BEAD Program Softens Stance on "Alternative" Technologies

In final guidance released on January 2, 2025, the National Telecommunications and Information Administration (NTIA) opened the door, ever so slightly, to Broadband Equity, Access, and Deployment (BEAD) Program projects utilizing unlicensed fixed wireless and low Earth orbit (LEO) satellites. By no means a course correction to a true technology neutral approach – end-to-end fiber proposals continue to be heavily favored without adequate regard for cost – at least providers using these so-called "alternative technologies" are no longer barred outright from participating in the $42.45 billion BEAD Program.

In the Public Notice, NTIA reiterated its position that states "must seek the most robust technology feasible at each location." Prior to this policy change, that meant (a) end-to-end fiber first ("Priority Broadband Projects"), and (b) cable broadband, digital subscriber line (DSL), or fixed wireless – using either licensed spectrum or a combination of licensed and unlicensed spectrum – second ("Reliable Broadband Service"). Projects using unlicensed spectrum only do not fall within the definition of "Reliable Broadband Service." Nor do LEO satellite-based offerings.

With this final guidance, NTIA will allow states to consider grant applications utilizing distribution technologies that meet the speed (100 Mbps downstream and 20 Mbps upstream) and latency (less than or equal to 100 milliseconds) requirements for "Reliable Broadband Service" but (in my view, at least) arbitrarily remain excluded from that category. Specifically, unlicensed fixed wireless and LEO satellite-based offerings now will be treated as quasi-eligible "Alternative Technologies."

However, and as I highlighted in "BEAD Program Technological Neutrality 'Fix' Falls Short," an August 2024 Perspectives from FSF Scholars, states may consider non-fiber "Reliable Broadband Service" technologies only where the cost to deploy fiber exceeds the "Extremely High Cost Per Location Threshold" (EHCPLT), an often unreasonably high bar that disregards the amount of time it will take to deploy fiber versus other technologies.

"Alternative Technologies," meanwhile, become eligible only after states "demonstrate that no ["Reliable Broadband Service"] was deployable for less than the EHCPLT by leveraging multiple strategies to obtain bids for Priority Broadband Projects and other ["Reliable Broadband Service"] projects that fall under the EHCPLT."

In other words, with this change the funding eligibility priority order has been expanded, somewhat, from two categories – end-to-end fiber followed by other "Reliable Broadband Service" – to three, with unlicensed fixed wireless and LEO satellite at the end of the line.

While in theory an improvement over the exclusionary approach originally set forth in the BEAD Program Notice of Funding Opportunity, the final guidance's creation of a third-place "Alternative Technology" category – well short of a full embrace of the concept of technological neutrality – may not have that much of practical impact.

Direct-to-Cell Innovation Will Expand Broadband Access to All Americans

On November 26, the FCC issued an order that granted low-earth orbit (LEO) satellite broadband provider Starlink authorization to provide Supplemental Coverage from Space (SCS) and operate on certain spectrum bands for direct-to-cellular (direct-to-cell) operations, under certain conditions. Direct-to-cell, sometimes called direct-to-device (D2D), is the technological capability of connecting satellite broadband networks to standard terrestrial mobile cellular wireless smartphones. Starlink reportedly has an agreement with nationwide mobile wireless network provider T-Mobile, under which it will provide mobile Internet connectivity in the US exclusively to T-Mobile for one year. 

Additionally, AT&T and Verizon reportedly have entered into commercial agreements with LEO satellite network provider AST SpaceMobile. AST SpaceMobile will be using spectrum in the 850 MHz band licensed by AT&T and Verizon, whereby AST SpaceMobile will provide direct-to-cell capability and thus enable mobile wireless broadband coverage to 100% of the geography of North America. 

As I wrote in a December 2023 blog post, smartphone access to satellite broadband networks is a stellar example of the broadband market's dynamism. Near-future commercial availability of direct-to-cell capability by competing mobile wireless broadband providers in partnership with LEO satellite network operators is innovative, enhances competition, and doubtless will improve access to broadband for Americans. 

 

Indeed, the important potential improvement in broadband access enabled by direct-to-cell innovation should factor into the FCC's forthcoming Section 706 Report as well as its forthcoming Communications Marketplace Competition Report. In assessing progress in deploying advanced capabilities in a reasonable and timely fashion to all Americans and in analyzing market competition for broadband services, the Commission should take a forward-looking analysis rather than rely on static snapshots in time from the past. 

 

For the Commission, direct-to-cell capability ought to serve as a reminder that private market investment and innovation drive the improvement and expansion of broadband networks far more than slow-moving subsidy programs such as the Broadband Equity, Access, and Deployment (BEAD) program that draw from the public treasury – and ultimately from US taxpayers. During the next Trump Administration, the FCC should return its focus to promoting private network investment and innovation and to eliminating rate regulation and other burdensome, costly restrictions that harm market competitiveness and fail to meaningfully benefit consumers. 

