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

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

TITLE IX—EXTENSION OF FCC AUCTION AUTHORITY 

SEC. 901. EXTENSION OF FCC AUCTION AUTHORITY. 

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

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

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

American Music Fairness Act Advances Out of House Committee

On December 7, the House Judiciary Committee voted to recommend the American Music Fairness Act – H.R. 4130 – in the form of a substitute bill. The legislation now goes to the full House of Representatives for consideration. The House – and then the Senate – should pass the bill into law and secure full public performance rights in copyright owners' music sound recordings. 

Under existing copyright law, terrestrial commercial AM/FM radio stations can profit off of copyrighted music sound recordings by broadcasting them to attract audiences and then draw revenue from running ads – all without paying royalties to the recordings' owners. The American Music Fairness Act would finally change this. The bill would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners.

An important aspect of the American Music Fairness Act is that the bill includes a low, flat royalty rate for smaller commercial stations and for non-profit stations. In addition to ensuring that sound recording owners finally receive compensation for third-parties' commercial use of their copyrighted works in America, the bill would enable sound recording owners to begin receiving from foreign radio stations public performance royalties that have long been withheld because of the shortcomings of U.S. copyright law.

Also, nobody in Congress should take seriously the claim that royalty payments to copyright owners for public use – including commercial use – of their works is a tax. Royalties are not taxes. There are obvious differences between paying taxes or fees to the government and paying for the right to make copies, publicly display, or publicly perform another's copyrighted property. (I address this matter more in my blog post of September 6, 2022.) The American Music Fairness Act is a pro-property rights bill. 

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," as well as my April 2021 Perspectives, "Congress Should Secure Full Copyright Protections for Music Sound Recordings."

Senators Introduce the Rural Internet Improvement Act

 On November 29, Senators John Thune and Ben Ray Lujan introduced S.5137 – the Rural Internet Improvement Act of 2022. The bill's purpose is to reform existing U.S. Department of Agriculture (USDA) Rural Development broadband programs and ensure that program dollars are directed to connect rural areas that are unserved or underserved.

According to a press release for the Rural Internet Improvement Act, the legislation would do the following: 

1. Streamline USDA's broadband authorities by merging and codifying the popular Rural e-Connectivity Pilot Program (ReConnect) with USDA's traditional broadband loan and grant program;
2. Ensure ReConnect funding is going to areas most in need of reliable broadband service by limiting funding to areas where at least 90 percent of households lack access to broadband service;
3. Enhance the participation of all types of broadband providers in the ReConnect Program by removing unnecessary barriers;
4. Increase transparency by improving the challenge process in the ReConnect Program;
5. Improve the coordination between USDA and the Federal Communications Commission (FCC) on broadband programs; and
6. Require USDA to enter into a memorandum of understanding with the FCC and National Telecommunications and Information Administration to facilitate outreach to rural residents and businesses of available federal programs that promote broadband access, broadband affordability, and broadband inclusion.

No House companion legislation to S.5137 has yet been announced. 

 

The Rural Internet Improvement Act appears to be a responsible and constructive measure for helping to ensure that broadband subsidy programs are efficiently and effectively implemented by USDA. Along with interagency coordination among USDA, NTIA, and the FCC, intra-agency coordination of broadband deployment subsidy programs through streamlined processes or merging of disparate programs is no doubt essential to ensure that precious tax dollars are spent wisely and that duplicative efforts and other forms of fraud, waste, or abuse are avoided. 

 

Congressional oversight is also necessary to help ensure that the billions in subsidies Congress has allocated to promote broadband deployment are well spent. Free State Foundation Senior Fellow Andrew Long addressed this important topic his November 10, 2022 Perspectives from FSF Scholars, "Absent Oversight, the Broadband Funding Faucet Likely Will Overflow." 

Recording Music Revenues Up: Stronger Copyrights Would Increase the Pot

Late September of this year, the Recording Industry Association of America (RIAA) released its "Mid-Year 2022 RIAA Revenue Statistics." RIAA's report reveals many interesting and positive trends and data points for the U.S. recorded music market. The report also ought to serve as a reminder that the sound recording industry is copyright intensive and that Congress can bolster copyrights for owners of music recordings by passing the American Music Fairness Act.

According RIAA's report, during the first half of 2022, retail revenues for the U.S. sound recording industry grew to $7.7 billion, up from $7 billion during the first half of 2021. And wholesale revenues rose to $4.9 billion during the first half of the year, up $300 million compared to the first half of the prior year. 

