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. 

FCC Opens New Inquiry into the State of Broadband Deployment

On September 6, the FCC announced that it was opening its eighteenth inquiry on the state of broadband in the U.S., which is expected to culminate in the next iteration of the Commission’s Section 706 report. Under Section 706(b) of the Telecommunications Act of 1996, the Commission is required to annually determine "whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion." In other words, for the upcoming report, the Commission is required to assess whether broadband Internet access service – an advanced telecommunications service under the statute – is being timely deployed to all Americans.

Earlier this year, the Commission initiated a proceeding for its forthcoming Communications Marketplace Competition report – a different report that includes an assessment of the broadband market over the previous two years. In public comments filed in June of this year, Free State Foundation scholars wrote: "In 2022 and 2023, overall conditions in the broadband Internet services market were effectively competitive, in many instances even more so than in 2020 and 2021 when this was already the case." FSF's comments cited publicly available data points, including broadband provider quarterly reports and analyst estimates, about fiber deployments, cable broadband network upgrades and footprint expansion, nationwide 5G network upgrades and new deployments, 5G fixed wireless access (FWA) entry in the residential broadband market, cross-platform competition from cable-hybrid wireless providers, and improvements in satellite broadband capabilities to support that conclusion. 

 

The pro-deployment trends from 2022-2023 identified on FSF's comments in the 2024 Communications Marketplace Competition Report proceeding appear to support an affirmative answer to the question that the Commission is addressing in its upcoming Section 706 report. Yet the Commission's just-opened Section 706 proceeding will provide a forum for considering more recent data about availability and deployment progress and enable a more definitive determination about the current state of ongoing broadband deployment. 

 

Expect Free State Foundation scholars to have more to say this year about the state broadband deployment to all Americans. FSF's public comments from December 2023 that were filed in the Commission's previous Section 706 report proceeding can be found on FSF's website.

PRESS RELEASE: FSF Files Comments in Response to the FCC’s “Section 706” Inquiry

 

Free State Foundation President Randolph May and Senior Fellow Andrew Long filed comments with the FCC today in response to the Commission’s “Section 706” Inquiry.

Immediately below are four paragraphs excerpted from the beginning of the Introduction and Summary of the Free State Foundation’s extensive data-rich authoritative comments.

 

The plain text of Section 706 posits two straightforward empirical queries. One, to what extent is "advanced telecommunications capability" – that is, broadband Internet access at sufficient speeds to satisfy actual consumer needs – currently available to all Americans? And two, with respect to those locations where "broadband" is not yet available, is it being deployed in a reasonable and timely fashion? Thanks to the Broadband DATA Act and the Commission's implementing efforts, for the first time interested parties participating in a Section 706 inquiry have at their disposal an official, communal data source upon which responses can be based: the National Broadband Map.

Consequently, these questions never have been so easy to answer – nor have the responses ever been so incontrovertibly clear. Data recently made available by Chairwoman Jessica Rosenworcel (though curiously not included in the Section 706 NOI itself) reveals that, as of May 2023, only 7.2 million out of a total of 115 million serviceable locations – just over 6 percent – were unserved. Incredibly, and at the same time the accuracy of the data was improving, the number of unserved locations shrank by more than 13 percent, or 1.1 million, in only six months. Thus, with reference to the specific metric called for by Congress and developed by the FCC itself, broadband undeniably is both available and being deployed in a reasonable and timely fashion.

Further, the Biden Administration's "Internet For All" initiative, which encompasses a dizzying number of federal subsidy programs administered by a worrisome number of different agencies, is in the process of injecting tens of billions into the network infrastructure construction pipeline. As touted in a June 2023 White House press release regarding the $42.45 billion Broadband Equity, Affordability, and Deployment (BEAD) Program, "President Biden and Vice President Harris are delivering on their historic commitment to connect everyone in America to reliable, affordable high-speed Internet by the end of the decade" (emphasis added).

Thus, there should be no doubt: $2 trillion and counting in private investment since 1996 has brought broadband to the vast majority of Americans, and existing federal subsidy programs are doling out tens of billions so that even the most cost-prohibitive locations are being connected. There is an inevitable lag between the commitment of funds and when networks become operational – one that the Commission could do more to shorten, especially with respect to pole attachment disputes, permitting, access to rights of way, and other bureaucratic red tape – but with an absolute minimum of $140 billion in taxpayer dollars committed to closing those digital divides that remain, not to mention matching funds as well as state and local money, there is every reason to conclude that nothing is standing in the way of universal broadband availability.

