the following statement: 

If I were a cynic, I might think the FCC's newly launched inquiry into "data caps" is just a political ploy with an election looming. But I'll just deal with the issue on the merits. The FCC's news release announcing the inquiry contains snippets of “stories” related by persons claiming to be adversely impacted by the practices of some broadband providers who charge higher prices for heavier usage. But, tellingly, the release contains not one single word regarding the economics of building out and maintaining ever faster, more reliable broadband networks. There is no apparent recognition that the heaviest users impose greater costs on broadband networks, and that, in reality, so-called "data caps" are just a form of "usage-based pricing" common in many different market segments.

 

Of course, if broadband networks grew freely on trees, and the costs of building and maintaining them didn't have to be recovered primarily by the users of the networks, it would be far easier to indulge in the polemics of those who advocate for unlimited usage for all at the same low price. But that's not reality. The FCC can't be an "economics free zone" relying on stories it collects if it expects the private sector to continue to invest enormous amounts of capital — over $2 trillion - just in the last two decades to build out and maintain increasingly faster, more reliable broadband networks.

 

To be sure, there are those who will always need financial assistance to obtain Internet services. But there are ways to provide subsidies to those in need without destroying incentives that lead to economic efficiencies that benefit all consumers.

Report Highlights Link Between Spectrum Policy and National Security

A new report published by the Center for Strategic & International Studies (CSIS) warns that absent a heightened focus on our national spectrum policy, "[t]he security of the United States as a market democracy is at stake." In the simplest of terms, online activity is only as secure as the underlying apps and network infrastructure over which it occurs. If that software and hardware is to come from trusted sources, policymakers must foster an environment in which America's mobile marketplace maintains a powerful say in global technology development, "especially as autocratic nations seek to dominate."

In Part 1 of "Concrete National Security Benefits of Spectrum Allocation for Commercial 5G," CSIS Strategic Technologies Program Senior Fellow Clete Johnson identifies two "difficult technical feats" that the U.S. must and can accomplish if it is to achieve the scale necessary to drive technology development down a secure and trusted path. The first is to better harmonize frequency use, as "[t]he more that U.S. spectrum use is harmonized with that of allies and global markets, the more scale trusted suppliers have for secure technology development." The second is to allocate sufficient spectrum so that capacity does not constrain the economic might of American consumers.

Harmonizing the frequencies allocated to 5G (and successor standards) is essential to achieving economies of scale because technology development is frequency specific: equipment developed for one band typically cannot be used in other bands. As the report points out, however, "the United States is becoming a mid-band spectrum 'island,' operating largely outside the core globally harmonized spectrum bands. If this trajectory continues, the U.S. technology ecosystem will be confined to a U.S.-only spectrum 'dialect' that lacks global influence and scale."

Allocating sufficient spectrum to satisfy growing mobile broadband demand, meanwhile, maximizes the economic ability of 350 million American consumers to shape global technology decisions. As the report explains:

U.S. wireless companies need sufficient spectrum resources to collaborate with like-minded nations in innovating and manufacturing advanced wireless technologies and components – including chipsets, software, radios, and more – for use in both the commercial and federal sectors…. The existing disparity between U.S. licensed mid-band spectrum allocations as compared to the rest of the world has become a major national security challenge, as it has created a platform for China to shape the near-term and future technology environment to its strategic advantage.

The report proposes several ways to address this situation. They include:

• Reframing the spectrum deficit as "an optimization challenge, not a scarcity problem."
• Moving from a "zero-sum" mindset that pits government and commercial uses against each other to a collaborative environment that promotes "static" and, in the longer term, "dynamic" spectrum sharing solutions.
• Restoring the FCC's spectrum auction authority.
• Aggressively pursuing harmonization opportunities, which may include the 7/8 GHz band, so that America speaks the same "frequency 'language'" as its allies.

The report's forthcoming Part 2 primarily will focus "on the importance of agile spectrum management capabilities in the context of electronic warfare."

PRESS RELEASE: FSF Continues to Oppose the FCC's Proposal to Regulate Political Ads Using AI

Free State Foundation President Randolph May and Director of Policy Studies Seth Cooper submitted reply comments today to the FCC continuing to oppose the agency’s proposal to require broadcasters, cable, and satellite operators to include a disclaimer in all political ads using AI. Below are the first two paragraphs from the Free State Foundation reply comments:

"In these reply comments, we emphasize two primary points. First, even comments filed by parties sympathetic to the proposed rulemaking acknowledge that the Notice’s definitions of terms are ambiguous and easily misunderstood. The key definition of 'AI-generated content,' on which the whole proposal depends, is especially problematic because it seemingly is so vague and overly broad that it would require a disclaimer for virtually all political ads.