 

This year, the Free State Foundation filed public comments and reply comments with the FCC in its current Section 706 report proceeding. FSF also filed public comments and reply comments in the Commission's current Marketplace Competition Report proceeding. 

Maine Satellite Plan Casts Doubt on BEAD Program Approach

As reported by Broadband Breakfast (subscription required), the Maine Connectivity Authority (MCA) has announced that it will allocate upwards of $5 million toward the purchase of Starlink terminals for every remaining "unserved" location in the state. What's more, the contract with Starlink "is expected to include capacity guarantees to ensure that the state-purchased terminals can connect to internet service at the newly established speed benchmark of 100/20 Mbps."

Universal access? Check. Speeds that satisfy the FCC's recently updated "broadband" benchmark? Check. A price tag roughly one-twentieth that of fiber? Check. So why, then, will the MCA spend an additional $278 million in federal subsidies from NTIA's Broadband Equity, Access, and Deployment (BEAD) Program to connect "underserved" locations to fiber?

Despite their marketplace-proven ability, technologically speaking, to deliver the speeds that consumers demand – and that the Infrastructure Investment and Jobs Act, the statute that created the BEAD Program, specifies – from day one NTIA has discouraged the use of BEAD Program subsidies to deploy non-fiber broadband distribution platforms.

As I pointed out in "BEAD Program Technological Neutrality 'Fix' Falls Short," an August 2024 Perspectives from FSF Scholars, even recent changes to NTIA's BEAD Program rules approving the use of satellites and unlicensed spectrum do so only under very limited circumstances – to be specific, when the price tag for fiber exceeds a state-specified price ceiling aptly labeled the Extremely High Cost Per Location Threshold (EHCPLT).

Other distribution technologies – cable broadband, fixed wireless access using licensed spectrum, and so on – likewise are eligible for BEAD Program subsidies only if the fiber cost exceeds the EHCPLT.

The MCA's announcement that it will make Starlink terminals available to all 9,000 unserved locations in the state at a cost of just $599 per location, plus free shipping and professional installation, highlights the degree to which NTIA's approach leads to inefficiencies and waste.

Evidence that proves this point can be found in the very same press release announcing the purchase of Starlink terminals: "[i]n 2025, MCA will facilitate the investment of an additional $350 million in broadband infrastructure through the [BEAD] Program to serve the remaining 5% of locations in Maine that currently have slow and unreliable internet service."

According to my back-of-the-envelope math, $350 million in total subsidies works out to almost $12,000 per "underserved" location – that is, locations with Internet access at speeds equal to or greater than 25/3 Mbps but less than 100/20 Mbps. That amounts to a nearly 20X premium for a fiber-based solution as compared to the cost of satellite-based service.

Incidentally, Volume 2 of Maine's Initial Proposal, which was approved by NTIA in June, does not identify a specific EHCPLT. Instead, it indicates that the MCA intends at some point in the future to set the EHCPLT so high that, in virtually all cases, fiber will win the day:

If it is determined that a small number of locations in a given PSA should be served with alternative technologies allowed through the EHCPLT process to ensure maximum impact of BEAD funding, MCA will consider allowing non-fiber service to a minimal number of locations. All other locations in the PSA will otherwise be served by FTTH.

Accordingly, the extent to which satellites and other non-fiber distribution platforms will be eligible for BEAD Program funding likely will be extremely limited.

The BEAD Program's underlying congressional goal is to connect locations still without "broadband" – Internet access at speeds of 100/20 Mbps – in a cost-effective manner. The fact that, in Maine, far more federal taxpayer dollars will be spent on "gold-plated" fiber infrastructure to upgrade "underserved" locations than what is being spent to connect "unserved" locations strongly suggests that NTIA's approach is fundamentally flawed.

TMT with Mike O'Rielly – Ep 13: Changing Satellite Regulatory Environment

Episode 13 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 October 17. This episode, titled "The Changing Satellite Regulatory Environment," features a conversation between Mr. O'Rielly and guest Tom Stroup, President of the Satellite Industry Association (SIA). Their conversation ranges from market change over the last decade with new entrants and new services such as low-earth orbit (LEO) satellite networks, dramatically improved broadband satellite network capacity and speed capabilities, the importance of access to spectrum for satellite providers – including potential expanded use of the 18 GHz band for satellite services, the 2024 State of the Satellite Industry Report, export reform, broadband subsidy programs and policy, direct-to-mobile (or direct-to-cell) integrated offerings through satellite provider partnerships with terrestrial wireless providers, and more. 

