PRESS RELEASE: The USF Fund May Be Constitutional, But It's on Shaky Ground

 

Free State Foundation President Randolph May issued the following statement regarding the Supreme Court’s decision in the FCC v. Consumers’ Research case:

“While the Supreme Court upheld the constitutionality of the FCC’s universal service programs, I hope the challenge at least served to highlight the long-standing problems with the nearly $10 billion per year Universal Service Fund. Without meaningful substantial reform, the USF fund, as it exists now, is unsustainable. Consumers of traditional telephone services are now paying a tax of 36% on all their calls as the contribution base continues to shrink. Congress needs to get serious about engaging in a top-to-bottom examination of the program to determine its size and scope going forward, how it should be funded, or whether it should even exist."

 

FCC Deletes, Modernizes, Streamlines Cable Rate Regulation

At today's Commission open meeting, Chairman Brendan Carr's IN RE: DELETE, DELETE, DELETE initiative bore fruit when the agency adopted a Report and Order providing the cable industry with long-overdue relief on the rate regulation front. As long as Section 623 of the Communications Act remains on the books (see below for more on that), the rate a cable operator not facing "effective competition" – essentially a null set, legally speaking, since 2017 –charges for the Basic Service Tier (BST) remains subject to regulation. This item, (circulated version available here), however, "will remove from … regulations approximately 27 pages, 11,475 words, 77 rules or requirements, and 8 forms."

The Report and Order deregulates most cable equipment, exempts smaller systems, and declines to extend its rules to commercial establishments. It also modernizes and streamlines those rules that remain in place, primarily to reflect the sunset, over 25 years ago, of tier regulation beyond that of the BST – that is, the tier (1) upon which local broadcast television stations and public, educational, and government access (PEG) channels must be carried, and (2) to which rate regulation in theory still applies.

In practice, of course, given the ubiquitous presence nationwide of "effective competition" from direct broadcast satellite (DBS) operators, telco TV providers, and virtual multichannel video programming distributors (vMVPDs), rate regulation of the BST no longer occurs. As the item notes, the Commission itself is "unaware of any local communities that are actively regulating cable rates at this time."

In a June 5, 2025, post to the FSF Blog, Free State Foundation President Randolph May described this undertaking broadly as "a meaningful regulatory reform accomplishment" and referenced the following language from our comments: "what primarily stands in the way of unbridled, consumer-benefitting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply." The Report and Order, the goal of which is to "unleash prosperity through deregulation," is significant step in the right direction.

Speaking of deregulation, according to Law360 (subscription required), earlier this week House Energy and Commerce Committee Chairman Brett Guthrie (R-KY) stated that "'it's time to have a real conversation and update the 1992 Cable Act.'" Consistent with the position for which I (as well as others associated with the Free State Foundation) long have advocated, most recently in "Deregulation Is the Cure for the Video Regulatory Disparity," a June 9 post to the FSF Blog, Chairman Guthrie indicated that he opposes calls to extend legacy MVPD regulation to virtual alternatives: "'I fear that imposing additional regulation on this industry rather than relieving burdens on others would slow down innovation rather than encourage it.'"

Nielsen: Streaming Surpassed Cable and Broadcast Combined in May

Nielsen's The Gauge™ provides a monthly snapshot of consumer viewing behavior. More to the point, it documents the trend over time away from traditional sources – "cable" and broadcasting – toward streaming options. Over the last four years, I have highlighted a few noteworthy milestones on that path:

• In "Nielsen: Viewership of Streaming Video Has Surpassed That of Broadcast Television," a June 2021 post to the FSF Blog, I noted that, in May 2021, consumers for the first time spent more time watching streaming services (26 percent) than broadcast television (25 percent).

• In September 2022's "A Tale of Two Trends: Traditional Video Distributors Shrink While Streaming Video Grows," a Perspectives from FSF Scholars, I pointed out that, as cable subscriber losses approached 1 million (949,209) during the second quarter of 2022, streaming for the first time exceeded one-third of total viewing.

