Neomi Rao Nominated to the U.S. Court of Appeals for the D.C. Circuit

Earlier this week, President Donald Trump nominated Neomi Rao, Administrator at the Office of Information and Regulatory Affairs (OIRA), to replace Judge Brett Kavanaugh on the U.S. Court of Appeals for the D.C. Circuit. We were very pleased that Neomi Rao gave a keynote speech at the Free State Foundation’s tenth annual telecommunications policy conference on March 27, 2018 at the National Press Club. The video of her keynote speech begins around the 2:41:00 mark.

Panelist at FSF Conference Highlights Demand-Side Problem with Municipal Broadband

Professor Christopher Yoo of the University of Pennsylvania, a member of FSF’s Board of Academic Advisers, spoke at the Free State Foundation Tenth Annual Telecom Policy Conference on March 27. The conference’s final panel featured Professor Yoo, Professor Michelle Connolly of Duke University, and Professor Daniel Lyons of Boston College Law School and was entitled “Final Thoughts and Looking Ahead: Perspectives from Three of FSF’s Academic All-Stars.”

Professor Yoo recently noted from his experience examining municipal broadband system a problem that is often not recognized by proponents of municipal broadband. He points out that proposals for new municipal broadband systems tend to focus on the costs being manageable, while paying too little attention to the demand side. In other words, these systems tend to be built on the assumption that “if we build it, they will come.” But the demand side is the part that municipalities are the most ill-equipped to address, especially in cities that already have established private broadband providers. As Professor Yoo explains: 

I'll tell you right now, the problem is not generally on the cost side. . . It's on the revenue side because as anyone who's been in this business knows, especially if you're in an overbuilt situation, you're marketing the heck out of these things. You got to come up with a new advertising campaign all the time to chisel someone off who's already got service. Guess what? Elected officials were not born to do that. They're not trained to do that. It's just not what's in their blood. But they think about operating a network. That's the easy part of being in this business, and they don't realize that. And they also assume that the incumbent won't drop its price. Well, guess what? If a monopolist faces duopoly competition, any economist will tell you prices are going to go down. They don't take that into account. A lot of models are oversold. Some of them are not even pro forma financials; they're pure marketing pitch. And they're put into the bond instruments, and simply put, some of them really have no chance of succeeding at all. 

Professor Yoo also pointed out that some municipalities are finding more creative solutions for making Internet access available to their residents, such as fixed wireless service, that don’t involve building risky municipal broadband networks: 

And in fact, there are a lot of areas of the U.S. that are underserved, and we're not just talking about Indian reservations, but counties. And we're studying western Massachusetts, counties in Arkansas. There are a lot of places that have real challenges. The two things that struck me about it is how the deployments that are working in a lot of these places that have some problems are very unorthodox. They looked very different than the ones before. Many of them are fixed wireless deployments, sometimes WISPs [wireless Internet services providers] where they're using unlicensed spectrum. 

To view the panelists’ discussions on those points and on other issues such as Internet freedom and net neutrality regulation, please watch the C-SPAN video of the conference here. The transcript for the panel on “Final Thoughts and Looking Ahead: Perspectives from Three of FSF’s Academic All-Stars,” featuring Christopher Yoo, is available at: http://www.freestatefoundation.org/images/March_27_2018_Tenth_Annual_Conf_Academic_Panel_Transcript_051718.pdf.

[Note: The quotations by the panel speaker included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]

Connecting All of America

FSF Panelists Address Policies for "Connecting America"

The Free State Foundation hosted its Tenth Annual Telecom Policy Conference on March 27. The conference’s first All-Star panel offered policymakers and the audience forward-looking insights befitting the panel’s title: “Solutions for Connecting America and Closing Digital Divides.”

