House Committee Advances Bill for Vetting Recipients of High-Cost Broadband Subsidies

On April 8, the House Commerce Committee voted 50-1 to pass the Rural Broadband Act of 2025 – HR 2399. The bill would require the FCC to establish a vetting process for future applicants for future high-cost universal service program funding for deployment and supporting broadband Internet access services. The purpose of the vetting process is to ensure that subsidies go to entities that are capable of fulfilling their universal service obligations. 

The Rural Broadband Act has been introduced in prior Congresses. My blog post from February 16, 2023, describes a bit more about the bill as it was introduced in the 118th Congress by Senators Shelley Moore Capito and Amy Klobuchar. 

 

This bi-partisan legislation appears to be a reasonable measure to help prevent money collected from U.S. consumers via surcharges – effectively, "USF Taxes" – being misspent and wasted. The House of Representatives should give HR 2399 an up-or-down vote.

 

Meanwhile, the need for an overhaul of the Universal Service Fund is still pressing. As Free State Foundation President Randolph May and I explained in our August 2023 comments to the Universal Service Reform Working Group: "Reform of the USF subsidy system is urgently needed because the system is outdated and no longer fiscally sustainable." The existing universal service regime was established in a voice-centric 1990s context, with a broader contribution base and much smaller sized fund than today with a dwindled base and a bloated annual distribution amount of $7 billion to $8 billion. As a result, the USF Tax has continued to climb, and the most recent proposed quarterly contribution factor increase will raise the USF Tax to 36.6%.

 

Notably, the constitutionality of the contribution mechanism of the USF was the subject of oral arguments before the Supreme Court on March 26 of this year. Regardless of the Court's verdict on the constitutionality of the USF's contribution system, economic realities require reforms. One possible reform is switching from the USF Tax to appropriations by Congress. Another reform option is expanding the contribution base to major Internet websites that benefit the most from universal broadband connectivity. Those ideas were among the many topics discussed at the Free State Foundation's Seventeenth Annual Policy Conference – #FSFConf17 – held on March 25, 2025, in Washington D.C. Video of the conference panels, keynote addresses, and keynote conversations are available online.

TMT with Mike O'Rielly – Ep 19: Keynote Convo at FSF's 17th Annual Conference

Episode 19 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 April 2. In this episode, titled "The Free State Foundation's Seventeenth Annual Policy Conference," Mr. O'Rielly has a conversation at #FSFConf17 with guests FTC Commissioner Melissa Holyoak, FCC Commissioner Nathan Simington, and former FCC Chairman Ajit Pai. Their conversation ranges a number of communications, competition, and administrative agency-related topics. Streaming video of the episode is now available: 

Video of #FSFConf17 Available Now!

The Free State Foundation's 17th Annual Policy Conference – #FSFConf17 – was held on March 25 in Washington, DC. The entire event was livestreamed and it is available online for viewing. To hear keynote addresses by Professor Jonathan Turley, Senator Ted Cruz, Congressman Richard Hudson, as well as insights from communications policy experts on topics such as spectrum repurposing and auctions, broadband subsidy programs like BEAD, state-level broadband regulation, and universal service, be sure to check out the video.

FCC Copper Retirement Orders Will Boost Next-Gen Network Deployment

 On March 20, the FCC announced a slate of orders that reduced regulatory burdens for voice service providers seeking to retire old legacy copper networks. Chairman Brendan Carr and agency staff deserve credit for taking proactive steps to eliminate and reduce regulations that delay and run up the costs of making technology transitions to more advanced networks. 