• In an October 2022 post to the Free State Foundation blog, I reported that, in September 2022, for the first time streaming (36.9 percent) surpassed cable (33.8 percent).

The zero-sum ascendence of streaming continues: according to the most recent edition of The Gauge, in May 2025 streaming (44.8 percent) for the first time exceeded cable and broadcast television combined (44.2 percent):

In a Perspectives published earlier this month, I wrote that "[f]ar from raising competitive concerns, the Charter-Cox merger appears to represent a pragmatic effort to accelerate the modernization of legacy cable offerings to a world where video competition is both fierce and consumer-driven." This latest data point from The Gauge serves to underscore that conclusion.

FSF Is Hiring! Positions Available

The Free State Foundation, one of the nation's leading pro-free market, free speech, property rights, and rule of law independent think tanks is hiring to accommodate its continued growth and to maintain its leading position in the communications law and policy, intellectual property, constitutional law, and administrative law fields.

Here are the currently open positions:

• Vice President and Senior Fellow

• Senior Fellow, Research Fellow, and Research Assistants

While we welcome applications to join FSF's highly respected team, please read the required qualifications carefully and only apply if you meet them!

President Trump Holds White House Meeting to Discuss EchoStar and FCC Review

News outlets have reported that President Donald Trump held a meeting at the White House with EchoStar Chairman Charlie Ergen and FCC Chairman Brendan Carr on June 12. Although we do not know for certain what was discussed at the White House meeting, it is a supremely safe bet that the conversation included the FCC's current review of EchoStar's compliance with deadlines for reaching wireless facilities construction milestones. Reports indicate the President rightly hopes to prevent a scenario in which a major U.S. company goes bankrupt. 

EchoStar previously acquired wireless spectrum licenses in conjunction with the T-Mobile/Sprint merger and settlement with the U.S. Department of Justice. It has invested billions in private capital to build out a nationwide 5G wireless network, which is available to 80% of Americans. EchoStar's network offers a fourth competitive nationwide facilities-based mobile wireless service, and its network is unique for its deployment of Open Radio Access Network (Open RAN) technology. 

 

Free State Foundation President Randolph May and I expressed our views regarding the FCC's review of EchoStar's compliance with buildout commitments in reply comments filed on June 6.

Reduce Multiple Government Agency Merger Reviews

On June 11, the Connecticut Public Utilities Regulatory Authority reportedly issued an order approving the Verizon/Frontier merger. The approval is welcome news, insofar as it involves the clearing of a regulatory hurdle to the completion of a pro-competition, pro-consumer transaction. As explained in a blog post from last month, the FCC approved the Verizon/Frontier on May 16. In its order, the FCC found that there are no potential transaction-related public interest harms and that there are some likely public interest benefits from the transaction. Verizon's and Frontier's wireline services operate in different geographic territories, meaning consumers do not lose a choice of providers as a result of the merger. Moreover, Verizon is more likely to invest in and improve service in Frontier territories than Frontier would absent the merger. Verizon's acquisition of Frontier means that fiber will reach more Americans – sooner.

 

Even with the approval by Connecticut regulators, the Verizon/Frontier merger is reportedly subject to pending reviews by state regulators in Pennsylvania and California. This raises the process issue of whether overlapping reviews of proposed mergers by state regulators are likely to provide added public benefits or more likely to result in extra costs and delays due to redundant reviews. This is not a new issue; it was the subject of my December 2010 Perspectives from FSF Scholars, "Multiple Government Regulatory Reviews Burden Telecom Mergers with Too Many Conditions." Therein, I discuss the problem of compounding process costs and regulatory conditions that can result from redundant merger reviews. 

 

One approach for a more efficient, streamlined process for mergers involving interstate communications service providers is to enable a sole federal agency review process in which state regulators are encouraged to provide input regarding state-specific concerns. 