Streaming is overwhelmingly the dominant source of revenue for the sound recording industry, as about 84% of its revenues during the first half of 2022 came from streaming services. Of the $6.5 billion generated by streaming during the first half of the year, about 78% or $5 billion came from paid streaming subscription services. Meanwhile, revenues from digital downloads of single tracks and albums declined 20% to $256 million, amounting to only 3% of total revenues for the recorded music industry. As RIAA's report shows, paid subscriptions have continuously increased in recent years and have now reached the 90 million subscriber mark.

 

Conversely, RIAA reported declines in revenues from digital and customized radio services such as SiriusXM and Internet radio stations. Total revenues from that category of services dropped 3%, down to $556 million. Notably, U.S. copyright law does not secure a public performance right for sound recording owners when AM/FM terrestrial radio stations broadcasts their music. As a result, direct revenues to the music recording industry from airplay on terrestrial radio is effectively zero. 

In terms of revenues from retail sales of physical products, revenues from CD sales declined 2% to $200 million. CD sales constitute 26% of physical revenues. Yet revenues from vinyl records continue to grow. According to RIAA's report, "[r]evenues from vinyl albums grew 22% to $570 million, and vinyl's share of the physical market increased from 68% to 73%."

Having noted these overall positive trends in music recording revenues, there are things that Congress can do to help promote the music marketplace and grow the pie bigger for recording artists and music fans. Perhaps the most immediate thing Congress can do is pass the American Music Fairness Act – H.R. 4130 and S. 4932. 

As previously mentioned, current copyright law exempts terrestrial AM/FM radio stations from having to pay royalties to owners of copyrighted sound recordings when their music is played on the air. This means that commercial AM/FM stations can profit off of copyrighted sound recordings by broadcasting them to attract audiences and then draw revenue from running ads. 

The American Music Fairness Act would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like satellite radio and Internet radio stations pay public performance royalties to sound recording owners.

 

So long as the U.S. exempts American AM/FM stations from paying royalties to American sound recording owners, foreign stations have no obligation to pay royalties for broadcasting copyrighted sound recordings owned by Americans. But by passing the American Music Fairness Act into law, Congress would open up royalty revenue streams from foreign radio stations and American copyright owners would receive revenues that they rightfully deserve. Importantly, the legislation includes a low, flat royalty rate for smaller commercial stations as well as for non-profit stations. 

As discussed in my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings," H.R. 4130 has received a hearing in the House Judiciary Committee. And S. 4932 was introduced in September of this year. There is still time in the 117th Congress for the American Music Fairness Act to become law. Congress ought to make it so. 

After FCC Auction Authority Extension, Senate Should Pass Spectrum Bill

Today, October 3, the Senate passed the H.R. 6833, the "Continuing Appropriations and Ukraine Supplemental Appropriations Act, 2023." The bill, which is expected to be signed into law, contains a two-and-a-half-month extension on the FCC's authority under Section 309(j)(11) of the Communications Act of 1934 to conduct spectrum license auctions. Leaving aside opinions about the rest of the bill, H.R. 6833 gives the 117th Congress an additional window of opportunity to take up and pass H.R. 7624, the Spectrum Innovation Act of 2022, before the end of its session.  

If passed by Congress and signed into law, the Spectrum Innovation Act would extend the FCC's spectrum license auction authority to March 2024. Additionally, the Act would direct the Commerce Secretary to identify 200 MHz in the lower 3 GHz band for "non-Federal use, shared Federal and non-Federal use, or a combination thereof." And it would direct the FCC to conduct an auction for licenses in the lower 3 GHz band.

There remains a pressing need for more commercially licensed mid-band spectrum, and the lower 3 GHz band is a prime candidate for repurposing. Indeed, Accenture's late September 2022 report observed that the federal government is the primary user for 3,300 MHz of spectrum between 3 GHz and 8.4 GHz. That amounts to 61% of the lower mid-band spectrum range, with a large percentage of the remainder dedicated to unlicensed use, and only 270 MHz currently available for commercial licensed wireless use. And in a September 22 blog post, Free State Foundation Senior Fellow Andrew Long spotlighted an AnalysysMason report that found the U.S. lags behind its global competitors France, Japan, and the U.K. in the amount of licensed mid-band spectrum available for commercial use by an average of 530 MHz. 

 

In order to effectively repurpose 200 MHz in the lower 3 GHz band, the FCC must retain its power to conduct licensed spectrum auctions and transfer licenses to winning bidders. And successful spectrum license auctions require regulatory certainty in order to draw the interest of auction participants and to maximize auction proceeds. 

As mentioned in a blog post from this summer, the House of Representatives passed the Spectrum Innovation Act on July 27. A joint announcement by the bipartisan leaders of the House Energy & Commerce Committee has highlighted the strong and widespread base of support for the Act and urged the Senate to take prompt action on the bill. The table is now set for H.R. 7624, and the Senate should make passage of the bill a top priority. 

