Congress and Regulators Should Follow NCTA’s Next Steps on AI-Driven Shortages

Surging demand for high-power AI chips is diverting scarce resources away from traditional chips that are used in broadband equipment. For example, the price of DDR4 memory – ubiquitous in broadband – has risen 700-800% year-over-year. NCTA – The Internet & Television Association has also emphasized that the problem extends beyond memory chips to substrate, the foundational materials on which chips are built.

An NCTA-led coalition of groups involved in deployment and operation of broadband services sent a letter on June 2 to Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick urging certain policy actions to expand chip production: “Ease constraints on alternative sourcing and product redesign by offering expedited validation and approvals for regulated products, along with flexibility for necessary hardware, firmware, or software changes. . . Identify and remove regulatory barriers that slow the expansion of memory manufacturing capacity, both domestically and internationally, to increase overall global supply.”

Promising policies under NCTA’s recommendations may include: streamlining regulatory and permitting requirements; reforming the Toxic Substances Control Act (TSCA) to speed up the review of new chemicals and substances necessary for innovation; allowing immediate expensing of foreign research and development costs; easing trade frictions by cutting unnecessary tariffs and customs barriers, expedite customs clearance procedures, and ensuring that semiconductor data can move freely across borders; and reforming high-skilled immigration for a robust workforce.

Broadband providers rely heavily on semiconductors to capture, process, and transmit data across their networks, making these shortages a direct constraint on their ability to operate, expand, and improve Internet service. And broadband providers are not alone. The coalition includes other sectors experiencing supply constraints, including automotive, medical technology, and retail associations.

State and federal policy responses to the shortages largely have relied on interventions in the form of grants, loans, and tax credits for domestic chip making and research. These interventions, like the 2022 CHIPS and Science Act, may indeed alleviate chip shortages but are subject to the typical flaws of government subsidies – they risk favoring selected companies and taxing Americans in the form of mounting government debt.

Encouragingly, there have also been some wins for more free-market oriented approaches to boost supply and slow the growth of increasing costs. In June, the FCC granted a waiver of certain router requirements that NCTA had petitioned for – I blogged about it here. The 2025 One Big Beautiful Bill Act restored expensing requirements for research and development (affecting all industries, not just chip-making). The OBBBA also let companies deduct the full cost of most new equipment and machinery in the year they buy it, particularly valuable for a capital-intensive industry like chip production.

Congress and regulatory agencies should build on NCTA’s recommendations and expand market-oriented approaches already supported by parts of the semiconductor industry, including the Semiconductor Industry Association.

Ultimately, persistent chip shortages translate into higher costs paid by consumers. When supply is stretched thin across industries, everyday products and services become more expensive – particularly in memory-heavy markets like broadband.

Congress and regulators must focus on finding market-oriented ways to bring these costs down for Americans.

FCC Allows Broadband to Substitute Router Parts Amid AI-Driven Shortages

On June 9, the FCC granted a partial waiver of its March ban on certain routers. The situation is bureaucratic and messy. While the March order banned “all consumer-grade routers produced in foreign countries” on national security grounds, the June waiver does not lift that ban.

Instead, the waiver allows already-approved domestic routers (approved by the FCC before March) to have certain parts substituted – substrate material and memory – without triggering a full re-certification process. In effect, the FCC is treating these modified designs as the same product, avoiding the need for them to go through a new approval process all over again.

This waiver was in direct response to the NCTA – the Internet & Television Association, which petitioned the FCC on June 2 explaining why it’s so important that their members be allowed to substitute components in their router designs: “unavoidable supply chain shortages in critical substrate material and memory . . . significantly constrain the industry.” The original ban in March had threatened to sharply limit new router imports and sales until approvals or waivers could be secured since the vast majority of waivers are made abroad.