 

Also, the FCC could adopt rules or issue a declaratory order setting forth limits on state regulatory conditions for merger approval as well as limits on state-level merger review process shotclocks. Actions by state regulators that transgress those limits and conflict with federal law would be subject to federal preemption. Certainly, this approach is viable in the interstate wireless communications services context, as merger review by state public utility commissions effectively constitutes state-level restrictions on market entry contrary to Section 332(c)(3) of the Communications Act. 

 

Hopefully, Pennsylvania and California will promptly conclude their reviews of Verizon/Frontier and allow fiber broadband to timely deploy to more Americans. 

Regulation Article Critiques the Weak IP Rights Regime

The Spring 2025 issue of Regulation magazine features an eye-opening article by Law Professor Jonathan M. Bartlett titled "The Perils of 'Free' Information." In the article, Mr. Bartlett tackles the narrative that IP owners are exploitative monopolists that inflate prices and bar competition and corresponding legal and policy strategies employed by certain tech platforms "to weaken IP rights to reduce the costs of securing content and tech assets, which are then monetized within a portfolio of complementary products and services." 

One of Mr. Bartlett's insights is that "even [IP-free] markets usually restore some form of property rights—whether implemented by IP law, contract, or technology—to sustain incentives to invest in innovation." He describes how tech platforms have migrated toward closed-access subscription models that rely on technology and contracts to serve as a function equivalent of IP rights. The weakening of IP rights undermines innovation and market entry by new competitors. According to Mr. Bartlett, "[w]hile innovation in information-technology industries can sometimes persist in a weak-IP environment, it would likely take place principally within the bundled product-and-service ecosystem maintained by tech platforms or the vertically integrated structures maintained by large bricks-and-mortar producers." 

 

Mr. Bartlett writes that "IP rights are often a precondition for sustaining the innovators and artists that drive knowledge ecosystems." He is in good company in writing this. The idea that creators and inventors require secure and exclusive rights in their writings and discoveries to fully realize their ideas and bring them to market goes back to the earliest days of our nation when the Framers of the U.S. Constitution drafted the Article I, Section 8 IP Clause. 

 

Mr. Bartlett's article is worth reading in full. It is based on his important new book, The Big Steal: Ideology, Interests, and the Undoing of Intellectual Property (Oxford University Press, 2024).

Study: State Broadband Rate Controls Have Bad Consequences for Investment and Competition

On May 29, ACA Connects held a webinar highlighting a newly released study by Cartesian titled "State Broadband Rate Regulation: Impact on Investment and Competition." The study analyzes the negative effects of state-level price controls for fixed broadband Internet service investment and access.  

My February 2025 Perspectives from FSF Scholars, "States Should Keep Broadband Internet Services Free From Price Controls," addressed New York's requirement that fixed providers in the state offer $15 and $20 monthly price plans to qualifying consumers. In response to the state's law requiring service offerings at rates far below market, AT&T discontinued its AT&T Internet Air fixed wireless access (FWA) service. Also, Starlink petitioned for an exemption and thus apparently intends to limit its subscribership to less than 20,000 in New York. Those early responses to the implementation of New York's law are real-life examples of how imposing price controls in competitive markets creates more problems than it solves. New York's rate regulation has discouraged market entry by new providers using innovative technologies. 

 

Back to the Cartesian study. Based on its economic model, Cartesian found that price caps on fixed broadband Internet service would result in most states losing 15% to 35% of modeled capital expenditures by marketplace providers, depending on the state and based on whether it imposes a $30 monthly or $15 monthly low-income plan mandate.  

 

Cartesian similarly concluded that American consumers lose choices as a result of state-level rate regulation, as it found that most states would get 15% to 35% fewer locations served by new competitive entrants. Among its key findings: a 19% drop in investment (per $30 low-income monthly plan) would result in one less provider for 3.3 million locations, and a 41% drop in investment (per a $15 low-income monthly plan) would result in 7.5 million locations with one less additional competitor. 