Senate Bill Would Ensure Royalties for Radio Play of Copyrighted Sound Recordings

On September 22, Senators Alex Padilla and Marsha Blackburn announced the introduction in the Senate of the American Music Fairness Act – S.4932. If it becomes law, the bill would secure full public performance rights for owners of copyrighted music sound recordings. In particular, the bill would secure the right of sound recording owners to receive royalties when their music is broadcast by terrestrial AM/FM radio stations. Current copyright law specially exempts AM/FM radio stations from having to pay such royalties, thereby giving those stations free rider use of copyrighted sound recordings for commercial purposes. That exemption should be removed from copyright law.  

S.4932 is identical to H.R. 4130. The latter bill received a hearing in the House Judiciary Committee on February 2 of this year. The House Judiciary hearing on the bill was the subject of my February 24, 2022, Perspectives from FSF Scholars,"American Music Fairness Act Would Secure Copyrights in Sound Recordings." Additional reasons for supporting the legislation were offered in Free State Foundation Legal Fellow Andrew Magloughlin's March 2022 blog post, "Broadcasters' FCC Filing Undermines Radio Copyright Exemption." And the American Music Fairness Act was one of the many interesting issues discussed during FSF's July 2022 webinar, "Hot Topics in Copyright Policy."

 

Notably, the American Music Fairness Act provides for significantly reduced royalty payment rates for non-profit and small commercial AM/FM radio stations. And don't for a minute confuse royalties with taxes. Royalties are payments owed to private parties for usage of their property rights. For more on royalties versus taxes, see my blog post from September 6 of this year, "In Debate Over Radio Royalties, Congress Should Favor Property Rights."

 

Hopefully, the 117th Congress will dedicate time in its remaining schedule to pass the American Music Fairness Act into law. By doing so, Congress will accord owners of copyrighted music sound recordings what is rightfully due to them when their music is played by commercial AM/FM radio stations. 

Congress Should Respect Free Speech and Markets for Video Content

On September 2, House Resolution 1329 was introduced, which declares its purpose in "[r]ecognizing the need for greater access to rural and agricultural media programming." One can see the benefit to viewers of being informed about agricultural weather, agribusiness, commodity markets, and Western sports like rodeos. At the same time, it's important that government respects the First Amendment free speech rights of video programming distributors to select content and determine where or how it is presented to their subscribers. A resolution is perhaps a fitting way to commend Western living, but Congress should steer clear of mandating or appearing to direct the programming content choices of video service distributors.  

House Resolution 1329 salutes farmers, ranchers, agricultural productivity that supplies the American people with food, and the importance of agricultural investment to our nation's future. It also calls attention to the potential for rural and agricultural video programing to inform Americans about those issues, including residents in big cities and suburbs. In these the matters the resolution's outlook is worthy of respect.

The House resolution – in agreement with identically-worded Senate Resolution 712, introduced back on July 14 of this year – also decries media consolidation's harmful impact on access to such programming. But that point deserves significant qualification. American consumers have access to more video programming choices and distribution outlets than they did thirty years ago. In the early 1990s, nearly all Americans had only one choice for subscription-based multi-programming video distributor (MVPD) services, a local analog cable provider. Yet in 2022, Americans are served by a local cable provider with expanded programming tier offerings and by two nationwide direct broadcast satellite (DBS) providers. Many Americans also have access to competing former telco MVPD services. Additionally, online digital streaming services are available nationwide, with online video distributor (OVD) subscriptions now outnumbering MVPD subscriptions. And broadcast TV programming, which is now offered via multi-streaming channels and with HD quality, overwhelmingly constitutes a widely available non-subscription viewing option. 

The House resolution recognizes the emergence of competing OVDs. It states that "multichannel video programming distributors and providers of digital and streaming media should make delivery of rural agricultural programming, including agricultural news and western lifestyle content, a priority." Although the sentiment behind the resolution may be commendable, it ought to be remembered that video networks are private property. Any government intervention in the marketplace favoring the carriage or specific placement of one particular channel or program on a cable or other video network risks improperly overriding the editorial rights of cable providers or other video distribution network owners. 

Cable and other video providers' editorial decisions about whether to carry content and how to present it are constitutionally protected free speech. In Turner Broadcasting System, Inc. v. FCC (1994), for instance, the Supreme Court held that cable video programming distributors engage in and transmit speech and therefore receive First Amendment protections. Moreover, in a concurring opinion in the D.C. Circuit's 2013 Comcast v. FCC decision, then-Judge Brett Kavanaugh wrote that "[j]ust as a newspaper exercises editorial discretion over which articles to run, a video programming distributor exercises editorial discretion over which video programming networks to carry and at what level of carriage." 