In fact, the substrate and memory shortages are so severe that it would’ve been difficult for the FCC to find a worse time to ban consumer-grade foreign routers. The shortages are hitting broadband operators like NCTA members hard as increasing demand for capacity, driven by the current boom of artificial intelligence, is affecting their ability to serve their customers. Surging demand for AI GPUs has drawn massive production capacity toward high-end AI chips, tightening supplies of traditional everyday components used in broadband. This includes DRAM (Dynamic Random Access Memory) and non-volatile memory. Substrate materials – the foundational layers used for broadband and AI semiconductors – are also in short supply.

As NCTA explained in its petition: “Driven largely by surging demand from AI, manufacturers are shifting production toward DRAM chips used in data centers, and this shift has tightened supply for the widely used DRAM memory components that support everyday technologies like routers . . . [AI] is driving unprecedented demands for substrate materials, leading to a growing shortage of the necessary materials for semiconductor manufacturing.”

The FCC’s waiver provides some immediate relief for NCTA members and other broadband providers. But the FCC can do more. In a June 3 coalition letter, NCTA and other participants urged the FCC to take broader action: “Ease constraints on alternative sourcing and product redesign by offering expedited validation and approvals for regulated products, along with flexibility for necessary hardware, firmware, or software changes . . . Identify and remove regulatory barriers that slow the expansion of memory manufacturing capacity, both domestically and internationally, to increase overall global supply.”

Substrate material and memory supply were a problem long before the FCC’s March routers ban, and these shortages continue to pose real challenges for broadband as telecommunications infrastructure requirements and AI demand keep growing.

The FCC Should Not Mandate the Next Gen TV Transition

Communications is one of the most innovative sectors of the U.S. economy. Industries ranging from broadcasting, smart phones, over-the-top Internet, cable, and satellite are battling for a larger slice of the market for entertainment and communication, broadly defined. So far, the secret to success has usually been the introduction of a new technology or business model that improves users’ experience. Regulators should welcome this type of marketplace competition since it produces faster growth and better living standards. It also helps boost U.S. competitiveness in a strategic competition against international challengers.

However, companies sometimes engage in another form of competition. That is, seeking to pressure regulators to give their own preferred technology or standards an advantage by adopting rules that favor them. This can be done by forcing competitors to use a favored regulatory standard or discouraging the use of a rival one. Either option conveys a competitive advantage in the marketplace. While it is normally preferable for companies that may compete with each other to face similar regulatory burdens, this is almost always better achieved by lowering the total burden rather than increasing it. Specifically, regulators should be very careful not to favor one technology over another absent compelling circumstances.

 

Unfortunately, this is exactly what the broadcasting industry is advocating as it asks the FCC to make the new Next Gen TV standard (also known as ATSC 3.0) mandatory. This would force households, broadcasting stations, and cable and satellite providers to purchase new equipment to meet the standards. It is not that the standard is per se bad. A number of broadcasters have voluntarily adopted Next Gen TV on their own. The underlying objection is that making Next Gen TV mandatory would foreclose the ongoing competition between it and other standards, including the existing one, and remove the pressure to improve them over time.

The broadcasters’ request has attracted opposition, including from cable and satellite operators who would have to adopt Next Gen TV in order to deliver broadcasters’ channels to their subscribers. The broadcasters are also requesting that the FCC should set a firm deadline ending use of the current ATSC 1.0 signals. This would force everyone to switch over to the new standard. Viewers would have to buy either converters to translate the new standard or new televisions with the new tuners.

As the NCTA writes: “[T]he cable industry does not oppose broadcasters’ use of new technologies. We simply believe that broadcasters’ transition to a new standard should not come at the expense of [multichannel video programming distributors], equipment manufacturers, and consumers, with no guarantee of meaningful benefits.”

The FCC may lack the power to do what broadcasters are requesting. As the NCTA points out, current must carry requirements were passed when it was possible to argue that cable carriage was necessary to protect free, over-the-air broadcasting because there was little competition between content providers. Since then there has been an explosion in video offerings. In addition to the traditional over-the-air broadcasters, many homes can choose between cable, satellite, fiber, and over-the-top content on the Internet. The rationale for regulation is much weaker now.