 

Opensignal Report Shows Mobile Broadband is Ramping Up in Rural America

My Perspectives from FSF Scholars paper, "Resurgence in Broadband Deployment Vindicates FCC's Pro-Investment Policies," focused on data cited in the FCC's 2019 Section 706 report and the Commission's policy focus on closing the digital divide. To that end, encouraging broadband deployment progress in un-served and underserved rural areas is particularly important. In "Mobile Experience in Rural USA– An Operator Comparison," Opensignal's Francesco Rizzato assesses rural broadband availability by mobile broadband provider and according to different geographic and performance metrics. The March-to-June 2019 data cited in this Opensignal report provides another indicator that 4G mobile broadband (including service with 10 mbps/3 mbps speeds) is continuing to be reasonably and timely deployed to all Americans. 

For more, check out Opensignal's report.

The Commission can continue to encourage investment in broadband infrastructure to rural areas by following through on policy initiatives identified in that Perspectivespaper. Additionally, the Commission ought to clarify the law regarding collocations and modifications to existing cell sites. For more on that, see my Perspectives paper, published today, titled "FCC Should Clear Legal Obstacles to Wireless Infrastructure Upgrades."

The FCC's Municipal Broadband Preemption Order Should Have Been Avoided

On August 10, 2016, the U.S. Court of Appeals for the Sixth Circuit reversed the Federal Communications Commission's (FCC) 2015 Municipal Broadband Preemption Order, which attempted to override state laws in North Carolina and Tennessee that restricted the use of municipal broadband. FSF scholars have declared that the FCC’s order was one of the most far-reaching and far-fetched attempted power grabs in the agency’s history. FSF scholars also have stated that the language of Section 706 of the Communications Act to remove barriers to infrastructure investment and to "promote competition in the telecommunications market" provides no clear statement of intent to authorize preemption of state laws concerning broadband networks owned by municipalities. 

In an August 12 blog in The Federalist Society entitled “Sixth Circuit Ruling Stops FCC’s Unlawful Municipal Broadband Preemption,” FSF President Randolph May and Senior Fellow Seth Cooper recapped the Sixth Circuit’s decision to use the Supreme Court’s precedent in Nixon v. Missouri Municipal League (2004). The legal reasoning behind the decision in Tennessee v. FCC (2016) is simple and obvious: “The force of the clear statement rule… makes the intent of Congress clear in this case: § 706 does not authorize the preemption attempted by the FCC.” Of course, FSF scholars warned the FCC of its misguided and fictional legal authority in their August 2014 comments.

On August 17, 2016, Seth Cooper published an article in The Washington Times entitled “Rescuing Broadband from Government Interference.” From a legal perspective, Mr. Cooper says that even students in Constitutional Law 101 understand that local governments are political subdivisions of their states, and therefore they would recognize that the FCC has no authority to preempt state laws. And from an economic perspective, Mr. Cooper explains why municipal broadband harms consumers and taxpayers. He says that government should not compete against the market providers they regulate, because the dual role of competitor and regulator creates favoritism over private providers in granting permits and licenses. Such favoritism causes uncertainty among market providers and likely stifles private investment, leading to fewer consumer benefits than what would occur in the market absent a municipal broadband provider. Mr. Cooper also states that municipal broadband projects often fail and local taxpayers end up covering the multimillion-dollar bailouts, constraining the amount of money the local government could spend on more valuable programs.

Whether from a legal or economic perspective, the Sixth Circuit’s decision to reverse the FCC’s order creates a framework for efficient policy. At the Free State Foundation’s March 2016 Telecom Policy Conference entitled “The FCC and the Rule of Law,” Daniel Lyons, a member of FSF’s Board of Academic Advisors, said that if the FCC had a better understanding of the rule of law, the Municipal Broadband Preemption Order and the subsequent Tennessee v. FCC court case could have been avoided:

One thing I found interesting, relating back to the earlier conversation, is the way rule of law issues are playing out in the municipal broadband proceeding. One of the things that's long given me comfort is the fact that the Chairman is in the good hands of Ambassador Verveer. I always get a little bit nervous when nonlawyers -- and I say this as a lawyer, right? -- are in the chairman roles because I'm much more concerned that the agency gets driven by questions about policy than about questions about rule of law. And they will say, "Well, the courts take care of the rule of law issue." I think the muni broadband example is a good one. I think the Chairman has a pretty good idea of where the law ought to go in this area. Unfortunately, the path that he's taken is pretty clearly foreclosed by the Nixon vs. Missouri Municipal League precedent. And it becomes very difficult to drive the agency in that direction and force the legal side of the house to engage in the types of really legal gymnastics that they had to engage in before the Sixth Circuit last week in order to try to defend that position. Ultimately, the Sixth Circuit is almost certainly going to strike that down. The question it raises from a rule of law perspective is whether that should've happened in-house long before. I mean with all due respect.