Moreover, if Congress or the FCC were to adopt a regulation favoring a specific type of video content for carriage on MVPD networks then the regulation would not be content neutral. Any government mandate for prioritizing carriage or ensuring cable basic tier placement for rural and agricultural content – or any other specific type of content – would by definition be content-based and therefore subject to strict scrutiny. It's highly unlikely that a court would find that a program carriage or placement mandate favoring specific video content furthers a compelling government interest and is the least restrictive means to further that interest. 

Video policy ought to be guided by the principle of limited government. That principle should caution us against the risk of public officials unduly influencing the programming content choices of private video networks. Another concern is that government could end up preferring highly objectionable content. Rural and agricultural programming may be all-American and family friendly, but there are myriad programming choices that are neither.

As both chambers of Congress consider resolutions that recognize the value of rural and agricultural video programming, its Members should steer clear of allowing such recognition to turn into any form of requirement for private sector video providers. 

In Debate Over Radio Royalties, Congress Should Favor Property Rights

An article published in Law360 on August 31 covers the ongoing debate in Congress over whether AM/FM radio stations ought to pay royalties when the stations play copyrighted sound recordings over-the-air. Mixed into the debate is an attempt by some radio broadcasters to equate copyright royalties with taxes. But it's a ruse and easy to see through. Royalties are rooted in intellectual property (IP) rights, and Congress should recognize the right of sound recording owners to receive royalties when their copyrighted music is played on the radio. 

The Law360 article mentions House Concurrent Resolution 33, which opposes recognizing the exclusive right of music recording owners to receive royalties when radio stations, including for-profit stations, broadcast their intellectual property (IP). House Concurrent Resolution 33 (H.Con.Res.33) states that "Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over-the-air, or on any business for such public performance of sound recordings."

 

It's bothersome that the House resolution lumps in public performance royalties with government fees and taxes. There are obvious, categorical differences between those things, but the resolution's language appears intended to blur the distinctions. Royalties are not taxes or government fees. Royalties come from private property rights. They are proceeds from the use of one's private property by another private party. 

 

The House resolution gets it right on taxes, but wrong on royalties. Congress should not impose new government fees or taxes on users of copyrighted sound recordings like AM/FM radio stations. But Congress also should not continue to privilege radio stations with free rider use of copyrighted sound recordings that belong to third parties. That privilege unjustly undermines the property rights of sound recording owners to receive a return when their private property is commercially exploited. 

 

For a legislative approach to this topic that better respects IP rights, see my August 2021 Perspectives from FSF Scholars, "Congress Should Secure Full Copyright Protections from Sound Recordings" and my February 2022 Perspectives, "American Music Fairness Act Would Secure Copyrights in Sound Recordings." As explained in those papers, the American Music Fairness Act (H.R. 4130) would finally recognize that sound recording owners have a public performance right to receive royalties when their copyrighted works are played over-the-air by AM/FM radio stations. The Constitution's Article I, Section 8 Copyright Clause gives Congress the responsibility to secure property rights in creative works such as sound recordings. And the American Music Fairness Act, if enacted, would achieve a pro-property rights result. The House Judiciary Committee ought to favorably report the bill and the House ought to pass it.   

Senators Urge Fixes to NTIA's NOFO for Broadband Subsidies

On August 18, a letter signed by thirteen senators was sent to Secretary of Commerce Gina Raimondo, calling attention to aspects of the NTIA's Notice of Funding Opportunity ("NOFO") for the Broadband Equity, Access, and Deployment (BEAD) Program that are contrary to directives made by Congress in the Infrastructure Investment and Jobs Act. The letter is worthwhile reading and NTIA should take up the senators' recommendations and make changes to its NOFO in order to help ensure that the BEAD Program conforms to the Infrastructure Act. 

One of the problems with the NOFO has to do with its provisions that impose or at least encourage controls on broadband prices. According to the senators' August 18 letter to Secretary Raimondo: 

The law clearly states: "Nothing in this title may be construed to authorize the Assistant Secretary or the National Telecommunications and Information Administration to regulate the rates charged for broadband service." In your recent testimony before Congress on April 27, 2022, you recognized this express prohibition on rate regulation. You also noted that State plans to address affordability may not involve rate regulation. 