In addition, courts have adopted less deferential standards for reviewing agency action, especially for issues of “vast economic and political significance,” unless Congress has clearly empowered the agency with authority over the issue. FCC rules may not survive a challenge under the new doctrine. The NCTA argues that forced conversion, by requiring significant costs, would represent a taking and force their members to carry certain broadcasts against their will.

Continued innovation in the communications marketplace over the next decade will be much faster if two conditions are met. The first is that new technical standards are welcome provided they increase value to consumers. Second, such new standards will need to spread through voluntary adoption driven by consumer demand. The FCC should not favor one set of standards over others.

The Broadband Providers Growing Role in AI

AI services and platforms and providers of high-speed broadband services are increasingly engaged in a symbiotic relationship. So I argue in the Free State Foundation’s latest Perspectives from FSF Scholars, AI promises significant improvements to broadband providers. But AI itself depends on the networks that collect, analyze, and transmit massive amounts of data. I point out that: “[i]f AI cannot obtain the vast amounts of power and water it needs, if it cannot connect with users to gather data and deliver value, or if access to this infrastructure is compromised, AI collapses.” 

This trend has caught the attention of industry leaders. NCTA President and CEO Cory Gardner recently gave a keynote speech to the State of the Net Conference. He stated that: “[T]his critical infrastructure isn’t just a byproduct of AI. It is the backbone, the workhorse, the foundational element that made and makes AI possible.” This is the result of sustained private investment. According to Gardner, NCTA members have invested more than $355 billion in broadband infrastructure over the last 20 years, including $26 billion last year.

On March 11 President and CEO of CTIA Agit Pai wrote on BroadbandBreakfast that “breakthroughs in artificial intelligence won’t matter much if the networks connecting devices and infrastructure cannot support them. AI without a strong wireless network is like a new car without a road.” Pai pointed to two pillars for success: harmonized spectrum policy and investment-friendly regulatory frameworks.

The dependence on reliable, secure, and high-capacity communications also applies to networks for power, water, and transportation. Each increasingly requires powerful broadband networks to provide the large amounts of data and computing ability required by AI. In order to attract the massive amounts of private investment required, regulators will have to craft sensible regulations that minimize uncertainty and delay. Luckily, the providers of broadband networks are increasingly aware of the opportunity. Hopefully, policymakers are too.

D.C. Circuit Unanimously Affirms the FCC's 5.9 GHz Band Order

Earlier today, in a development that will benefit WiFi users and make way for modern wireless vehicle safety capabilities, the U.S. Court of Appeals for the District of Columbia Circuit unanimously affirmed the Commission's November 2020 Order repurposing 45 MHz of fallow spectrum in the 5.9 GHz band for unlicensed use.

In a Statement, NCTA – The Internet & Television Association called the court's decision in Intelligent Transportation Society of America v. FCC "an enormous victory for American consumers," one that will lead to "even more reliable high-speed Wi-Fi and access to next-generation automotive safety applications."

Image by Jagathish Saravanan

In 1999, the FCC dedicated 75 MHz of beachfront spectrum to a proprietary vehicle safety technology that never lived up to its promise. Over twenty years later, the 5.9 GHz Order put that valuable wireless capacity to its highest and best use, making 30 MHz available for successor intelligent transportation systems technologies and repurposing the lower 45 MHz for WiFi and other unlicensed services.

Free State Foundation President Randolph May and I filed comments in support of the FCC's proposal. And in a Perspectives from FSF Scholars published shortly before the Commission adopted the 5.9 GHz Order, I argued that it represented "a fresh approach to this vastly underutilized spectrum that advances both public safety and the capabilities of WiFi networks."

Regrettably, in one of several recent high-profile instances of a breakdown in interagency spectrum coordination efforts necessitating process reform, the Department of Transportation raised objections to the Commission's proposal outside of established channels.