Daniel Lyons is not the only expert who predicted the Sixth Circuit’s reversal of the FCC’s order. At the same conference in a separate panel called “Perspectives on Hot-Topic Communications Issues,” Brad Ramsay, General Counsel/Director of the Policy Department at the National Association of Regulatory Utility Commissioners (NARUC), issued his opinion regarding the action the Court might take:

I still would be very surprised if any three judges or any circuit would want to uphold the FCC in these circumstances given the precedent from the Supreme Court in Nixon. I looked at this case. This is basically the FCC telling the state whether or not it's going to get into the broadband business and where. The problem with the FCC's analysis is that it treats the state and the state organs as two separate entities. Basically it says, "State, this subdivision of the state is not really part of you, it's an independent entity and you can't tell it what to do." It's completely flawed analysis… So I'll be very surprised if this gets upheld at the Sixth Circuit. And if it does, I predict, with as much confidence as I have in the federal judiciary, which, granted, is not a lot, it'll go to the Supreme Court and get reversed if they do.

FSF scholars and prominent experts in this field frequently articulated why the FCC’s Municipal Broadband Preemption Order was unlawful and should have been avoided. It is unfortunate that valuable resources (time and taxpayer money) were wasted during the FCC’s proceeding and the subsequent court case. On the hand, hopefully the Sixth Circuit’s decision has halted the FCC’s attempts to preempt state laws.

FCC GON Wild

Last week, briefs were filed in the court of appeals by parties challenging the FCC’s preemption of a Tennessee law imposing restrictions on a local government’s ownership and operation of a broadband network. In the same order, the Commission also preempted a similar North Carolina law. In FCC acronym-land, a government-owned network is commonly referred to as a GON.

As in … FCC GON wild.

I have never suggested that, as a matter of policy, GONS should be prohibited in all circumstances at all times. If there are particular areas that private sector broadband providers simply are not serving, and do not intend to serve, then a GONS, or some form of public-private partnership, may be appropriate. But these cases, by far, should be the exception, not the rule.

As my colleague Seth Copper and I explained in a May 2015 article, FCC Preemption of State Restrictions on Government-owned Networks: An Affront to Federalism, in the Federalist Society publication Engage:

A threshold issue is the problematic nature of government assuming the dual role of both enforcer of public law and competitor to private sector providers. This duality poses inherent conflicts-of-interest. For example, local governments may excuse their own networks from running the bureaucratic permitting and licensing gauntlet through which private providers must pass. Fear of disfavored treatment deters private market investment in broadband infrastructure. In addition, questions concerning the institutional incentives and competency of local governments operating capital-intensive advanced communications networks in rapidly innovating markets heighten the concerns of local taxpayers. And speech restrictions that are common in the terms of services of government-owned networks raise significant First Amendment issues.

So GONS are problematic from a policy perspective. But I want to use the occasion of the filing of the initial appellate briefs to emphasize the highly questionable nature of the FCC’s preemptive action as a matter of law. The FCC’s action raises rule of law concerns that are at the heart of our federalist constitutional system.

Our Federalist Society article focused primarily on theses serious legal issues. To my mind, the FCC’s preemption order is sufficiently beyond the authority delegated to the agency by Congress, and beyond the bounds of the Constitution’s federalist structure, that I suggest this is a case of the FCC GON wild. Below are a few excerpts from the article that highlight why the Commission’s action is likely to be overturned in court.

*   *   *

“The most obvious difficulty with basing preemptive authority on Section 706 is that the statute’s language nowhere authorizes it. Section 706(a) provides:

The Commission and each State commission with regulatory jurisdiction over telecommunications services shall encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans...by utilizing, in a manner consistent with the public interest, convenience and necessity, price cap regulation, regulatory forbearance, measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment.