 

The NOFO, however, appears to open the door to rate regulation by imposing several requirements not included in the law. The NOFO even suggests a price point of $30 dollars for states to adopt for low-cost options. This appears to be an attempt to pressure Eligible Entities to set rates deemed appropriate by NTIA. Additionally, the NOFO prohibits all data usage-based pricing options, which many existing providers use in conjunction with different tiers of service. This requirement could discourage provider participation by conditioning grants on substantial changes to their current practices. Additionally, the NOFO states that, "each Eligible Entity must include in its Initial and Final Proposals a middle-class affordability plan to ensure that all consumers have access to affordable high-speed internet." A "middle-class affordability plan" is a new term that does not appear in the law. Asking States to pursue various strategies for achieving this new objective, including by requiring "providers receiving [BEAD] funds to offer low- cost, high-speed plans to all middle-class households using the BEAD-funded network," is another indirect form of rate regulation. Elsewhere, the NOFO requires States to review the affordability of a 1 Gbps symmetric service and 100/20 Mbps service as part of their prioritization for program scoring. That requirement is also not part of the law. 

 

Congress did not invite States to adopt rate regulations that the statute plainly prohibits, nor can NTIA go beyond the statutory affordability initiatives in the law. Unfortunately, the NOFO does not fully conform to this clear limitation and, if NTIA or States move in this direction, it could deter participation in the BEAD program. We therefore urge NTIA to rescind or correct these portions of the NOFO and make clear to States that rate regulation of broadband service is prohibited under this program. 

Indeed, NTIA ought to make the changes prescribed in the senators' letter and alleviate these reasonable concerns that the BEAD Program will result in federal price controls on broadband services. 

 

Additionally, the senators' letter calls out the NOFO's provisions that discard technological neutrality by favoring fiber technology. FSF Senior Fellow Andrew Long called attention to this problem with the NOFO and the need for NTIA to correct it in his May 24 Perspectives from FSF Scholars, "Future Guidance Can Fix NTIA's Flawed "Fiber-First" Approach." Also, the letter takes issue with the provisions in the NOFO that give preferences to government-owned broadband networks in the BEAD Program grant award process. Those concerning NOFO provisions were addressed in my May 26 Perspectives, "NTIA's Broadband Subsidies Must Respect State Law Limits on Government-Owned Networks."

 

The senators' letter rightly calls for changes to fix the NOFO's provisions favoring technological non-neutrality and government-owned networks and to bring the BEAD Program more in line with the Infrastructure Act. 

PLAN for Broadband Act Addresses Funding Coordination Concerns

On August 4, Senators Roger Wicker and Ben Ray Lujan introduced the Proper Leadership to Align Networks (PLAN) for Broadband Act. That same day, a companion bill was introduced in the House by Representatives Tim Walberg and Peter Welch. The PLAN for Broadband Act would require the President, in consult with the heads of several federal agencies, to develop a "National Strategy to Close the Digital Divide" as well as an "Implementation Plan." Under the Act, the National Strategy would have to be submitted to Congress within one year of the legislation's enactment, and the Implementation Plan would have to be submitted to Congress 120 days later. 

The PLAN for Broadband Act was prompted by a May 2022 report by the Government Accountability Office (GAO) titled "Broadband: National Strategy Needed to Guide Federal Efforts to Reduce Digital Divide." As Free State Foundation Senior Fellow Andrew Long explained in a June 14 blog post, the GAO report warned about significant wasteful duplication of funding and effort to increase broadband access that could result from the lack of coordination among over 133 broadband access-related funding programs under the purview of 15 different agencies. To address this concern, the GAO report recommended that the Executive Office of the President develop and implement a national broadband strategy. 

The sponsors of the PLAN for Broadband Act deserve credit for calling attention to the issue of duplicative wasteful spending and for seeking to improve the effectiveness and efficiency of federal efforts to close the digital divide. In the meantime, nothing ought to prohibit federal agency heads from closely coordinating their efforts to expand broadband access to all Americans and to protect taxpayer dollars from being wasted. 

Congress Should Direct Repurposing of Specific Spectrum Bands for Commercial Use

Today, August 2, the Senate Commerce Committee held a hearing on "The Future of Spectrum." Speakers testifying at the hearing spotlighted pressing wireless spectrum issues, including renewing the FCC's spectrum auction authority, repurposing more mid-band spectrum for commercial use, and ensuring better cooperation between agencies on spectrum policy. 

A key point made at the Senate Commerce Committee hearing was that renewal of the Commission's authority should be connected to Congressional directives that specific spectrum bands be repurposed and auctioned for private commercial use:

@CTIA Prez & CEO Meredith Attwell Baker @SenateCommerce hearing: Spectrum policy is out-of-balance in mid-band, with 2/3 held by govt. Lower 3 GHz, 7-8 GHz, and 4 GHz bands should be the immediate focus for maximizing amount of commercial licensed spectrum. #FutureofSpectrum

— Seth Cooper (@CooperFSF) August 2, 2022

Mandates by Congress regarding specific bands will ensure that the agencies take action and that the spectrum is actually repurposed. 