The FCC released four orders. The first order clarified the Commission's Adequate Replacement Test criteria for streamlining discontinuances of telecommunications services under Section 214(a), initially adopted in the 2016Technology Transitions Order. The agency found that the rules had been misunderstood in an overly expansive way as requiring pre-discontinuance network performance testing of replacement networks only according to a specific set of requirements. As a result, "there has been a significant delay in carriers availing themselves of the technology transitions streamlined discontinuance process for their own replacement services, to the detriment of consumers who have been slower to receive next-generation services than the Commission expected." Accordingly, the order states: "We thus clarify that a carrier seeking Commission authorization to discontinue a legacy voice service pursuant to the Adequate Replacement Test's totality of the circumstances with respect to its own replacement service need only show, based on the results of the carrier's routine internal testing or other types of network testing, that 'the network still provides substantially similar performance and availability' as the service being discontinued."

 

The agency's second order "waives the filing requirements in the Commission’s network change disclosure rules adopted under section 251(c)(5) of the Communications Act of 1934." In the order, the agency found that "good cause exists to waive any requirement to notify the Commission of network changes" by incumbent local exchange carriers (LECs) such as changes resulting from the retirement of copper networks and transitions to next-generation networks. "As a result, an incumbent [local exchange carrier] LEC now is only required to post public notice of its planned network changes through industry fora, industry publications, or on the carrier’s publicly accessible Internet site, and to provide direct notice to interconnected telephone exchange service providers for copper retirements and short-term network changes." And it found that the waiver’s benefits outweighed any costs given extraordinary developments in the market over the last 30 years – including the dramatic rise of VoIP services to over 75% of fixed retail voice subscriptions at the end of 2023, while switched access lines continue to dramatically decline. 

 

Its third order waives Section 214(a) notice and application requirements for providers seeking to grandfather legacy services – that is, to stop offering those services to new customers. 

 

Additionally, the agency's fourth order waives the "stand alone service" requirement in the Commission’s rules for service discontinuance established in the agency’s 2018 Wireline Infrastructure Order. By granting the waiver, the order provides relief that was requested in a February 2025 petition by USTelecom. According to the order, USTelecom has asserted that adults in landline-only households had fallen to 1.3% of all households, and that bundled voice and broadband options, are available at prices that compare favorably to legacy voice pricing. 

 

In each of the copper retirement orders, the Commission found that relief from the regulatory requirements would free up the investment of resources in the development and deployment of more advanced communications services. 

 

The release of the four copper retirement orders coincides with Chairman Carr's announcement of the opening of the Commission's DELETE, DELETE, DELETE initiative. Under new leadership, the Commission's early actions are hopeful indicators that the agency will modernize its rules and reduce old and wasteful requirements. 

P.S. The reduction and modernization of the FCC's rules will be on the agenda for the Free State Foundation's Seventeenth Annual Policy Conference - #FSFConf17 - on Tuesday, March 25, in Washington D.C. Register online. 

Pennsylvania Bill Would Turn Broadband Internet Networks into Public Utilities

On March 17, Pennsylvania House Bill 924 was referred to a legislative committee in that state's lower chamber. If it were to become law, the bill would change the definition of "public utility" under Pennsylvania law to include "[p]roviding persons with the ability to connect to the Internet through equipment that is located in this Commonwealth." In short, PA House Bill 924 is a state net neutrality bill, that would impose no blocking, no throttling, no paid prioritization, and other restrictions on provider network management, and delegate authority to the state's public utility commission to regulate broadband Internet access services.  

PA House Bill 924 was filed in the wake of the Sixth Circuit's March 11 order denying a rehearing en banc on that court’s January 2 three-judge panel decision to vacate the FCC's 2024 Title II Order. The state bill also follows closely on the heels of the Supreme Court's February 24 order deny a rehearing on its prior order to deny a writ of certiorari in New York State Telecommunications Association v. James. The denial of a rehearing in James leaves in place a Second Circuit decision from April 2024 that upheld New York State’s Affordable Broadband Act that imposed rate regulation on interstate Internet broadband access services offered by broadband providers in that state.