 

ACA Connects and Cartesian should be commended for preparing and publishing the insightful study about the harmful downsides of state-level rate regulation of broadband services. 

 

The bottom line is that state-level rate regulation is a poor policy for promoting Internet access. Instead of imposing price controls that will inevitably reduce investment and new market competitors, state legislators who are concerned about affordability and lack of access for low-income households should consider options such as (1) promoting awareness of the federal Lifeline subsidy program, which offers $9.25 per month toward broadband service for qualifying households; (2) using state universal service fund subsidies or establish other state-level subsidy programs to supplement Lifeline support for their residents; (3) promoting awareness of private affordability programs such as Xfinity's Internet Essentials. 

TMT with Mike O'Rielly – Ep 22: Pending SCOTUS Decision on USF

Episode 22 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 June. In this episode, titled "The Pending U.S. Supreme Court Decision on the Universal Service Fund," Mr. O'Rielly has a conversation with guest Tim Donovan, President and CEO of the Competitive Carrier Association (CCA). Their conversation addresses issues involving the much-anticipated ruling by the Supreme Court in FCC v. Consumers' Research. Streaming video of the episode is now available:

Deregulation Is the Cure for the Video Regulatory Disparity

In a May 27 op-ed, just-departed FCC Commissioner Nathan Simington, along with his Chief of Staff Gavin Wax, argued that a 2014 proposal by then-Chairman Tom Wheeler to regulate "virtual" video distributors (vMVPDs) the same as facilities-based video distributors (MVPDs) "deserves a second look." Relatedly, Chairman Brendan Carr, in a March 7 letter to YouTube TV and its parent company, Alphabet, noted that "the FCC and Congress have been encouraged by a diverse group of stakeholders to expand the Commission's existing rules and to apply the same or a similar framework to virtual MVPDs like YouTube TV" and that it "has multiple open proceedings seeking comment on whether to do just that."

Without question, the intended goal – in the words of Simington and Wax, "placing [vMVPDs] on equal regulatory footing with cable and satellite operators" – is one that policymakers should prioritize. After all, and as I described most recently in "No Basis Exists in 2025 for Rules Targeting Traditional Video Providers," a March Perspectives from FSF Scholars, facilities-based MVPDs subject to FCC regulations have been shedding subscribers for years while their online competitors – including the vMVPD YouTube TV, which is expected to surpass Charter Communications, Inc.'s Spectrum to become the largest MVPD by the end of 2026 – have been adding subscribers at a breakneck pace.

However, given that the video distribution marketplace is, and grows steadily more, competitive, I (and others affiliated with the Free State Foundation) have argued consistently that the appropriate path to a level playing field is through the deregulation of facilities-based MVPDs, not the expansion of existing regulations to vMVPDs.

In Comments filed in the "IN RE: DELETE, DELETE, DELETE" proceeding, Free State Foundation President Randolph May and I pointed out that "what primarily stands in the way of unbridled, consumer-benefiting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply: cable operators and Direct Broadcast Satellite (DBS) providers."

And in "Video Subscriber Updates Underscore Ongoing Shift to Streaming," an August 2023 post to the FSF Blog, I wrote that "the appropriate response to these ongoing trends is to eliminate outdated rules, not expand them."

The proposal to extend rules targeting legacy MVPDs to vMVPDs isn't only the wrong approach from a competition policy perspective, however. It also appears to lack a statutory justification.

In a March 2023 letter to Senator Charles Grassley (R-IA), then-FCC Chairwoman Jessica Rosenworcel explained that the plain language of 47 U.S.C. § 522(4), which defines a "channel" as "a portion of the electromagnetic frequency spectrum which is used in a cable system and which is capable of delivering a television channel," limits the FCC's ability to regulate vMVPDs that stream content over the public Internet:

It is imperative that the Commission give these words full meaning. As reflected in the record, online video programming distributors do not neatly fit in these statutory definitions because they lack a physical connection to subscribers and do not use any electromagnetic frequencies when delivering programming to their viewers. As you know, the Commission lacks the power to change these unambiguous provisions on its own but can do so if Congress changes the underlying law.