Satellite Broadband Competition and Access is Improving, and FCC Policy Should Promote That

A December 14 article in PCMag reports that satellite broadband provider HughesNet is now offering residential subscribers services with advertised download speeds of up to 100 Mbps. This is up from prior offerings of up to 25 Mbps and 50 Mbps downloads. The improved capabilities are the result of the high geostationary orbit Jupiter 3 satellite this summer, which apparently has now been tested and is ready for service. 

According to the FCC's 2022 Communications Marketplace Report, "[a]s of year-end 2021, satellite operators served a combined 1.7 million subscribers in the United States." And subscriber numbers for GEO satellite broadband services offered by HugheNet and ViaSat do not appear to have grown but have perhaps declined slightly in recent years. (GEO providers as well as LEO entrants were subjects of my March 2018 blog, "Satellite Broadband Services Will Enhance Competition and Reach New Consumers.") But HughesNet's satellite service upgrade is a shot in the arm to broadband competition, and the Jupiter 3 will better enable HughesNet's geostationary orbit (GEO) broadband service to compete with Starlink's low earth orbit (LEO) broadband service. 

 

Speaking of LEO broadband, PCMag also reports that a recent filing with the FCC shows that Starlink now serves approximately 1.3 million subscribers, or about 59% of the total satellite broadband subscriber base. And it is reported that Starlink recently received approvals to conduct testing of the cellular Starlink system that will transmit data to unmodified smartphones using T-Mobile’s licensed spectrum in the 1910-195 and 1990-1995 MHz bands. 

 

(Much, much more could be said about the FCC's treatment of Starlink, and expect Free State Foundation scholars to weigh in on that in early 2024. For now, one ought to consider reading the order released by the Commission on December 12 and the separate statements by its members, including Commissioner’s Brendan Carr and Nathan Simington)

 

Future commercial availability of smartphone access to satellite broadband networks is another example of the broadband market's dynamism. For further background, see my March 2023 blog post, "Big Announcements on Deployments to Direct-to-Device (D2D) Satellite Services." Importantly, these broadband innovations that enhance competitiveness and expand access to unserved and underserved Americans ought to be promoted with a light touch regulatory policy and not by turning those services into heavily regulated public utilities, which the Commission has proposed to do. FSF's comments filed with the Commission on December 14 of this year make the case against imposing public utility regulation on broadband services – including satellite broadband. In order to be able to ensure that all Americans have access to broadband, it is essential that the Commission promote competition and innovation by satellite providers, not suppress it. 

Report Shows Growth in Satellite Broadband

On June 20, the Satellite Industry Association (SIA) announced the release of its 26th Annual State of the Satellite Industry Report. A report executive summary or set of satellite industry highlights for the year 2022 is available online.  

According to SIA's announcement, a total of 2,325 commercial satellites were deployed in 2022, a 35% increase compared to the year before. And at year's end 2022, there were 7,316 active satellites orbiting the earth. Additionally, SIA announced that global satellite broadband subscriptions and revenue combined with satellite radio and remote sensing revenue growth totaled $113.3 billion. 

Notably, a June 23 Via Satellite article stated that "the report found that consumer broadband satellite service revenue grew 18% in 2022 to $2.4 billion, while subscribers grew 28%, to nearly 4 million. The majority of revenue comes from Geostationary Orbit (GEO) broadband, but subscriber growth is largely driven by Low-Earth Orbit (LEO) systems. And the article also observed report findings of growth in satellite mobile voice and data revues of 7%. 

 

SIA's report constitutes a reminder of the potential for next-generation satellite technologies to provide viable new choices for high-speed broadband competition and connectivity in difficult-to-reach geographic areas. That potential was discussed by former FSF Legal Fellow Andrew Magloughlin and I in our January 2022 Perspectives from FSF Scholars, "The Broadband Internet Services Market in January 2022:
5G, Cable, Fixed Wireless, Wi-Fi 6, and Fiber Are Benefitting Consumers."

Starlink Hits 400k Subscribers, Introduces Portable Dishes

Starlink recently stated to the FCC that it has 400,000 global customers, nearly tripling from the 145,000 customers it had when I last blogged about Starlink in January. This figure includes subscribers across 36 countries, and while Starlink does not specify its US-based subscribership, its broadband service is currently available in 48 states.

Starlink also recently introduced a "portability" feature. For an extra $25 per month, Starlink subscribers can bring and use their satellite dish wherever they want. Portability should be useful for activities like camping, road trips, and generally improving Internet access in rural areas and other hard-to-serve terrains.

Image Copyright: Jud McCraine. Reshared without alterations.

Portability could increase broadband competition on the basis of product quality because it makes Starlink a hybrid between fixed and mobile offerings. The feature could differentiate Starlink from fixed broadband offerings by adding dual fixed-or-mobile capability to a single subscription. And the feature could also differentiate Starlink from existing mobile offerings by enabling mobility without the need to stay in range of wireless infrastructure.