 

It seems unlikely, if not implausible, that Congress intended to open up jurisdictionally interstate information services (previously known as "enhanced services") like broadband access to state regulation when it established non-regulated or lightly-lightly regulated Title I classification for "information services" in the Telecommunications Act of 1996. But according to three circuit courts of appeal, that apparently is what Congress did. The Second, Ninth, and D.C. Circuits – have concluded that the FCC's decision in the 2017 Restoring Internet Freedom order to classify broadband access services as Title I services had the effect of removing the agency's jurisdiction over interstate broadband services, thus preventing the Commission from preempting state public utility regulation of those same services. 

 

For some further context, the FCC's proceeding that led up to the FCC's 2024 Title II Order cited zero instances of blocking, throttling, or harmful paid prioritization arrangements. Moreover, all or nearly all broadband ISPs in America have terms of service pledges to not engage in blocking, throttling, or harmful paid prioritization. So long as broadband access services are Title I "information services" (and not Title II "telecommunications services") those service term pledges are enforceable by the Federal Trade Commission under its authority to address unfair and deceptive trade practices. 

 

Expect the issue of state-level public utility regulation of broadband Internet access services, including price controls, to be a subject of discussion at the Free State Foundation's Seventeenth Annual Policy Conference – #FSFConf17 – on March 25, in Washington, D.C. Register today for the conference. 

FCC Chairman Brendan Carr a Keynoter at FSF's March 25 Conference! Register Now!

 Registration Now Open!

New Keynote Speaker Announced!

 

Brendan Carr

Chairman, Federal Communications Commission

 

Previously Announced Keynoters Include: 

 

Senator Ted Cruz

 

Jonathan Turley

 

Ajit Pai

 

Nathan Simington

 

WHAT: FSF's Seventeenth Annual Policy Conference

 

WHERE: National Press Club, Washington, DC

 

WHEN: Tuesday, March 25, 2025

 

The Free State Foundation will hold its Seventeenth Annual Policy Conference on March 25, 2025, at the National Press Club in Washington, DC. This annual conference is acknowledged to be one of the nation's premier law and policy events.

 

As always, a truly outstanding lineup of senior officials and prominent experts from the FCC and Congress, and from other government agencies, industry, academia, and think tanks will discuss and debate the most important communications and Internet policy issues of the day, as well as other topical law and policy issues involving free market competition, free speech, and the rule of law.

 

With a new Trump administration, a new Congress, and new leadership at the FCC, FTC, and other agencies, this promises to be one of the most impactful of FSF's annual conferences.

 

REGISTRATION IS COMPLIMENTARY, INCLUDING CONTINENTAL BREAKFAST AND LUNCH.

BUT YOU MUST REGISTER TO ATTEND.

REGISTER HERE!

 

#FSFConf17

Sen. Ted Cruz Announced as a Keynote Speaker! FSF's 17th Annual Policy Conference on March 25!

 Registration Now Open!

New Keynote Speaker Announced!

 

Senator Ted Cruz

 

Chairman, Senate Committee on Commerce, Science and Transportation

 

Previously Announced Keynoter

Jonathan Turley

 

WHAT: FSF's Seventeenth Annual Policy Conference

 

WHERE: National Press Club, Washington, DC

 

WHEN: Tuesday, March 25, 2025

 

The Free State Foundation will hold its Seventeenth Annual Policy Conference on March 25, 2025, at the National Press Club in Washington, DC. This annual conference is acknowledged to be one of the nation's premier law and policy events.

 

As always, a truly outstanding lineup of senior officials and prominent experts from the FCC and Congress, and from other government agencies, industry, academia, and think tanks will discuss and debate the most important communications and Internet policy issues of the day, as well as other topical law and policy issues involving free market competition, free speech, and the rule of law.

 

With a new Trump administration, a new Congress, and new leadership at the FCC, FTC, and other agencies, this promises to be one of the most impactful of FSF's annual conferences.

 

REGISTRATION IS COMPLIMENTARY, INCLUDING CONTINENTAL BREAKFAST AND LUNCH.

 

BUT YOU MUST REGISTER TO ATTEND.

REGISTER HERE!