Dr. Nicol Turner-Lee succinctly framed the challenge of connecting digitally excluded people in America: “[W]hen you look at the digital divide, there is still about 11% of Americans who do not have access.” She cited reports by Pew Research indicating that many digitally disconnected persons are over 65, lack a high school diploma, are rural residents, and are poor. Dr. Turner-Lee declared, “they still deserve to be connected in a way that is meaningful or they risk the chance of becoming digitally invisible… that invisibility has consequences over the long run if we do not get this right.”

The panelists stressed the importance of even-handedly promoting investment and of deploying different network technologies – whether fiber, 5G, Wi-Fi, or satellite – in order to provide broadband Internet access services to unserved Americans. Indeed, they emphasized that, at this time, there is a convergence of technological solutions that facilitates use of a mix of different network facilities in providing Internet access to unserved Americans. 

Importantly, the panel addressed several policies that all play a role in promoting a multiplicity of next-generation broadband Internet network pathways – all of which are part of the discussion regarding the goal of “connecting all of America.” Some key points are collected here, but please don’t neglect to watch the entire panel discussion on the C-SPAN video beginning around the 38:00 mark.

Make more licensed spectrum available for commercial use.

You heard Chairman Pai this morning talk about two of the higher spectrum bands [28 GHz and 24 GHz] that he wants to see go to auction starting later this year, which is great. We need to keep that going with other bands that the FCC has identified for auction. We need to get those auctions scheduled as well, and it’s the high-band [Chairman Pai identified the above 24 GHz and above 95 GHz bands], its mid-band… in the 3.4-4.2 gigahertz range... Internationally, those bands are getting a lot of attention and it’s important that we harmonize as much as we can around the world. That helps with scale; that helps the people making the devices and making the chips reduce their costs, which means you can have faster and more efficient deployment. -- Tom Power, CTIA 

Make more unlicensed spectrum available.

We do need a balanced approach when it comes to spectrum, both with respect to licensed spectrum, which we make available to meet the needs of 5G, but also to meet the needs of Wi-Fi. When we consider all of these devices that we have that are connecting wirelessly, the fact that 80% of that traffic is going over Wi-Fi, that’s a pretty strong amount of work, and that workload is only going to increase over time, as it will for licensed wireless as well… The problem, as I think we all know, with spectrum is you can’t turn on a dime, you essentially have to deal with incumbent users as you find them and try to plan out a long-range strategy over time. So I think it’s critically important that NTIA and other parts of the federal government really take that long-term view, and really put out what is our national plan with respect to both licensed wireless and unlicensed wireless. -- James Assey, NCTA 

Remove barriers to wireless infrastructure deployment by clarifying siting rules and setting shorter timelines for action on infrastructure applications.

There’s actually a number of efforts pending on the Hill, and bipartisan efforts, I should say…[T]he efforts that Senators Thune and Schatz have undertaken on infrastructure siting is probably the most effective vehicle I’ve seen right now [S.19, the MOBILE NOW Act]. It would do a couple things in terms of making more uniform the siting rules across the country, so that when you apply to site an antenna or a tower in a public right-of-way, you know what the rules are. It would put timelines, deadlines for local governments to act on those siting requests, with the length of time depending on the nature of the installation. It would also ensure the localities are paid their costs that they incur in overseeing this process… so that you don’t have different players paying different costs for getting essentially the same rights of access. -- Tom Power, CTIA 

Remove barriers to wireline infrastructure deployment by further reforming federal policy for pole attachments.

If we want look at places for us to relook at broadband policy, I would say one place that might be fertile territory would be the rules with respect to pole attachments, both to speed up the process by which there is an orderly effort to add new lines to poles, and also maybe to deal with something Congress didn’t deal with in 1996, when it exempted municipal and co-op poles from the federal scheme that we have for poles. I think those would be two places to start. -- James Assey, NCTA

Remove barriers to wireline broadband deployment by reforming digging and siting rules for federal lands.