Verizon-Amazon Backhaul Deal Could Boost Intermodal Broadband Competition

In the latest example of dynamic intermodal ISP competition, Amazon announced this week that, once the satellite network launches, its Project Kuiper satellites will provide backhaul to Verizon’s fixed and mobile wireless networks in rural areas. This news is another sign of the existence of effective competition among ISPs and the growing irrelevance of distinguishing, for regulatory purposes, among various intermodal transmission platforms.

Project Kuiper is Amazon’s $10 billion low Earth orbit (LEO) satellite network that will offer high-speed broadband with a focus on rural and remote areas. The FCC approved Amazon to operate 3,236 satellites in July 2020. While these satellites are not yet deployed, Amazon is making progress towards launch. Project Kuiper likely will be the second large LEO constellation providing broadband—SpaceX’s Starlink already has launched over 1,700 satellites in LEO and is running a beta program for 100,000 broadband customers.

Credit: James T. M. Towill

While LEO satellite broadband offerings could sport innovations of their own, such as faster airline Wi-Fi and service in remote areas like oceans, I want to focus on what the Verizon-Amazon deal means for the overall marketplace. ISPs compete vigorously in most places for customers. The FCC’s 2020 Communications Marketplace Report demonstrated the extent of this competition, showing improvements with respect to both speeds and choice among providers. Free State Foundation scholars stressed the strong evidence of intermodal competition between transmission methods in comments submitted in this proceeding. While the FCC hasn’t yet adopted this view regarding the extent of the existence of intermodal competition, the Verizon-Amazon deal is further proof that intermodal competition is reality.

We discussed the emerging potential of fixed wireless as an intermodal competitor back in 2017. That potential is now reality. There are 6.9 million fixed wireless customers as of 2020, up from 4 million in 2016. Fixed wireless service is now available to 45% of US customers. Verizon alone has 150,000 fixed wireless customers after gaining a 55,000 subscribers in Q3 2021, an enormous 58% quarterly increase. T-Mobile, also seeing opportunity in fixed wireless, announced a price cut for its plans earlier this month. And the Verizon-Amazon deal for rural backhaul will ensure Verizon’s fixed wireless service is faster, more reliable, and available in more areas.

Senior Fellow Seth Cooper previously noted the importance of LEO satellites to future broadband competition in 2018 before the FCC approved any LEO satellite constellations. In that blog, Seth focused mostly on how satellite ISPs would compete for customers. The Verizon-Amazon deal is an example of just how dynamic broadband competition can be. While Project Kuiper and other satellite ISPs will certainly compete for their own customers, their provision of backhaul services will improve competitiveness for other transmission modes as well.

That the Verizon-Amazon deal improves Verizon’s offerings is an important point, because it shows how ISPs of various sorts can cooperate to form competitive offerings. Amazon, as a new market entrant, will face steep customer acquisition costs. These acquisition costs include marketing and sales investments to make customers aware of Project Kuiper's broadband offerings and convince them that they’re the right option. Verizon, as an established ISP, has a strong advantage in this area because it’s made these investments, has past success, and has a recognizable brand.

But Verizon needs additional, expensive-to-build backhaul capacity for its networks in rural areas. Amazon has already made capacity investments by manufacturing its satellite constellation. Given these facts, the companies teamed up according to comparative advantage. So Amazon provides backhaul to a customer of one—Verizon—in exchange for revenues Amazon can later invest in building out its customer acquisition strategy. And as a result, new customers get access to Verizon services, existing customers get better Verizon service, and Project Kuiper moves closer to viability.

Market entry by LEO constellations and cooperation among ISPs to create new competitive offerings are what Free State Foundation scholars mean when we say dynamic, intermodal competition is here. The deal between Amazon’s Project Kuiper and Verizon appears to be welcome news for broadband customers. The FCC should take note.

FCC Adopted NPRM to Streamline Licensing Procedures for Small Satellites

On Wednesday, the FCC adopted a Notice of Proposed Rulemaking (NPRM) that would streamline licensing procedures for small satellites. This proposal would expedite the application process and reduce fees for deploying small satellites, which have relatively short duration missions compared to large satellites and therefore should not be regulated in the same manner. The proposal also identifies a variety of frequency bands that are useful for small satellite operations.

It is commendable that the Commission is taking a nuanced approach to reducing the barriers to satellite broadband deployment by specifically identifying how different sized satellites require different regulations and frequency bands. As Free State Foundation Senior Fellow Seth Cooper stated in a March 2018 blog, satellite broadband will enhance competition and help reach new consumers, which is why it is important that the FCC continue to reduce regulatory barriers that stand in the way. And I discussed in a March 2018 Perspectives from FSF Scholars how the increasing capabilities of satellite broadband have enabled it to become a viable alternative for residential broadband in rural areas and could be an important technology for closing the gap of the digital divide.