This statutory impediment has become more pointed in the wake of the Supreme Court's Loper Bright decision rejecting the Chevron doctrine. Rather than defer to an agency interpretation of an ambiguous statute, reviewing courts now will adopt what they view as the "best reading of the statute." In this case, and assuming for argument's sake that the statute is ambiguous, that seemingly would lead to the judicial conclusion that the FCC's regulatory authority over MVPDs does not extend to vMVPDs that deliver digital bits over the public Internet.

FCC Chairman Carr Says DELETE Legacy Cable TV Rules

Yesterday FCC Chairman Brendan Carr said: ‘’Our dated and reticulated set of cable television rate regulations are one such example. That is why I would like to consider an order that gets rid of those obsolete and unworkable rules.”  He's proposing to remove "77 rules and requirements that have no meaningful application today."

This would be a meaningful regulatory reform accomplishment if it occurs.

The Free State Foundation's initial comments in the FCC's "DELETE DELETE DELETE" proceeding were focused most heavily on just what Chairman Carr is now proposing: the elimination of outdated legacy regulations applicable to cable and satellite TV operators.

Here is part of what FSF said in its comments:

The ability to deliver the highest-quality video over broadband, in any format and to any connected device, has proven to be the great equalizer – a development that indisputably eviscerates any policy rationale underlying legacy regulations premised upon the existence of claimed video distribution "bottlenecks." As ongoing trends in the marketplace make plain, facilities-based Multichannel Video Programming Distributors (MVPDs) enjoy no competitive advantage vis-à-vis over-the-top providers warranting one-sided regulations.

To the contrary, what primarily stands in the way of unbridled, consumer-benefitting competition are ill-fitting rules that hamstring the subset of participants to which they uniquely apply: cable operators and Direct Broadcast Satellite (DBS) providers. This proceeding can foster optimal efficiency levels in the operation of the marketplace by realigning the regulatory environment to fit the facts that exist on the ground today.

I'm encouraged by Chairman Carr's statement -- and I look forward to the deregulatory follow-through!

PRESS RLEASE: Reaction to Supreme Court's Refusal to Stop NLRB and MSPB Dismissals; Impact on FCC

 

With regard to the Supreme Court’s refusal to stop President Trump’s dismissal of members of the NLRB and Merit Systems Protection Board and the potential impact on the FCC, Free State Foundation Randolph May issued the following statement:

“Even before the Supreme Court’s action yesterday refusing to stop President Trump’s dismissal of members of the NLRB and the Merit Systems Protection Board, the handwriting was on the wall that Humphrey’s Executor likely would be overruled, or sharply curtailed. Now the handwriting is even more clear. I don’t see anything that would protect FCC commissioners from dismissal at will any more than members of the NLRB or MSPB, or for that matter many other multimember commission members. If I’m correct about Humphrey Executor’s likely demise, the notion that the FCC is an ‘independent’ agency is no longer operative.

Whether or not President Trump actually dismisses any FCC commissioner, it makes sense to start thinking right now about whether the agency should be reconfigured to comport with the likely new constitutional reality. I’ve suggested that the Commission’s policymaking functions could be transferred to the executive branch, say, to NTIA, while adjudicative-type functions could remain with the multimember commission. The Communications Act is long overdue for an update in any event to jettison the current outdated ’stovepipe’ model and the over-reliance on the amorphous 'public interest’ doctrine. So perhaps whatever happens in the current dismissal cases will spur discussion regarding that needed Communications Act update.”

 

GAO Flags Broadband Funding Coordination Concerns

Last month, the Government Accountability Office (GAO) issued a report on the state of federal broadband funding interagency coordination. Not for the first time, it flagged breakdowns in process that could lead to duplication, waste, fraud, and abuse.