 

Second, commenters rightly recognize that the Commission’s proposal to rely on a 'credible third party' to trigger FCC action for an alleged failure to comply with its rules is susceptible to political manipulation, or at least the appearance of it. It is naïve to suggest that, during heated political campaigns, and in today’s charged political environment, that there will be agreement regarding the true independence, dispassionate judgement, and expertise of ‘credible' third parties. Any proposal to rely on such supposed credible third parties almost certainly would not find widespread public acceptance.”

TMT with Mike O'Rielly – Ep 12: First Amendment & Media Environment

Episode 12 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 9. This episode, titled "The First Amendment and Today's Media Environment," features a conversation between Mr. O'Rielly and guest Richard T. Kaplar, President & CEO of the Media Institute. Their discussion includes topics such as media consolidation and media ownership rules, the Net Vitality 3.0 report on global Internet ecosystem leaders, and the Madison Project.

MT with Mike O'Rielly – Ep 11: Wireless Broadband & BEAD

Episode 11 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on September 26. In the episode, titled "WISPs' Wireless Broadband Offerings & BEAD Funding," Mr. O'Rielly is joined by guest David Zumwalt, President and CEO of WISPA – The Association for Broadband Without Boundaries. The conversation touches on matters such as spectrum, concerns about the Biden Administration’s favoritism for fiber in implementing the Broadband Equity, Access and Deployment (BEAD) Program and the subsequent change to that policy, concerns about federal subsidies being used to overbuild in areas already being served by small wireless providers, and more. 

Competition and Federal Law Preclude COLR Regulation of Wireless

The California Public Utilities Commission (PUC) has an open rulemaking proceeding in which it is considering whether to impose "carrier of last resort" (COLR) regulation on wireless voice providers. COLR rules are outdated and unjustifiable in today’s competitive market environment. And federal law preempts state COLR regulation of wireless voice providers.

A voice services carrier designated as a COLR typically is required to serve all customers within a territory, even if that means requiring them to build out their networks. COLRs must obtain permission from regulators before exiting the market. Also, COLRs typically are required to charge rates that are limited to what the regulating authority deems “just and reasonable.” 

COLR obligations are premised upon the existence of local monopoly conditions for voice telephone services. But those conditions do not exist anymore. Instead, today's voice market gives consumers choices among competing providers. As comments filed by CTIA on September 30 with the California PUC observed: 

Wireless providers in California operate in an intensely competitive market where “there are multiple providers that compete for wireless subscribers” and “consumers have the ability to switch providers” if they wish to do so. Due to this fierce competition, wireless providers in California experience customer switching rates between 9% and 34%.

FSF President Randolph May made a similar point about the competitive landscape for voice services and the outdatedness of COLR obligations in a blog post from June of this year:

In an era before consumers in almost all areas of the country, including California, had more than a single option from which to choose for the provision of basic voice telephone service, it may have made sense for the government to have the power to require that a service provider be designated as the Carrier of Last Resort. Needless to say, nowadays, consumers in most all areas have several options for acquiring voice telephone service from various providers that employ different technologies – copper wires, coaxial cable, fiber, cellular, satellite, and hybrid networks combining these facilities.

Additionally, Section 332(c)(3)(A) of the Communications Act contains a state preemption provision that effectively precludes states from imposing COLR obligations on wireless providers. The statute provides, in relevant part, that “no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service.” CTIA’s comments correctly point out that “[r]ate regulation has always been a key element of COLR regulation” and point out various ways that the California PUC regulates the rates of COLRs. Any attempt by California regulators to control the basic rate for wireless service would be preempted by federal law. 

 

Moreover, any COLR obligation that required a wireless provider to build out its network to serve customers surely would be preempted as a regulation of entry under Section 332(c)(3)(A). Indeed, any state COLR regulation regarding wireless providers exit likely would clash with the FCC’s decision, in its 1994 CMRS Order, to forbear from exit approval requirements for wireless providers. As CTIA’s comments described that order:

The FCC specifically elected to forbear from exercising its statutory authority to require CMRS providers to obtain approval for market exit for specific policy reasons, including that “barriers to exit may also deter potential entrants from entering the marketplace” and “the time involved in the decertification process can impose additional losses on a carrier after competitive circumstances have made a particular service uneconomic,” such that “forbearance will better serve the public interest by avoiding the social costs identified in this paragraph.”

COLR obligations impose costs on voice providers, and those costs can undermine a provider’s competitiveness. For the California PUC, the better policy for voice consumers, and the lawful one, would be to promote competition and not undermine it with outdated COLR regulations.