 

The Senate Commerce Committee hearing was particularly timely, as the ongoing 2.5 GHz band spectrum license auction (Auction #108) is the last near-term auction on the FCC's plate, and the House of Representatives passed the Spectrum Innovation Act (H.R. 7624) on July 27. As observed in my July 28 blog, the Spectrum Innovation Act would confer on the Commission an 18-month extension of its spectrum auction authority, which currently is set to expire later this year. The bill also would direct NTIA and FCC to examine and repurpose for public auction the next swath of spectrum in the lower 3 GHz band. Last week, Free State Foundation President Randolph May commended the House's passage of the bill, which is essential to replenishing the spectrum pipeline for next-generation wireless services.

Now it's the Senate's turn to pass legislation that will ensure that the future of spectrum will promote commercial wireless services, the American economy, and jobs. That legislation should extend the FCC's spectrum license auction authority and also mandate the repurposing of lower 3 GHz band as well as other specific bands for commercial use.  

House Passes Bill on FCC Spectrum Auction Authority and Lower 3 GHz Band

On July 27, the House of Representatives passed the Spectrum Innovation Act of 2022 (H.R. 7624). The House deserves credit for passing the bill, which will help ensure a continuing supply of spectrum to meet future demands for next-gen wireless services.  

The bill was the subject of my blog from July 13. As stated in that blog, the Spectrum Innovation Act would extend the FCC's auction authority to March 2024. It also would authorize the Secretary of Commerce to identify 200 MHz in the lower 3 GHz band "for non-Federal use, shared Federal and non-Federal use, or a combination thereof." The bill authorizes the Commission to conduct an auction for spectrum licenses in the band. 

 

As reported by many outlets, the Spectrum Innovation Act also dedicates several billion dollars from future spectrum license auction proceeds to fund next-gen 911 services as well as the "rip-and-replace" program that is intended to help protect national security by removing Chinese-made equipment from U.S. communications networks. 

 

The Spectrum Innovation Act now goes to the Senate, and hopefully it will receive timely consideration. 

House Committee Advances Bill on FCC Spectrum Auction Authority and Lower 3 GHz Band

As widely reported, on July 13 the House Energy and Commerce Committee voted 52-0 to recommend passage of the Spectrum Innovation Act of 2022. The Committee approved a substitute bill rolled together a handful of spectrum-related bills that previously were introduced in the 117th Congress. This a necessary and welcome development for helping to maintain a supply of new spectrum resources for next-generation wireless services.

The FCC's authority to conduct spectrum auctions is set to expire in September of this year. Among its provisions, the Spectrum Innovation Act would extend the Commission's auction authority to March 2024. And the Act, if it becomes law, would authorize the Secretary of Commerce, in consultation with other executive agencies and with the Commission, to identify at least 200 MHz in the 3.1-3.45 GHz band "for non-Federal use, shared Federal and non-Federal use, or a combination thereof." And the Commission would be authorized to conduct a competitive bidding auction for spectrum licenses in the lower 3 GHz band. 

This legislation is important for the future of wireless services and the U.S. economy. Hopefully, the House of Representatives will promptly vote on the legislation and the Senate likewise will take concerted action. 

The need to extend the Commission's spectrum auction authority and the desirability of a lower 3 GHz band auction mandate from Congress were subjects that came up during the Free State Foundation's Fourteenth Annual Policy Conference – #FSFConf14 – in Washington D.C. on May 6 of this year. (Panel videos from #FSFConf14 are available here and here.) Also, a prior version of the Spectrum Innovation Act was the subject of my May 3 blog post.

Congress Disavows USDA's Misguided Favoritism of Municipal Broadband

Congress disapproved of the Department of Agriculture's (USDA) favoritism for municipal broadband in a nonbinding directive attached to the Consolidated Appropriations Act of 2022 passed last week. That nonbinding directive, which appears within a Joint Explanatory Statement, "encourages the Secretary to eliminate or revise the awarding of extra points…" to municipal broadband networks applying for ReConnect program deployment subsidies.

If followed, this nonbinding directive would improve the likelihood that ReConnect funds flow to states based on true need for broadband service rather than states' conformity to unrelated policy objectives. ReConnect is a multi-billion broadband deployment grant and loan program managed by USDA that generally targets unserved rural areas. Congress tasked ReConnect with distributing $3.15 billion in broadband subsidies over the next few years between the Infrastructure Investment and Jobs Act (IIJA) and appropriations made in 2021.