Publicly released on April 28, "Broadband Programs: Agencies Need to Further Improve Their Data Quality and Coordination Efforts," identifies two concerns:

1. The FCC's failure to evaluate and document the accuracy of the service availability data underlying its National Broadband Map, which "adds both to the risk that agencies leveraging these data cannot effectively target funding to areas that lack high-speed internet and to users' existing concerns about the data's reliability."
   
   
2. The need for the FCC, NTIA, and the Departments of Agriculture and Treasury to define with sufficient clarity their coordination processes to "better position the agencies to sustain their collaboration, manage fragmented federal broadband efforts, and ensure that the considerable federal broadband funding is spent efficiently and effectively."

Regarding the National Broadband Map, the Report states that:

FCC officials described its processes for data validations, verifications, audits, and enforcement referrals as a new workstream that continues to be informed by fresh rounds of data, citing this as the reason why FCC had not yet formally evaluated or finalized formal operating procedures for these processes. However, without evaluating the effectiveness of its validations, verifications, audits, and referrals processes, FCC cannot know the extent to which these processes are sufficient to ensure the accuracy of the data in the National Broadband Map.

With respect to interagency coordination, the Report identifies three shortcomings: (1) no clear shared definition as to what the "covered data" that the agencies have agreed to share actually entails; (2) delays in the submission of data to be included in the FCC's Broadband Funding Map, a separate map that I described in a May 2023 Perspectives from FSF Scholars; and (3) the fact that "officials … have not established a formal process to de-duplicate their funding prior to making decisions about projects to fund."

To address these concerns, the Report presents 14 recommendations for executive action.

As you may recall, the GAO assessed broadband funding interagency coordination efforts once before, in May 2022. As I noted in a contemporaneous post to the Free State Foundation's blog, "Broadband: National Strategy Needed to Guide Federal Efforts to Reduce Digital Divide" identified "at least 133 funding programs that could support increased broadband access" under the purview of 15 different agencies and warned that "[t]his patchwork of programs could lead to wasteful duplication of funding and effort."

PRESS RELEASE: The FCC's Public Interest Authority Is Not a Blank Check!

Regarding the Court of Appeals for the Fifth Circuit’s decision issued today in Texas Association of Broadcasters v. FCC, Free State Foundation President Randolph May issued the following statement:

“For at least two decades now, in this law review article and otherwise, I have been urging the FCC, as a matter of bureaucratic self-restraint and regulatory modesty, to construe the congressional delegation of public interest authority narrowly. The Fifth Circuit’s decision holding that the FCC lacks authority under the 'public interest' standard to require broadcasters to collect and disclose, on a broadcaster-identifiable basis, certain employment data, including that based on race and gender, should be a cautionary tale. In holding the FCC’s regulation unlawful, the Court declared that 'the FCC’s authority to act in the ‘public interest' does not extend outside of the statutorily prescribed tasks that Congress has instructed the FCC to carry out.'

With a standard as concededly amorphous as 'the public interest,' regulators will always be tempted to deploy the delegation as a sword, as they were in this case. While Democrat FCC commissioners surely have been far more prone in the past to take an overly expansive view of the agency’s public interest authority, the temptation exists regardless of party. It should be resisted.

Here what I said in the Conclusion to my 2008 law review article:

With convergence and competition in the communications marketplace a reality, it is indeed time to revisit the application of the public interest standard. Whatever the merits of regulation under the indeterminate standard in the earlier, more monopolistic analog age (and I have serious doubts), the exercise of such unbridled and malleable discretion by the FCC is no longer appropriate in today’s digital environment. Assessments of marketplace competition primarily should guide the Commission’s regulatory decisions. Absent Congress’s or the courts’ narrowing the agency’s public interest authority, which is unlikely, the Commission, uncharacteristically, should heed my modest plea for regulatory modesty. In an exercise of self-restraint, the FCC should commit itself to narrowing the application of its public interest authority."