I had the pleasure of serving on Jonathan Adelstein’s BDAC subcommittee on barriers, and that committee did, I think, a great job of coming together and…coming to agreement on what the barriers to entries were. And a lot of it dealt with federal lands and permitting… Speed to market is really the emphasis there, but it does it very little to address the cost issues. But it’s great getting that moving forward.  -- John Jones, CenturyLink 

Forbear from legacy regulatory barriers to wireline broadband deployment.

If you look at the rules we’re dealing with forbearing from, most ILECs have lost 70% of their market share across the board from a voice and broadband standpoint. And we still have rules that are pretty far back in time… So any rules that can be forborne from that keep our segment of the industry basically still hamstrung in a wide open field running environment of competition would be, at the highest level, what we would ask for. -- John Jones, CenturyLink 

Ensure that broadband subsidy support is targeted to unserved areas.

[A]nother thing that we have hopefully learned from past mistakes is… when we focus on the public subsidy portion of connecting America, to refocus attention on the unserved parts of America, those places that don’t have that broadband to make sure that those scarce resources we have available are not going to basically layer over places we already have built right into private capital. And I’m encouraged by…the omnibus appropriations bill, with respect to the newly created RUS pilot program, that is aimed at ensuring the dollars go to where they’re needed so that we can assess whether these programs are actually working or not. -- James Assey, NCTA

Ensure low-income consumer broadband access by funding Lifeline and preserving eligibility for non-facilities-based providers.

[C]utting the Lifeline program and imposing unnecessary caps will have a detrimental effect on closing the digital divide, especially if the program starts with the assumption that people are trying to outsmart the benefit.
…[S]ome of the assumptions in the Lifeline proposal right now – take the limitations to facility-based providers – regresses on some of the work done over the last couple of years to ensure more competition in the marketplace… I also think that it’s important that we allow USAC to put in the national verifier to reduce some of the redundancies. I think until you actually do some of that stuff it’s very hard to go back in a program that is the only potential lever for people to get online… particularly when you want to talk about closing the digital divide. -- Nicol Turner-Lee, Brookings

To view the panelists’ discussions on those points and on other issues such as Internet freedom and net neutrality regulation, please watch the C-SPAN video of the conference here. The panel on “Solutions for Connecting America and Closing Digital Divides” begins approximately 38 minutes into the video’s run time.

[Note: The quotations by the panel speakers included in this post were taken from the C-SPAN transcription of the Conference, with minor edits made for purposes of correcting obvious syntax, grammar, and punctuation errors. None of the meaning was changed.]

Paid Prioritization: The "Third Rail" of the Net Neutrality Controversy

At the Free State Foundation’s Tenth Annual Telecom Policy Conference last week, the speakers discussed a wide range of topics, including net neutrality, 5G and advanced fiber deployments, spectrum policy, universal service and Lifeline, and more. We’re grateful that C-SPAN-2 covered the conference from start to finish, and you can find the entire C-SPAN broadcast here.

Over the next few weeks we will be recounting some of what we learned at the conference. Here I want to highlight some of the discussion relating to so-called paid prioritization, what Comcast Senior Executive Vice President David Cohen called the “third rail” of the net neutrality controversy. Mr. Cohen said that he is amenable to considering a ban on paid prioritization if there is a limited exception for provision of specialized services. Harkening back to the FCC’s 2010 Open Internet Order, he suggested that “something might come along that is not anti-competitive, that is pro-consumer, and that is a specialized service that is not available to every user of the Internet that would be in the public interest.”

My longstanding position has been that there should not be an absolute ban on paid prioritization arrangements, but rather a presumption that such arrangements between Internet service providers and Internet users should be deemed lawful absent convincing evidence that a particular arrangement causes either consumer harm or is anti-competitive. This position acknowledges the possibility that a particular arrangement may be anti-competitive or harmful to consumers, but it places the burden on those challenging the arrangement to demonstrate this. In my view, if the burden is placed otherwise – or certainly if an absolute ban exists – there is a substantial risk that experimentation by Internet service providers with beneficial new services will be chilled and that investments that otherwise would be made in modernizing broadband networks will be foregone. Neither result benefits consumers.