In response to this cash influx, USDA published "Evaluation Criteria" guidance last year explaining how it will review applications for ReConnect deployment subsidies. This guidance amounts to a points-based system that awards applicants with greater chances of success for meeting standards contained within.

As Free State Foundation Senior Fellow Andrew Long explained in a Perspectives from FSF Scholars, the portion of the Evaluation Criteria awarding 15 extra points for applications submitted by municipal broadband providers exceeds USDA's authority. This criterion intrudes into the FCC's jurisdiction to set communications policy "in the face of conflicting congressional intent" and should be repealed. And USDA didn't adhere to Administrative Procedure Act notice and comment requirements while adopting the municipal favoritism criterion, which foreclosed potential for public comment on whether USDA has authority to adopt such a criterion in the first place.

Further, the municipal favoritism criterion biases ReConnect funds to flow to states that lack prohibitions on municipal broadband, irrespective of actual need for broadband infrastructure, because only municipal applicants within those states will be eligible for these 15 extra points. This is an ill-advised policy choice. As Andrew Long explained in another Perspectives from FSF Scholars, municipal networks are often economic failures that cannot achieve financial viability, explaining why many states prohibit them. So biasing ReConnect funds in favor of municipal networks will reduce ReConnect's effectiveness for narrowing the digital divide.

Now, in the Consolidated Appropriations Act of 2022, Congress appears to agree. This law added nearly $550 million additional funds to ReConnect and other smaller broadband programs at USDA, and it included a nonbinding directive that disavows the Evaluation Criteria's municipal favoritism:

"In addition, the agreement encourages the Secretary to eliminate or revise the awarding of extra points under the ReConnect program to applicants from States without restrictions on broadband delivery by utilities service providers in order to ensure this criterion is not a determining factor for funding awards."

This disavowal should be unsurprising because Congress rejected similar municipal favoritism in the IIJA. Of course, nonbinding directives are, indeed, nonbinding, and amount to legislative history, which is disfavored and cannot substitute for the plain text of the law. But Congress's disavowal of municipal broadband favoritism is at least notable because no law authorizes the Department of Agriculture authority to set Communications Policy in the first place.

Also, a separate nonbinding directive in the Consolidated Appropriations Act of 2022's Joint Explanatory Statement encourages the Secretary of Agriculture to follow notice and comment rulemaking for "all program administration and activities" regarding ReConnect.

It will be interesting to see if the Secretary of Agriculture heeds Congress's wise advice to stop favoring often failed municipal networks for subsidized support.

The PATRIA Y VIDA Act Would Help Defeat Despotic Restrictions on Internet Access

Today, Sen. Marco Rubio introduced the Protecting Against Tyrants by Restoring Internet Access and Yielding Vital Interconnectivity in Designated Areas Act – or PATRIA Y VIDA Act. In the words of Sen. Rubio's press release, the bill would "build a strategy to protect internet freedom worldwide and strengthen support for technologies that allow users to evade foreign government-backed censorship and restrictions." The legislation would require the federal government to support and deploy Internet censorship circumvention technologies so that people located in foreign nations Cuba and China that are subject to authoritarian rule can access information. The bill's title commemorates the Cuban peoples' protests from July of this year against their despotic leaders who censored Internet access in that country. 

Sen. Rubio surely is right that the PATRIA Y VIDA Act is important legislation. The Senate should promptly take up consideration of the bill, which would direct the U.S. to do more to push back against despotic foreign regimes.

Congress Passes Bill to Secure Communications Network Supply Chains from National Security Threats

On October 27, the Senate passed the H.R. 3919, the Secure Equipment Act of 2021. The lead sponsors of the legislation are Reps. Steve Scalise and Anna Eshoo. The House of Representatives passed the bill earlier this month, meaning that H.R. 3919 is going on to the White House for signature. Once signed into law, H.R. 3919 will shore up the FCC authority to withhold license authorization for equipment or services offered by companies deemed to pose a national security risk – such as companies linked to authoritarian China. The text of the enrolled bill for H.R. 3919 is available online.

NDAA Markup Should Steer Clear of FCC's Careful L-Band Order

Today, I posted the following tweet thread about the FCC's April 2020  order approving Ligado Networks' deployment of wireless services in the L-Band and the September 1, 2021 markup hearing scheduled for the National Defense Authorization Act (NDAA) for Fiscal Year 2022:

1) U.S. leadership on #5G is more important to the future of the free world than ever. @LigadoNetworks' planned 5G commercial wireless network using L-Band spectrum -- which has @FCC approval -- will play a vital role in ensuring that global leader on 5G is America, not China.