Eventually, several interested parties challenged the 5.9 GHz Order in court.

As Free State Foundation Director of Policy Studies and Senior Fellow Seth Cooper explained in a December 2021 post to the FSF Blog, consistent with the Supreme Court's 1968 decision in U.S. v. Southwest Cable Company, "[a] decision by the D.C. Circuit to uphold the 5.9 GHz Order would constitute a small but helpful step toward vindicating the FCC's 'unified jurisdiction and regulatory power' over commercial spectrum from interference by other federal agencies."

Today's decision does just that. In response to petitioners' claims that the 5.9 GHz Order "was arbitrary and capricious because it violated the Transportation Equity Act," the D.C. Circuit succinctly responded as follows: "It was not."

Specifically, the court held that:

[T]he Transportation Equity Act did not transfer away from the FCC its broad authority to manage the spectrum related to intelligent transportation systems. Instead, as the FCC noted, it simply required the FCC to account for the Department of Transportation's views and the needs of intelligent transportation systems when it does so. The FCC did that here.

Comcast's "Internet Essentials" and Similar Programs Make a Difference

 For the past decade, Free State Foundation scholars have chronicled new developments regarding Comcast's "Internet Essentials" program and the progress the program has achieved in furthering more ubiquitous broadband adoption, especially for low-income persons.

As recited in a September 2021 Free State Foundation blog post, Comcast’s $700 million investment in Internet Essentials already had connected 10 million Americans to high-speed broadband and, during that time, Internet Essentials was responsible for 40% of new Internet subscriptions by low-income families with school-aged children. For details on recent expansions of the Internet Essentials program, see these FSF blogs published in 2020, 2019, 2018, and 2017.

Comcast's Internet Essentials program is an undertaking that involves very substantial private investment, and as a recent NCTA post shows, by making broadband much more accessible to low income persons, it creates educational, entrepreneurial, and social opportunities that otherwise might not available.

 

Of course, other cable operators like Charter have programs similar to Comcast's to provide subsidies to support accessibility by low-income persons. NCTA reports that over 14 million people have been connected through the cable industry's low-cost broadband adoption programs. And similar efforts by non-cable ISPs like AT&T, Verizon, T-Mobile, and many others have connected many more.

 

All these private sector efforts should be applauded. They all contribute to closing the digital divide.

New Study Quantifies Huge Potential Losses Absent Revised Pole-Attachment Policies

An economic analysis commissioned by Connect the Future assigns a hefty price tag to the potential delays that utility pole disputes could cause in the deployment of broadband infrastructure.

"Advancing Pole Attachment Policies To Accelerate National Broadband Buildout," by Professor Edward J. Lopez and Patricia D. Kravtin, asserts that "broadband deployment is being inhibited or outright stopped due to the lack of effective pole policy to address problematic behavior of certain utility pole owners affecting broadband provider access to utility poles."

According to their analysis, this "hold up problem" could lead to substantial economic losses: between $491 million and $1.86 billion for each month of delay that results.

As I highlighted in a February 2021 post to the Free State Foundation's blog, Charter Communications, Inc. (Charter) has announced plans to invest $5 billion, including $1.2 billion in subsidies won via the FCC's Rural Digital Opportunity Fund auction, to connect over a million locations currently without access to broadband.

That initiative, however, hinges upon reasonable and timely access to utility poles. And in a post last week to the FSF Blog, I drew attention to two FCC filings in which Charter described several ongoing disputes that underscore the need for the relief sought by NCTA – The Internet & Television Association (NCTA) in a July 2020 Petition for Expedited Declaratory Ruling: (1) greater clarity regarding the proper allocation of pole replacement costs between attachers and owners, and (2) use of the Commission's Accelerated Docket to resolve pole-related impasses promptly.