Satellite Broadband Services Will Enhance Competition and Reach New Consumers

When it comes to the next generation of broadband services, fiber-based gigabit networks and 5G-enabled fixed wireless networks have drawn much-deserved attention. But satellite broadband services and integrated satellite and terrestrial services are becoming potent new sources of competition to the benefit of both residential consumers and enterprise customers.

Advanced geostationary orbit and emerging non-geostationary orbit fixed-satellite broadband providers are fast approaching the ability to reach residential consumers nationwide with high speeds. Competing fixed-satellite broadband services are increasingly offering consumers and businesses access with 25 Mbps, 50 Mbps, and even 100 Mbps download speeds. Near-future satellite broadband technologies are anticipated to reach terabit-level speeds.  

According to the FCC’s 2018 Broadband Progress Report, at the end of 2016, about 92.3% of the U.S. population had access to fixed broadband Internet access services offering speeds of 25Mbps/3Mbps for uploads and downloads. Fixed broadband service coverage numbers rose to 95.6% of the population when satellite broadband services are included. Importantly, fixed-satellite broadband services have the potential to quickly close the broadband coverage gap almost entirely and to give consumers who already have access to broadband services new competitive choices.  

Since 2017, the FCC rightly has encouraged satellite broadband services, including by granting new market entrant applications and by streamlining satellite service rules. Going forward, the Commission should continue making expeditious approval of satellite-based broadband services a priority. The Commission should follow through with its ongoing effort to streamline rules. Also, the Commission should reduce processing delays and at all times seek to make suitable spectrum available in a timely fashion for new satellite technologies and services, for example, like Ligado’s proposed service to use satellite-terrestrial spectrum on an integrated basis to serve primarily industrial enterprises.

Emerging Competition from Geostationary Orbit Fixed-Satellite Broadband Services: HughesNet and ViaSat

The Satellite Industry Association’s 2017 report indicates that there were nearly two million residential subscribers to geostationary fixed satellite broadband services at the end of 2016. The FCC’s 2018 Broadband Progress Report called specific attention to geostationary fixed-satellite broadband services offered by Hughes Network Systems and ViaSat: “The 2017 launches of the high throughput Jupiter 2 and ViaSat 2 satellites by Hughes and ViaSat, respectively, could further increase 25 Mbps/3 Mbps satellite offerings in the future.”

HughesNet is currently the largest provider of residential fixed broadband service, with approximately 1 million subscribers in 2017. In March of 2017, HughesNet deployed its advanced EchoStar XIX satellite, thereby doubling the capacity of its prior satellite configuration. Hughes’ reply comment in the FCC’s broadband progress report proceeding stated the EchoStar XIX enables it “to deliver broadband-defined speeds of 25/3 Mbps for residential users and 55/5 Mbps for enterprise users across the continental United States.” Meanwhile, Hughes is planning an early 2021 launch of its EchoStar XXIV/JUPITER 3 ultra-high density satellite, which “will provide residential and commercial Internet and data services, including in-flight Internet and network backhaul for remote cellular towers.” It is reported that the Echostar XXIV/JUPITER 3 will have a total throughput of 500 gigabits per second.

At the end of 2017 ViaSat had about 577,000 residential subscribers to its broadband service, according to a quarterly earnings report. On February 2 of this year, ViaSat announced the availability of its fastest residential broadband service to date. Enabled by ViaSat-2, its latest generation satellite, the new satellite broadband service has advertised speed tiers reaching 25 Mbps, 50 Mbps, and 100 Mbps in download speeds. Via-Sat’s new satellite broadband service is available across the nation and offers unlimited data for all of its plans. A San Diego Union-Tribune story indicates that ViaSat intends to be competing with HughesNet and is also “positioning its service as a higher speed alternative to DSL offerings.” And ViaSat’s future plans include the launch of its ViaSat-3 satellite, which potentially will offer 1 terabit per second download speeds.

Emerging Competition from Non-Geostationary Fixed-Satellite Broadband Services: OneWeb, Space Norway, Telesat, and SpaceX

The FCC’s 2018 Broadband Progress Report also highlighted recent agency efforts to close the digital divide by promoting non-geostationary satellite orbit (NGSO) fixed-satellite services with purported terabit-level speed capabilities. In June 2017, for instance, the Commission granted market access to SoftBank-backed OneWeb for its NGSO system. The Commission also granted NGSO applications by Space Norway and Telesat in 2017.

According to the FCC’s OneWeb Order, OneWeb’s system is set to consist of “a constellation of 720 satellites evenly distributed in 18 near-polar orbital planes, at an approximate altitude of 1200 kilometers.” OneWeb intends to use its system of numerous low-orbit satellites “to provide high-speed, affordable broadband connectivity to anyone, anywhere” in the United States, with launches planned for 2018 and 2019. Reports indicate that OneWeb’s plans include “connecting every unconnected school” by the year 2022. OneWeb’s first satellite constellation is projected to reach speeds of seven terabits per second, with successive constellations reaching significantly higher speeds.