 

#FSFConf17

Remarks from FCC Commissioners Pai and O’Rielly at FSF’s “Future of the Internet” Conference

The videos are up from the Free State Foundation’s seventh annual telecom policy conference entitled “The Future of the Internet: Free Market Innovation or Government Control?” The distinguished series of panels and speakers delivered wonderful discussions and statements on various issues within telecommunications policy.

In one of the panels, Free State Foundation President Randolph May had the privilege of speaking with FCC Commissioners Ajit Pai and Michael O’Rielly. The conversation covered many aspects of the FCC’s Open Internet Order and its preemption of state laws restricting municipal broadband in North Carolina and Tennessee.

When asked which part of the FCC’s Open Internet Order is most troubling, Commissioner Pai said the reduction in broadband competition that will result from massive cost increases is most concerning. Commissioner O’Rielly, on the other hand, finds the uncertainty resulting from the general conduct standard most troubling.

About 10 minutes into the video, Commissioner Pai spoke out against the advisory opinions of the Open Internet Order:

The key to American entrepreneurship and innovation, I would think, is the fact that we’ve generally had an approach of permissionless innovation - that entrepreneurs don’t have to go to regulators, who stand as gatekeepers, who decide ultimately which business models are going to be allowed to proceed and which are not allowed to proceed.

I think the danger of this enforcement bureau advisory opinion is twofold. Number One - that it represents the very essence of innovation by permission. And secondly, it is also done by delegated authority. The five commissioners themselves will never have a chance to weigh in on some of these innovative services and products that may come before us.

The two Commissioners not only expressed concern that this Order went beyond the FCC’s authority, but they questioned the need for Internet regulations in general. Around the 17 minute mark, Commissioner Pai stated:

The predicate for regulation should be the existence of a problem that can be demonstrated with some specificity and it, generally speaking, should be industry-wide to the extent that we are adopting industry-wide regulations. But if you look at the Order, all you see is isolated niche examples that don’t suggest anything about a current market failure.

Commissioner O’Rielly added that the FCC has gone way beyond its authority and that the Order lacks any limitations to that authority:

[The order] is a double layer [of Title II and Sec. 706]

with no limitation.

In terms of wireless regulation, Commissioner O’Rielly questioned the consistency of the FCC. He mentioned that the FCC generally would not include wireless in its broadband statistics because it did not consider wireless a broadband service. Yet, when it came to rulemaking, the FCC thought wireless should be regulated with wireline broadband services.

Many of the Order’s opponents have expressed concern about how these rules will shape the perception of the United States on the international stage. Now that the United States has adopted strict Internet rules, it likely could lead to other countries, who have not done so already, adopting similar Internet regulations. Of course, violations of free speech and content control are some of the foreshadowing consequences of government regulation of the Internet. Approximately 30 minutes into the video, Commissioner O’Rielly said he is “very worried about the international implications of this decision.”

Around the 36 minute mark, the conversation changed to the forbearance process. Commissioner O’Rielly described why he thinks this Order does not allow for a forbearance process, but instead a “fauxbearance” process:

The Commission is saying - the only thing we really need is 201…because we can doing anything we want under 201, under just and reasonable. And in that scenario, there is no forbearance. Every situation that they can envision being tripped up in another provision can be dealt with in 201. So I don’t see any argument that this is light touch. It’s the opposite.

Finally, around the 45 minute mark, the conversation switched to the preemption of state laws restricting municipal broadband in North Carolina and Tennessee. Commissioner Pai stated that the FCC does not have the legal authority for preemption:

To me, the most problematic aspect was that it was

unlawful.

I think it’s pretty clear that if Section 253 didn’t serve as a sufficient basis for having clear statement that Congress intended giving the FCC preemptive authority, there is no way Sec. 706 did.

Commissioner O’Rielly, on the other hand, said that the idea of the government acting as a competitor in the broadband service market does not sit well with him:

On the policy merits, I do not agree with municipal broadband. I think it’s an affront to capitalism. I do not think it should be allowed, but that is not my decision to make. That is for states and others to make.