Consistent with the NCTA petition, the study's authors conclude that "policymakers need to facilitate the streamlining of equitable access and cost-sharing arrangements between broadband attachers and pole owners" in order to realize the full economic potential of ubiquitous broadband coverage.

Charter to Commission: Pole Disputes Threaten Timely Deployment of Broadband Infrastructure

In two recent FCC filings, Charter Communications, Inc. (Charter) offered further evidence that efforts to connect rural Americans to broadband hinge upon agency action ensuring access to utility poles "on reasonable timelines, terms and conditions." Specifically, the grant, whether through declaratory ruling or notice-and comment rulemaking, of the forms of relief requested by NCTA – The Internet & Television Association (NCTA) in a Petition for Expedited Declaratory Ruling submitted in July 2020 and denied by the Wireline Competition Bureau in January of this year.

As I highlighted in "Charter Announces Ambitious Project to Deploy Broadband to Over One Million Unserved Locations," a February 2021 post to the FSF Blog, Charter is investing $5 billion, including $1.2 billion in subsidies secured via winning bids in the Rural Digital Opportunity Fund (RDOF) reverse auction, to expand its network in 24 states. This will enable it to offer high-speed Internet access – specifically, service that meets or exceeds the FCC's current 25 megabits per second (Mbps) downstream and 3 Mbps upstream definition of "broadband" – to more than one million locations at present unserved.

When it unveiled its plans, Charter cautioned that "pole applications, pole replacement rules and their affiliated issue resolution processes are all factors that can have a significant impact on the length of time it takes to build into these rural areas."

And in conversations last week with representatives of the Wireline Competition Bureau and legal advisors to Chairwoman Jessica Rosenworcel and Commissioner Geoffrey Starks, Charter presented specific evidence of issues relating to the processing of pole applications that threaten its ability not just to connect rural Americans, but to meet deadlines associated with RDOF subsidies.

Maureen O'Connell, Charter Vice President, Regulatory Affairs, detailed one impasse, involving the Warren Rural Electric Cooperative Corporation (WRECC) in rural Kentucky, that jeopardizes its plans to provide broadband to over six thousand unserved locations:

At the permit processing rate currently proposed by WRECC, it would take 14 years to complete the permitting process for attachments to poles to reach these locations – about seven times longer than planned and double the maximum allowed to deploy these federal taxpayer dollars under RDOF. That means a child in kindergarten now will have graduated from high school before the permitting phase is complete.

Charter also identified pole-related disputes in California, Hawaii, and South Carolina and "expressed concern that some pole owners have competitive incentives to delay broadband deployment by attaching entities because they are themselves affiliated with broadband providers who are putative competitors to the attaching entities, including (in the case of WRECC) affiliates or business partners receiving RDOF support."

In July 2020, NCTA filed with the FCC a Petition for Expedited Declaratory Ruling (NCTA Petition) seeking relief in rural areas including: (1) various clarifications regarding the appropriate allocation of pole replacement costs between attachers and owners, and (2) timely resolution of pole-related disputes via the Commission's Accelerated Docket.

Free State Foundation President Randolph May and Director of Policies Studies and Senior Fellow Seth Cooper filed Comments in support of the NCTA Petition.

In a January 2021 Declaratory Ruling, the Wireline Competition Bureau did clarify that "utilities may not require requesting attachers to pay the entire cost of pole replacements that are not necessitated solely by the new attacher and, thus, may not avoid responsibility for pole replacement costs by postponing replacements until new attachment requests are submitted."

As a general matter, however, the Wireline Competition Bureau denied the NCTA Petition, concluding that "it is more appropriate to address questions concerning the allocation of pole replacement costs within the context of a rulemaking, which provides the Commission with greater flexibility to tailor regulatory solutions."

The picture painted by Charter underscores how important it is for the FCC to provide additional clarity and guidance with respect to the respective rights and responsibilities of pole owners and attachers.