Regardless of my own views, because paid prioritization is such a key part of the net neutrality controversy, it is worth considering the comments of a few of the other conference speakers.

Here’s Jeff Campbell, Cisco’s Vice President, The Americas of Global Affairs:

“Paid prioritization, or prioritization in general, is one of the most misunderstood issues out there. I wish the press would stop writing fast lanes, slow lanes. The Internet has no lanes. They do not exist! Traffic either goes or it does not go. It moves at the speed of electrons, or the speed of light. When there’s congestion, you either drop packets randomly or you drop them intelligently by using some sort of prioritization scheme. Now I would posit that there are a lot of benefits to intelligently deciding what traffic has better quality of service than other things. I am going to give you two examples - one which is crucial and one which is mundane but very important too. The first is – I guarantee you that all the people who are against paid prioritization are hugely in favor of paid prioritization the minute we start having remote surgery occurring across electronic networks. You want those packets to be prioritized. You want them to get through and you want everything to work right. There’s a benefit to doing that. It’s not an inherently bad thing. It’s good technology.”

“Rather than banning the technology, because that’s what a ban on paid prioritization is - you’re essentially banning the use of this technology, we should talk about whether the technology is being used for good or for bad. If it’s being used anti-competitively, we can write rules or use the existing law or both to address those situations. But there are a lot of benefits that can come from the use of prioritization and quality of service technology and I think that it would be a real mistake for our country to walk away from that because the rest of the world isn’t walking away from it.”

Michelle Connolly, Duke University Professor of Economics and a Member of FSF’s Board of Academic Advisors said this:

“And I don’t want [paid prioritization] to be swept under the rug because simply people are so happy to be getting rid of Title II regulation that they forget that paid prioritization is a very important thing about keeping this market free and allowing people to have services - that they may want to have certain quality of services and they are willing to pay for it. They should have that right to do that. As an economist, this is about a market and this is about intervention in a market and that should not be forgotten.”    

And then Professor Connolly, as she had at last year’s conference, related what she calls the “waterbed effect” to a ban on paid prioritization:

“Essentially this amounts to a subsidy that is paid to certain types of content providers who want the quality of service but don’t want to pay for paid prioritization. And so if we think about a waterbed, if any of you in the 70s went on a waterbed, if you push down on one side – and you say that the price is going to be lower here for something, it’s going to go up somewhere else. So the idea was that in terms of the digital divide, the Open Internet Order of 2015, by creating this inability to charge for something, was inherently pushing up the price of the average service to the average consumer. And to the extent that we think that their income is large component of when people are not adopting, you are going to be exacerbating the digital divide when you have the no paid prioritization.”

Immediately following this statement by Professor Connolly, Christopher Yoo, also a Member of FSF’s Board of Academic Advisors and Professor of Law at the University of Pennsylvania suggested this regarding a paid prioritization ban: “By reducing the ability to raise revenue, you’ve raised the breakeven number of consumers, you’ve made it harder for them to be viable and you’ll see fewer areas built out. It’s quite simple.”

Finally, when asked about paid prioritization, Commissioner Michael O’Rielly answered: “I don’t think there should be a ban on paid prioritization. I disagreed with that point. I’ve testified to that fact that I don’t think that it should be part of a legislative package that goes forward. We’ll just see what the Congress does with that suggestion.”

As the ongoing net neutrality controversy continues, with paid prioritization at or near the forefront, I hope this recounting of some of the conference discussion is helpful. And over the years, we’ve spilled an awful lot of ink – and worn out a lot of keyboards – addressing paid prioritization. If you wish to explore the issue in more depth, here are just two Perspectives from FSF Scholars that are worth reading:

·         Theodore Bolema, Allow Paid Prioritization on the Internet for More, Not Less, Capital Investment, May 2017.

·         Daniel Lyons, Title II Reclassification Is Rate Regulation, February 2015.

Don’t forget the C-SPAN video is here.