The FCC’s Open Internet Order was a popular topic at the conference but other topics such as video policy, spectrum auctions, and universal service were also discussed. Check out and subscribe to the Free State Foundation’s YouTube page for more videos from the conference and past events.

Remarks from "The Future of the Internet: Free Market Innovation or Government Control?"

The videos are up from the Free State Foundation’s seventh annual telecom policy conference entitled “The Future of the Internet: Free Market Innovation or Government Control?” The distinguished series of panels and speakers delivered wonderful discussions and statements on various issues within telecommunications policy.

Congressman Greg Walden, Chairman of the House Subcommittee on Communications and Technology, delivered an outstanding opening keynote address. Chairman Walden expressed concern about the unintended consequences of the FCC’s recent Open Internet Order:

I think that applying these outdated utility-style regulations will ultimately lead to increased uncertainty, leading to depressed investment, decreased innovation, reduced consumer choice, and a slowdown of our exceptionally vibrant Internet economy. And all that will ultimately hurt consumers.

Free State Foundation President Randolph May sat down with the House Majority Whip, Representative Steve Scalise, to discuss the FCC reclassifying broadband under Title II. Representative Scalise stated that such Internet regulation is ill-advised and concerning to the American people:

This is a solution looking for a problem. The Internet is working really well. You don’t want to the Federal government coming in and “fixing it.” 

There are millions of Americans that have a real concern and fear of the Federal government starting to regulate the Internet.

The FCC’s Open Internet Order was a popular topic at the conference but other topics such as video policy, spectrum auctions, and universal service were also discussed. Check out and subscribe to the Free State Foundation’s YouTube page for more videos from the conference and past events.

The FCC and the Future of the Internet

When I selected a theme – “The Future of the Internet: Free Market Innovation or Government Control” – several months ago for this year’s Free State Foundation annual telecom conference, little did I know that it would now be even more apt than I then imagined.

If you don’t think the direction of the Internet’s future is implicated by the choice between two very different paths – free market innovation on the one hand or government control on the other – I invite you to read the Federal Communications Commission’s just-released “Open Internet” order. All 300+ pages and 1777 footnotes worth of it!

The 1777 footnotes caught my eye. Before turning the last page, to the “Ordering Clauses,” I thought there were only 1776 footnotes. This would have been fitting because, in my view, the Commission’s action represents the antithesis of the “spirit of ‘76.” I wonder what our Founders would think about an unelected body of government administrators reaching out to seize control, absent clear statutory direction, of the most vibrant, open communications medium the world has ever known – and absent evidence of a present market failure or consumer harm.

Two quotations from Thomas Jefferson, both pertinent to the FCC’s aggrandizing action, leave little doubt:

“Were we directed from Washington when to sow, and when to reap, we should soon want bread.”

“Laws are made for men of understanding and should, therefore, be construed by the ordinary rules of common sense. Their meaning is not to be sought in metaphysical subtleties which may make anything mean everything or nothing at pleasure.”

There are very many problematic aspects to the Commission’s action, but here I want to focus on only one – a crucial one nonetheless that goes to the very heart of the question concerning whether the future of the Internet is to be guided by free market innovation or government control.

The new regulations inevitably will lead to more government control at the expense of innovation because the FCC has arrogated unto itself such open-ended power to decide which Internet practices it will allow or disallow. In other words, the agency deliberately has created a large realm of uncertainty that gives it free rein, in its discretion, to shape the future of the Internet as it goes about deciding, far into the future, what is permissible or not.

I understand that the FCC is claiming that its new rules will create more certainty. Indeed, in a story in today’s Communications Daily [subscription required], an unnamed Commission spokesperson is quoted to this effect: “The Open Internet Order provides clear rules of the road that will enable the Enforcement Bureau to carry out the Commission’s policies ensuring that consumers and innovators have access to an open Internet.”