Meanwhile, Space Norway’s planned “Arctic Satellite Broadband Mission (ASBM) system consists of two satellites in one orbit,” which would provide fixed broadband service coverage to unserved and underserved residential customers in the Artic region of the United States. Additionally, Telesat was “permitted to access the U.S. market using a proposed constellation of 117 satellites,” and thereby “enhance competition among existing and future” fixed-satellite broadband services.

Furthermore, on February 14, FCC Chairman Ajit Pai proposed that the Commission grant the application of Elon Musk’s SpaceX “to provide broadband services using satellite technologies in the United States and on a global basis.” Reportedly, SpaceX would deliver fixed-satellite broadband services using “4,425 satellites in non-geostationary orbit traveling in a tightly choreographed ballet 700 miles above the surface of the Earth.”

The FCC Should Continue Promoting Satellite-Based Broadband Technologies

The FCC’s 2018 Broadband Progress Report indicates that “[a]s of year-end 2016… over 24 million Americans still lack fixed terrestrial broadband at speeds of 25 Mbps/3 Mbps.” Also, 30.7% of Americans in rural areas as well as 35.4% of Americans on Tribal lands lacked access to fixed terrestrial broadband with speeds of 25 Mbps/3 Mbps.” Fixed-satellite broadband services – including those briefly surveyed above – can provide an important solution for reaching unserved and underserved areas. Furthermore, fixed satellite broadband platforms can offer additional, competing choices to residential consumers and businesses in those areas already covered by wireline broadband networks and soon to be covered by 5G fixed wireless networks.

Moreover, advanced satellite-based broadband technologies are necessary to fully enable the Internet-of-Things. Satellite services will be essential for transmitting geo-location information to vehicles as well as for transmitting other data to myriad types of smart devices and equipment. Pending before the Commission, for example, is Ligado’s proposed service, which would use satellite capability in combination with a terrestrial network to deliver smart device communications. If approved, the service would primarily support transportation, energy, electric utility, and public safety industry sectors. Ligado’s proposal, which depends on the use of mid-band spectrum in the 1-2 GHz range, was filed at the Commission back in December 2015. And the public comment period concluded in August 2016. Unless and until the FCC resumes its review process and approves the proposal, valuable mid-range spectrum resources will continue to go unused and generate no economic or other public benefits.

In sum, satellite technologies are poised to become increasingly important competitors in the next-generation broadband services market and essential facilitators of the Internet of Things. Accordingly, the FCC should build on its recent track record of promoting fixed-satellite broadband services. Indeed, prompt approval of new services using satellite-based technologies should remain a top priority. Streamlining of satellite service-related rules and clearing spectrum for commercial usage by satellite services should also remain imperatives.

Viasat Is Offering Satellite Broadband Speeds of 100 Mbps

On February 27, 2018, Viasat announced that it is offering a new nationwide satellite broadband service called Viasat-2, which includes unlimited access with download speeds up to 100 Mbps. It also plans to begin offering Viasat-3, a global satellite broadband service, in 2020. The increasing capabilities of satellite broadband make it an attractive alternative for residential broadband, particularly for consumers who live in rural or undeserved areas. 

Stay tuned for a forthcoming Perspectives from FSF Scholars regarding free market policies that will promote private broadband investment throughout rural areas in the United States.

FCC Paves the Way for More Satellite Broadband Deployment

Yesterday, the FCC adopted a Report and Order to modernize rules facilitating deployment of next-generation satellite systems. In a June 2017 Perspectives from FSF Scholars entitled “The Problem with Municipal Broadband and Solutions for Promoting Private Investment,” Ted Bolema and I discussed how satellite broadband is an emerging technology that could be a viable solution to closing the gap of the digital divide. Satellite broadband is accessible to 99.1% of Americans at 10Mbps down and 1 Mbps up, but innovation has enabled consumers to access speeds of 25 Mbps down and 3 Mbps up. By simplifying regulatory approval processes and relaxing requirements for antenna pointing and frequency-band usage, this Report and Order will allow satellite broadband providers to experiment with consumer-friendly innovations and deliver high-speed broadband access to rural Americans.

Process Problems Plague FCC Review of Harbinger Merger

Communications Daily recently highlighted a disconcerting facet of the FCC's conditional grant of approval in the Harbinger-SkyTerra merger. It appears that non-parties to the transaction directly affected by controversial conditions to the merger were kept in the dark about those proposed conditions because of a Commission grant of confidentiality issued a month prior to the merger approval. The episode highlights the continuing need for change that the Commission has promised in other areas. It's time to bring greater openness and transparency to the FCC's merger approval process.

