#FSFConf14: Agency Sharing of Information is Essential for Broadband Program Success

The Free State Foundation's Fourteenth Annual Policy Conference – #FSFConf14 – was held on May 6 in Washington D.C. The first conference panel featured current FCC Commissioners Brendan Carr and Nathan Simington as well as former FCC Commissioner Mignon Clyburn. Among several topics discussed was monumental challenge facing NTIA as well as other federal and state agencies, in coordinating on the implementation massive broadband subsidy programs such as the Broadband Equity, Access, and Deployment Program ("BEAD Program").

During the panel's conversation, Former Commissioner Clyburn emphasized "sharing of information" as being essential for implementing subsidy programs for expanding broadband Internet to unserved and underserved areas, promoting adoption, and other broadband-related purposes. She emphasized the need for the agencies to ensure that efficiencies are being realized: "One way we realize that is information being shared in a workable sort of clearinghouse manner, where all of it is on the table... That helps deployment, that helps with efficiency, that helps with ensuring that these programs are as waste fraud and abuse free as possible."

A few days after #FSFConf14, several federal agencies jointly announced the May 9 signing of a Memorandum of Understanding ("MOU") in order to "collaborate around the collection and reporting of certain data and metrics broadband derived from programs administered by the FCC, the programs administered by the Rural Utilities Services of the USDA, the programs administered by or coordinated through NTIA, and the Coronavirus Capital Projects Fund (CFP) and the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) administered by Treasury (Covered Data)."

 

Hopefully, NTIA and other agencies that are parties to the MOU will have a fruitful exchange of information to ensure that their respective broadband subsidy programs are effectively implemented to expand broadband access to unserved Americans and achieve other program goals. 

 

At #FSFConf14, former Commissioner Clyburn also offered insights on the beneficial uses of information sharing: "[t]he sharing of intelligence will make it easier to reduce intentional fraud and abuse." Also, "[u]sing and incorporating analytical tools will help mitigate risk and hold wrongdoers accountable" as well as for "[i]dentifying and excluding companies that have applied for multiple loans, or have applications other than in the same name, or are using the same IP address, and checking the banking history." From the beginning, as we are getting firmer grounding from all of these agencies, including the FCC, all of those things need to be in place and in front of mind. Everyone wants this to work."

 

(*Note: The #FSFConf14 quotes contained in this blog are based on an unofficial, edited transcription made by the author of this blog. The edits were made for purposes of readability but none of the meaning was changed in doing so.)

Opposing the FCC's Use of Economics and Analytics Raises a Red Flag

Yesterday, the FCC voted to establish the Office of Economics and Analytics, which will help ensure that economic analysis is deeply and consistently incorporated as part of the agency’s regular operations. The decision was a party-line vote with Commissioners Clyburn and Rosenworcel dissenting, but why would any Commissioner vote against the FCC using more economics and analytics?

In a September 2017 blog, I said that opposing a cost-benefit analysis for proposed regulations is a red flag:

It is important that the FCC perform this cost-benefit analysis, because agencies, independent or not, should analyze how new rules will impact innovation, investment, job creation, and economic activity. It is reasonable to question the methodology that an agency uses when assessing the costs and benefits of a regulation. However, if an interested party offers only criticism of an agency proposal to conduct a regulatory CBA, this is likely a signal that the interested party fears that the costs will outweigh the benefits, invalidating its policy position.

I think the same rationale applies for anyone who opposes the FCC’s action to create the Office of Economics and Analytics. It will be important for consumers, businesses, and policymakers to question the methodology and results that this office will produce in the future, and I fully expect all Commissioners, at some point, to disagree with a methodology used by the office. However, opposing the implementation of additional uses of economics, analytics, and data science at the FCC raises a red flag. 

Yes, Internet Regulation Negatively Impacts Wireless Broadband Investment

On September 26, 2017, the FCC adopted the Twentieth Wireless Competition Report, which found that the market for mobile wireless broadband is effectively competitive. Commissioner Mignon Clyburn issued a dissenting statement in which she claimed that the Report manipulated data to support the narrative that the Open Internet Order decreased investment. She also said that the Report did not include investment data that she specifically requested. Nevertheless, when considering the data Commissioner Clyburn cites in her dissenting statement, the evidence is clear that the Open Internet Order discouraged wireless providers from investing in broadband networks.

In her dissenting statement, Commissioner Clyburn said:

For one, the discussion of investment in the mobile wireless services industry is fundamentally flawed. By highlighting a decrease in investment between 2015 and 2016, this section was clearly written to support the false narrative that the 2015 Open Internet Order deterred wireless carriers from investing in their networks. Despite my office’s request, this Report does not include data from the 19th, 18th, and 16th Competition Reports, which showed investment from all commercial wireless companies declined from $33.1 billion in 2013 to $30.9 billion in 2015. In case you missed it, those reports predated the 2015 Order.

According to CTIA’s data, wireless investment grew substantially from $20.4 billion in 2009 to $33.1 billion in 2013. Commissioner Clyburn is correct; wireless investment dropped from $33.1 billion in 2013 to $32.1 billion in 2014. But keep in mind, the FCC’s Open Internet proceeding began in early 2014. In May 2014, the FCC adopted a Notice of Proposed Rulemaking inviting comments on bright line rules and the possible imposition of Title II regulation. And in November 2014, President Obama encouraged the FCC to reclassify broadband under Title II of the Communications Act.

Therefore, the writing was on the wall throughout most of 2014 that the FCC would impose some type of more stringent Internet regulation than the regulations then in place. The regulatory uncertainty hovering over broadband Internet service providers during this time discouraged them from investing in network infrastructure.

Also, Commissioner Clyburn undermines her argument when she says “investment from all commercial wireless companies declined from $33.1 billion in 2013 to $30.9 billion in 2015.” The Open Internet Order was adopted in February 2015 but investment data includes all of 2015, meaning wireless providers had almost a full year to decrease their planned investments due to the impending regulatory costs imposed by the Order. When you consider the regulatory uncertainty of 2014, along with the imposition of Title II regulation in early 2015, it is no surprise that wireless providers decreased investment by $2.2 billion from the end of 2013 to the end of 2015. (As you can see in the graph below, CTIA’s data shows a decline of $1.2 billion over this same period.)

As I stated in a May 2017 blog, overall broadband capital investment has declined by $5.6 billion since the adoption of the Open Internet Order. And as we illustrate in this infographic, the steep decline in wireless broadband investment is consistent with the adoption of the Open Internet Order, dropping by $6.7 billion from 2013 to 2016.

The data that Commissioner Clyburn requested to be included in the Twentieth Wireless Competition Report provides no evidence that the imposition of Title II regulation has not harmed broadband investment. The Commission will recognize the negative investment impact of Internet regulation when it considers Chairman Pai’s Restoring Internet Freedom proposal to return to a light-touch regulatory framework.