— Seth Cooper (@CooperFSF) August 30, 2021

3) @FCC's order approving Ligado Networks' L-Band use followed a careful process. It complied with APA, factored public comments, used staff engineering expertise + GPS safeguards. @FCC's decision should not be thwarted by last-minute amendments to NDAA via an uncareful process.

— Seth Cooper (@CooperFSF) August 30, 2021

Twitter Thread on the Infrastructure Bill and Broadband Access

Congress is currently hammering out an infrastructure bill that includes a section on broadband. The following Twitter thread from July 23 that provides a response to the broadband section of a recent draft bill that was produced in the course of Congress's ongoing negotiations:

(2) Unfortunately, it appears the latest iteration of the infrastructure bill is more focused on expanding federal regulatory power and control over broadband service rates than on expanding Americans’ access to broadband service.

— Seth Cooper (@CooperFSF) July 23, 2021

(4) The infrastructure bill, part of ongoing negotiating to reach compromise, contains a broadband section that appears to compromise itself. Its regulatory control approach will undermine efforts to expand broadband access. Congress should go back to the drawing board.

— Seth Cooper (@CooperFSF) July 23, 2021

The RETAIN Act Would Restrain America's 5G Future

In its April 2020 L-Band Order, the FCC voted 5-0 to approve Ligado Networks' use of 30 MHz of licensed spectrum for commercial wireless services, including 5G. The carefully tailored order included specific safeguards for GPS and for satellite communications services operating in adjacent spectrum bands. But a bill called the RETAIN GPS and Satellite Communications Act takes a slapdash approach to the intricate technical issues addressed by the L-Band Order. 

Congress should reject the RETAIN Act and ensure that 30 MHz of valuable spectrum finally gets put to economically beneficial use. Putting L-Band spectrum into commercial use is especially important to further America's preeminence over China for 5G services.  

The FCC's L-Band Order permitted Ligado Networks to deploy an innovative mixed mobile-satellite network that will offer 5G private network solutions to energy, utility, and other industries. The L-Band Order observed that Ligado's network could lead to over 8,000 new jobs. Moreover, it is reported that Ligado raised $4 billion in private capital last year to develop and deploy its network. On June 21, Ligado announced it had received 3GPP standards approval for its specifications to deploy 5G services in its L-Band spectrum. And on June 22, it was reported Ligado reached a deal with Nokia to develop 5G base stations. 

But the RETAIN Act (S.2166) would thwart Ligado Networks' commendable efforts to bring next-generation commercial wireless network services to the L-Band. The bill, which was introduced by Sen. James Inhofe, would require Ligado to buy new equipment for any and all GPS and satellite communications providers and customers that are impacted by Ligado's operations within its licensed L-Band spectrum. 

A major problem with the RETAIN Act is that it takes the kind of indiscriminate blanket approach to alleged spectrum interference issues that was rightly rejected by the FCC. In its L-Band Order, the Commission required Ligado Networks to replace government-owned GPS devices in the event that Ligado's network caused harmful signal interference issues with government users of adjacent spectrum. But the RETAIN Act's requirement that Ligado replace any and all GPS devices impacted by its network operations ignores the fact that some GPS devices receive signals using Ligado's licensed spectrum. As the FCC recognized in its L-Band Order, some GPS receivers apparently were designed to receive signals far outside of the spectrum allocation for GPS. The FCC sensibly concluded that protection shouldn't be extended to every GPS receiver operating far outside its allocation or to every poorly designed GPS receiver. However, the RETAIN ACT would quite unreasonably require Ligado to pay for and replace all such equipment. This would amount to giving third parties rights to use Ligado's licensed spectrum.  

Additionally, the RETAIN ACT treats one-way GPS and two-way satellite communications the same even though they are distinct services operating in different bands that present different technical issues. Significantly, in the L-Band Order, the FCC concluded that Ligado's operations, subject to certain emissions limits, would not cause harmful interference to satellite communications operations in an adjacent band. Accordingly, the Commission did not pre-determine responsibility for any other such potential harmful signal interference issues, and it nowhere mandated that Ligado buy new equipment for its competitor, Iridium, should any future signal interference issue arise. But the RETAIN Act effectively would mandate this result. 

In its L-Band Order, the FCC addressed potential harmful signal interference issues in a way that was fitted to concerns unique to each type of service and spectrum allocation. Yet the RETAIN Act lacks any such careful calibration. The bill seems intended to thwart new wireless services and effectively keep 30 MHz of valuable L-Band spectrum from ever being used. This result would cause a huge setback to America's 5G future and harm our nation's competitiveness against China. Congress should say "no" to the RETAIN Act and let Ligado Networks move forward with its next-gen wireless network, consistent with the safeguards established by the FCC.