In that regard, I point out that, in a statement to Telecompetitor, a self-described "puzzled" WRECC disputed Charter's allegations and expressed "hope than we can come to an agreement soon." Thus, it would seem that the parties involved are not on the same page. Prompt intervention by the FCC holds the potential to accelerate the deployment of network infrastructure.

In other words, the policy goal of rapid rural broadband expansion compels precisely the relief requested in the NCTA Petition: "expedited consideration under the Accelerated Docket."

As noted above, the Wireline Competition Bureau denied NCTA's request for declaratory relief because it believed that a rulemaking of general applicability would be the more appropriate vehicle. It is time to begin that process.

Broadband Organizations Join Together to Form America's Broadband Future

On May 14, seven broadband providers and trade associations announced the formation of America's Broadband Future, a coalition that "will urge lawmakers to bridge the digital divide by expanding access in rural America, equipping vulnerable communities with resources needed to get connected, and investing in digital literacy initiatives to empower all Americans to thrive in the digital age."

On its home page, America's Broadband Future asserts that:

Unfortunately, some of the broadband policy plans being discussed in Washington, D.C. fall short. They fail to provide the resources necessary to empower and enable vulnerable communities to get connected quickly. And they fail to prioritize those unserved areas of the country that are most in need of major broadband investment. 

Free State Foundation scholars have addressed various shortcomings of the broadband-specific provisions in President Biden's American Jobs Plan in the following Perspectives from FSF Scholars and blog post:

• "Biden Broadband Plan Favoring Government-Owned Networks Lacks a Constitutional Foundation"
• "Biden Broadband Plan: Claims That Broadband Is 'Too Expensive' Are Unfounded"
• "Biden Broadband Plan: Misdirected Broadband Subsidies Hurt Competition and Consumers"
• "'Future Proofing' Subsidized Broadband Would Inflate Consumer Prices"

The founding members of America's Broadband Future are AT&T, Charter Communications, Comcast, Verizon, CTIA, NCTA – The Internet & Television Association, and USTelecom.

Senate Should Immediately Pass the Permanent Internet Tax Freedom Act

The Internet tax moratorium is set to expire on Wednesday, December 16, 2015. Instead of Congress temporarily extending the moratorium as it has done several times in the past two years, the Senate should pass the Permanent Internet Tax Forever Act, which would permanently ban state and local taxes on Internet access. (See here, here, and here.) The House already passed its version of the bill back in June 2015. (See my June 2015 blog for more.)

Michael Powell, President and CEO of the National Cable and Telecommunications Association, Meredith Attwell Baker, President and CEO of CTIA - The Wireless Association, and Walter B. McCormick Jr., President and CEO of U.S. Telecom Association, sent a coalition letter to members of the Senate, urging them to support a permanent extension on the Internet Tax Freedom Act. The letter also discusses the important bipartisan history of this issue:

Over the nearly 17 years since ITFA was enacted, the Internet has become an engine for economic growth, opportunity, and inclusion while American consumers have been shielded from having their broadband access subject to the myriad of discriminatory taxes and fees that apply to traditional telecommunications services, often at rates twice that of general sales taxes—11.5% on average but as high as 17% in some places. Because of this bipartisan policy achievement, most Americans have never paid these taxes on their broadband access.

This success – begun during the Clinton Administration, and continued through the Bush Administration and thus far through the Obama Administration – is at risk because ITFA will expire this year unless Congress acts. Expiration would likely increase the cost of broadband access as it would become vulnerable to new onerous telecommunication taxes and fees, an imminent threat due to the Federal Communications Commission’s recent reclassification of broadband services as a Title II telecommunications service. At a time when promoting broadband adoption is a national priority, Congress should ensure that every American can afford to participate in the digital economy by making the expiring ban on Internet access taxation permanent.

As stated in the letter by these industry leaders, permanently banning taxes on Internet access would help keep the Internet affordable for all Americans and would lead to additional market-driven innovation, content choices, and economic growth. 

The Senate should act immediately to adopt the permanent ban on state and local taxes for Internet access!