Preemption is not one of the enumerated measures or methods. Inferring preemption from Section 706(a) is also difficult because of its poor fit with the statutory structure. Section 706(a) recognizes a role both for ‘[t]he Commission and each State commission with regulatory jurisdiction over telecommunications services.’ Federal preemption of state laws imposing geographic or other forms of restrictions or safeguards on government ownership of broadband networks disregards the role of state officials that the statute explicitly acknowledges.”

*   *   *

“In a 1997 order, the FCC rejected a petition requesting it to preempt state law restrictions on municipal telecommunications networks based on Section 253(a) of the Communications Act. … As the FCC’s 1997 order declared: ‘[S]tates maintain authority to determine, as an initial matter, whether or to what extent their political subdivisions may engage in proprietary activities.’ It also observed that preemption ‘effectively would prevent states from prohibiting their political subdivisions from providing telecommunications services, despite the fact that states could limit the authority of their political subdivisions in all other respects.’

This agency precedent cannot be avoided simply because Section 706 is now invoked as opposed to Section 253. The states’ authority to decide ‘whether or to what extent their political subdivisions may engage in proprietary activities’ is not altered just because a particular FCC majority wants local governments to offer broadband services. Federalism principles previously recognized by the FCC, grounded in the Constitution, do not lend themselves to dismissals based on ‘reasonable explanations’ about current Commission policy objectives. For that matter, the 1997 Order recommended states consider restrictions on government-owned networks rather than totals bans. The FCC’s present about-face regarding such restrictions hardly seems reasonable. Indeed, it seems arbitrary and capricious.”

*   *   * 

“The clear statement doctrine requires that Congress speak with unmistakable clarity before federal preemption of ‘a decision of the most fundamental sort for a sovereign entity’ will be considered. The rule is in ‘acknowledgment that the States retain substantial sovereign powers under our constitutional scheme, powers with which Congress does not readily interfere.’ In Gregory v. Ashcroft (1991), the Court reiterated its longstanding jurisprudential requirement that “[I]f Congress intends to alter the ‘usual constitutional balance between the States and the Federal Government,’ it must make its intention to do so ‘unmistakably clear in the language of the statute,’” and that “Congress should make its intention ‘clear and manifest’ if it intends to pre-empt the historic powers of the States…. No fair reading of Section 706 can find any clear statement of congressional intent that the FCC can interpose itself between states and their political subdivisions. And Section 706 cannot be read to clearly state that Congress intended to preempt state authority over decisions about whether and to what extent to allow its political subdivisions to offer proprietary services.”

*   *   *

“Finally, and importantly, the FCC’s preemption of state restrictions on government-owned broadband networks violates constitutional federalism principles. The Supreme Court has stressed that: ‘The Framers explicitly chose a Constitution that confers upon Congress the power to regulate individuals, not States.’ The Constitution established ‘two orders of government, each with its own direct relationship, its own privity, its own set of mutual rights and obligations to the people who sustain it and are governed by it.’ Indeed, ‘[t]he Constitution thus contemplates that a State’s government will represent and remain accountable to its own citizens.’

Local governments are created by state constitutions through state legislation. They are accountable to the citizens of the respective states in which they exist. Thus, the Supreme Court has long recognized that “[s]tate political subdivisions are ‘merely ... department[s] of the State, and the State may withhold, grant, or withdraw powers and privileges as it sees fit.’” Our constitutional regime does not recognize, as a matter of legal status, ‘citizens’ of Chattanooga or Wilson. It does recognize citizens of Tennessee and North Carolina. And the Constitution confers upon these citizens of states the authority to exert their will through their elected representatives to adopt laws that restrict municipal activities. In essence, this is what the Supreme Court reaffirmed in Nixon, declaring that ‘preemption would come only by interposing federal authority between a State and its municipal subdivisions, which our precedents teach, are created as convenient agencies for exercising such of the governmental powers of the State as may be entrusted to them in its absolute discretion.’”

A Number That Does Not Compute – 706: FCC Preemption Will Cost Taxpayers Millions

By Deborah Taylor Tate

Most Americans probably do not associate anything in particular with the number “706.” However, Section 706 of the Telecommunications Act has recently taken the national spotlight after a pointed message from the present Federal Communications Commission Chairman, Tom Wheeler: “I believe the FCC has the power – and I intend to exercise that power – to preempt state laws that ban competition from community broadband.”

Interestingly, the Electric Power Board of Chattanooga in my home state of Tennessee has filed a petition before the FCC requesting the agency to do just that: preempt long-standing Tennessee state law which limits expansion of city services into another city’s boundaries.