This “clear rules of the road” line from agency officials is belied at many turns in the Commission’s order. To take a notable example, the agency adopts a general conduct rule that prohibits Internet providers from 'unreasonably interfering' or 'unreasonably disadvantaging' others in the Internet ecosystem. You don’t need to be a lawyer –or a metaphysician – to understand that these terms don’t establish clear rules of the road. They are so standardless they necessarily will lead to an ongoing exercise of power akin to the 'dispensing power' that I wrote about in my essay, “Is the FCC Lawless,” published in The Hill.

In addition to other forms of administrative diktats likely to be utilized, the Commission is establishing a whole set of new regulations governing the issuance of “Advisory Opinions.” If the rules of the road were clear, it would not be necessary to “use advisory opinions to explain how it will evaluate certain types of behavior and the factors that will be considered in determining whether open Internet violations have occurred.” [Para. 229] Entities may request advisory opinions regarding prospective practices they fear may run afoul of the Commission’s enforcement officials, but only if they “certify that factual representations made to the Enforcement Bureau are truthful and accurate, and that they have not intentionally omitted any material information from the request.” The enforcement officials are not required to respond to such requests, but, if they do, the advisory opinions will expressly state “that they are premised on specific facts and representations in the request and any supplemental submissions.” [Para. 233]

The way the Commission’s new regulations will discourage innovation is obvious. Under a relatively light touch regulatory regime, the Internet continued to evolve in response to consumer demand without the need to seek a priori bureaucratic permission. Going forward this is most unlikely to be the case. When the engineers, marketers, businesswomen, and other innovators get together to discuss a new product and service, inevitably the question will be asked: “Before moving ahead, in order to protect ourselves and avoid trouble, shouldn’t we get an Advisory Opinion from the FCC’s enforcement folks.” The answer from the lawyers most often will be “yes.”

Unless, of course, the decision is made from the get-go not to seek an a priori opinion, but instead simply to reduce the extent to which the new product or service differs from the existing one – or to simply abandon the idea. And, make no mistake, we will never know – and this won’t trouble the Commission – how much innovation has been foregone and left on the drawing boards. Because you can’t really measure foregone innovation.

In the same Communications Daily story cited above, Christopher Yoo, University of Pennsylvania law professor and a member of FSF’s Board of Academic Advisors, put it this way: “The enforcement provisions conflict with the spirit of permissionless innovation that has long been the foundation of the Internet’s success. The Internet has long been based on the principle that innovators should not have to ask approval from anyone before deploying a new business model.”

In the next several weeks, Free State Foundation scholars will be addressing various other aspects of the FCC’s order. So stay tuned for that.

But, more immediately, I certainly hope you will attend FSF’s Seventh Annual Telecom Policy Conference this Thursday at the National Press Club. I’m sure the FCC’s Internet regulation order – and what comes next in Congress and the courts – will be a prime topic of discussion, along with other hot communications policy issues.We have an outstanding lineup of top-flight speakers. The agenda is here. Greg Walden, Chairman of the House Subcommittee on Communications and Technology, will deliver the Opening Keynote Address and the action will be non-stop from there until FCC Commissioner Clyburn offers some “Final Thoughts.”

In order to attend, register here.

Speakers Announced for FSF’s Seventh Annual Telecom Policy Conference – March 19

A power-packed lineup of speakers will present at the Free State Foundation’s Seventh Annual Telecom Policy Conference – "The Future of the Internet: Free Market Innovation or Government Control?" – Thursday, March 19, 2015, at the National Press Club in Washington, DC. In addition to leading senior officials and prominent experts from government, industry, academia, and think tanks, featured speakers include Opening Keynoter Rep. Greg Walden, Chairman, House Subcommittee on Communications and Technology; House Majority Whip Steve Scalise, a member of the House Subcommittee on Communications and Technology, participating in a  Lunchtime Conversation with Free State Foundation President Randolph May; and Closing Keynoter Sen. Ron Johnson, Chairman, Senate Committee on Homeland Security and Governmental Affairs, and a member of the Senate Subcommittee on Communications, Technology, and the Internet. Register now!