The conditions adopted in the FCC's Order approving the merger include a prohibition on the merged entity’s allowing access to its spectrum by the two largest wireless carriers absent prior Commission consent. In a blog post from last month ("FCC Regulating Outside Its Orbit"), I pointed to the problem inherent in the Commission’s action. In sum, the FCC claimed for itself authority to bind not only the mobile satellite service providers that are parties to the transaction but also a power of sole discretionary approval of future business deals involving non-parties to the merger. Whereas several prior Commission merger approvals gave rise to extra-statutory regulation by condition relating to merging parties, its conditional approval of the Harbinger-SkyTerra merger marks a troublesome enlargement of the "regulation by condition" problem to unwitting non-parties.

Now added to those concerns with a seemingly open-ended condition by regulation process through FCC merger review is another peculiar dimension of agency non-transparency. The Supplement to Petition for Partial Reconsideration recently submitted to the FCC by Verizon Wireless complains about the Commission’s grant of confidentiality to the merging parties’ proposal of conditions "materially the same" as those adopted one month later in the FCC’s Order. "At no point during the month after they were first proposed," asserts Verizon Wireless, "did [it] ever receive notice that its access to spectrum and alternative network capacity was at risk of being restricted via an adjudicatory proceeding to which it was not a party." Rather, an unexplained post-approval withdrawal of confidentiality by Harbinger resulted in the disclosure of those "materially the same" conditions offered up a month before the FCC's Order.

In light of the new FCC's professed commitments to change, to openness and to transparency, one is hard-pressed to understand the Commission's decision to consider those controversial merger conditions while keeping them away from the eyes of the non-parties to be affected and the eyes of public. None of this is to suggest that Harbinger-SkyTerra merger approval was the result of a conspiracy of regulators with sinister motives conducting deals in a dark and smoky room. But the episode positively points to the need for agency reform. The Commission is undertaking reforms of its procedural rules, its ex parte rules, and its forbearance process. FCC merger review should be the next prime candidate for process reform.

The non-transparency of the FCC’s actions in approving the Harbinger-SkyTerra merger certainly bring into sharper focus the short-changing of due process principles resulting from the Commission’s merger review actions. As Verizon Wireless' supplemental petition aptly put it:

Stripped to its essence, the filing of the proposed commitments under these circumstances prevented Verizon Wireless from learning of their existence until after the Order was adopted. This new information underscores that the conduct in this proceeding denied Verizon Wireless – a target of two of the Order’s key conditions – any opportunity to be heard, and underscores the unlawfulness of the conditions themselves. This deprivation of Verizon Wireless's due process and other rights represents that antithesis of open and transparent decisionmaking, and further establishes why the conditions should be eliminated immediately.

It is a basic rule of law that the rights of parties cannot be adjudicated unless those parties are actually or constructively before the decision-maker. FCC regulation by conditions imposed on non-parties to merger transactions epitomizes arbitrary agency action and is fundamentally unfair.

Overall, the FCC's case for adopting merger conditions constraining the non-party wireless carriers appears shaky. Agency non-transparency and non-party due process problems raise serious questions about the FCC's Order. Not to mention that the FCC's Order offered no analytical reasoning tying the controversial conditions it approved with any kind of market failure or power. Taking all these shortcomings into account, the most immediately sensible thing for the Commission to do is to drop the merger conditions constraining the non-parties to the transaction. The next most sensible thing for the Commission to do is to bring its professions of commitment to change, openness and transparency to its merger review rules with meaningful process reform.

FCC Regulating Outside Its Orbit

Late last week the FCC served up another instance of "regulation by condition" through its merger approval process. Through its decision in the Harbinger-SkyTerra merger, the FCC claims authority to not only bind transacting mobile satellite service providers but also to give itself a power of sole discretion over the approval of future business dealings with the two largest wireless carriers--who are not even parties to the merger. Call it a feat of regulatory rascality.

Three FCC bureaus issued a Memorandum Opinion and Order and Declaratory Ruling that gives the green light for SkyTerra Communications to transfer control one if its subsidiaries and its licenses to operate a mobile satellite service ("MSS") and ancillary terrestrial component ("ATC") facilities to Harbinger Capital Partners Fund. As the FCC observed, "Inmarsat is the leading MSS provider," offering low-speed data and voice services and the only provider of high-speed data services over North America. SkyTerra competes with Inmarsat by providing low-speed mobile satellite data and voice-grade MSS. The private investment firm Harbinger, through a series of funds, holds voting shares of Inmarsat and debt instruments issued by Inmarsat subsidiaries. So the FCC maintained that the proposed transfer of SkyTerra's licenses to Harbinger did "raise some competitive concerns for customers of current mobile satellite services and for potential customers of future services might use the MSS bands."