Why? Because the publicly-owned Electric Power Board (EPB) decided to enter the broadband/cable TV arena not just in Chattanooga, but in other surrounding municipalities as well. The EPB isn’t the first “muni” government to venture into the broadband business, and if the FCC Chairman gets his way, it certainly won’t be the last.

EPB first hit the national news when it announced its ultra-high-speed fiber optic network, capable of providing Internet speeds up to one gigabit per second, along with a cable TV offering. Adding competition and choice for consumers is typically a good thing. In the case of EPB, however, electric customers, rather than private investment, were responsible for financing EPB’s $160 million loan to its new telecom arm. In addition, EPB received approximately $111 million dollars from President Obama’s “stimulus” bill – so we, the taxpayers, funded that next chunk of funding. And the remaining approximately $29 million is to be paid by the new customers of this broadband/cable offering.

In essence, if you are an EPB customer, you might be surprised to discover that of an approximately $300 million dollar cost for your new government broadband provider, users of the system will be paying only about 10 percent directly, with another 53 percent financed through loans. Taxpayers will be left to foot the balance.

While many blithely tout the benefits of government-owned broadband networks, very few have seriously analyzed the cost to taxpayers. As Andrew Moylan and Brent Mead of the National Taxpayers Union rightly asked in 2012: “How much debt is associated with these projects? How high is the risk of a project failing? If it does fail, how much will taxpayers be on the hook for? Can government officials ever hope to run a business when many of them can’t even balance a budget or restrain spending?”

EPB could have easily looked across our state to a similar muni project, Memphis Networx, to garner some useful economic perspectives – and some lessons learned. While at one time that muni broadband network actually had a revenue stream of $5 million, it never once turned a profit, and the entire network was sold in 2007 for $11.5 million – a loss of more than $28 million.

And when questioned about how many subscribers were being served by EPB’s supposedly fabulous new “gig” service, EPB spokeswoman Danna Bailey said, “We have a handful of residential gigabit-per-second subscribers and nearly two dozen businesses.” I wonder whether the thousands of other Chattanooga taxpayers would consider that a good use of their $270 million in taxpayer dollars or whether they have figured out the per capita cost of this platinum-plated “gig” service.

Whether in Philadelphia, PA, or Burlington, VT, sadly, local municipal broadband across the country has often ended up costing the taxpayers – rather than benefitting them.

Being both a public entity and a private business at the same time creates an inherent conflict of interest and potential for abuse of power not allowed with regard to other types of municipal services. (For a complete review of the abuse of power issues, see the Free State Foundation’s comments, recently filed with the FCC.)

As compelling as these public policy reasons are for generally eschewing the promotion of government-owned broadband systems, they are above and beyond the real crux of the matter, which is that the FCC lacks legal authority to preempt state bans in the first place. And, that could not be clearer than in the EPB case.

There actually is a provision in the Communications Act which does provide narrow and limited legal authority to preempt some state laws. This provision was specifically and narrowly crafted and has been upheld by courts. Early on, proponents of muni broadband attempted to use that same section to override state laws restricting municipal telecom networks. However, the U.S. Supreme Court rejected this claim, clearly siding with state legislative authority. Further, in looking at the legislative history surrounding the specific language of Section 706, while Congress contemplated giving the FCC preemption authority in an early draft, it expressly chose not to include that language in the final version.

I am one of the very few FCC Commissioners who previously served as a “state official,” and I spoke often about the need to be a “humble regulator,” especially as such humility relates to unauthorized federal action and overreach. Preemption is not only wrong from a fiscal and legal perspective, but, also, more importantly, it is short-sighted public policy. We need to continue to fuel the incredible innovation and expansion of the Internet and its progeny, the productive engine of our intellectual economy and the sheer explosion of consumer tech usage in our daily lives. Section 706 needs to be used as a carrot and not a stick.

We all want every American – especially our children – to have access to the vast opportunities that the Internet and broadband can provide. We want to insure that the full breadth of educational advantages are available to everyone – along with the opportunity to participate in this vibrant, multi-sector technological economy. And we certainly want to keep our nation’s competitiveness strong in what is a global economy. So, we welcome Chairman Wheeler’s efforts to promote the expansion and adoption of broadband.

But Chairman Wheeler, like President Obama, should understand that there are very real, legal limitations on just how far “a pen and a phone” can go in a constitutional democracy. As a historian, Chairman Wheeler should appreciate the federalist structure that our forefathers established in the Constitution. As James Madison put the matter in Federalist Paper 45: “The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.”