However, the FCC concluded the transaction would likely have no anticompetitive effects on the current MSS market. As for future MSS, the FCC conceded that "there is considerable uncertainty about what new products all of these firms will roll out and what customer segments they could profitably serve" and that "these markets are not yet mature enough to allow us to determine the competitive effects, if any, of this transaction." Furthermore, according to the FCC:

it would be premature to evaluate the effect of this transaction on 'next-generation' mobile satellite services. Next generation services have not yet been commercially launched, and no customers yet exist. Indeed, the MSS companies' business plans, and the very nature of the service offerings, are fluid. The fact that companies have changed their plans over the past years, both in response to changing economic times and to changes in Commission rules, weighs against making any predictions about any potential harms that might arise from this transaction. Accordingly, it would be speculative as to whether any competitive harm would occur, and if there were harm, the extent of its magnitude.

The FCC pointed to significant potential benefits for consumers from the transaction: "Through Harbinger’s role as a wholesale provider, it may be a catalyst for market-changing developments in the use and sale of innovative new mass-market consumer devices." And: "If realized, Harbinger’s plans to offer 4G wireless broadband services will achieve substantial public benefits, relating to the build out and deployment of a new facilities-based broadband player that will serve more than 80 percent of the U.S. population by the end of 2015."

Ultimately, the FCC concluded that those potential benefits outweigh any potential harms. But it nevertheless made its grant of the transfer subject to conditions:

In a letter dated March 26, 2010, Harbinger made a number of commitments to the Commission and, by extension, to the public, that give us greater confidence that the promised benefits will occur. Because our conclusion that Harbinger’s acquisition of SkyTerra is in the public interest is dependent on those benefits being achieved, we are adopting Harbinger’s commitments, in Attachment 2 of its March 26, 2010 letter, as conditions to our approval. The first condition requires that if the Applicants seek to make spectrum available to either of the two largest terrestrial providers of CMRS and broadband services, they must obtain Commission approval. The second condition requires the Applicants to build a terrestrial network using Skyterra's ATC authorizations. The third condition requires the Applicants to obtain Commission approval before traffic to these largest terrestrial providers accounts for more than 25 percent of SkyTerra’s total traffic on its terrestrial network in any Economic Area.

Keep in mind that the commitments were offered by Harbinger one year after it submitted the application for transfer. And the application for transfer was placed on Public Notice by the FCC back on May 1, 2009. Such a lengthy agency delay in resolving potential anticompetitive concerns is reason enough to question just how voluntary those voluntary conditions really were. This delay and conditional approval puts the Harbinger-SkyTerra in company with other FCC merger approvals that have resulted in what has been fittingly named "regulation by condition": the FCC lets its 180-day shot clock to approve license transfers lapse, and puts the parties in a precarious position that prompts them to make "concessions" to the FCC after lengthy delays. Here, the FCC can stick a "voluntary" label on those commitments, but that doesn't negate the fact that it chose to impose them as key conditions for approval. The voluntary commitments following a year-long delay resulted in the FCC imposing itself on future MSS and wireless broadband market transactions that it would otherwise have no authority to impose.

One also has reason to ask how the FCC's conditions remedy the perceived potential anticompetitive threat posed by the transfer. The FCC pinned its hopes on Harbinger providing additional facilities-based competition in the wireless broadband market. After analyzing the current and future MSS markets, the FCC imposed conditions limiting Harbinger's ability to enter into marketplace arrangements with the two leading wireless carriers—currently AT&T and Verizon, respectively. Exactly how would such limiting conditions prevent competitive harm to the current and future MSS markets characterized by the FCC as uncertain and fluid? No market analysis or public interest analysis tied to mobile wireless broadband networks appears in the ruling or public notice.

What's more, the "voluntary" approval conditions imposed by the FCC bind not only the parties involved in the merger but also third parties or potential new third parties who had no reason to expect to be implicated by the FCC's decision. Otherwise, does anyone doubt that either of those two major wireless carriers or any of their major rivals would have weighed in during the merger's comment period? But no comments were filed in the proceeding by either of the two largest wireless carriers or their leading.

The FCC has now set up haphazard and unprincipled precedent for specifically regulating an industry or its key players through merger approvals involving smaller entities competing in the same market or in adjacent markets. Should every company, association or interest group now submit comments in merger approvals that do not directly implicate them or appear to even indirectly implicate them, just to be on the safe side? Unsurprisingly, AT&T has now filed a petition for reconsideration with the FCC.

As the FCC's Paul de Sa blogs, the conditional approval technically doesn't prevent any particular transaction. Still, it gives the FCC new oversight powers it never possessed before – and without even seeking public comment before doing so. The FCC has devised a backdoor method for inserting itself into the regulation of MSS and wireless broadband networks. The Commission should shut that backdoor on reconsideration.