Reduce Multiple Government Agency Merger Reviews

On June 11, the Connecticut Public Utilities Regulatory Authority reportedly issued an order approving the Verizon/Frontier merger. The approval is welcome news, insofar as it involves the clearing of a regulatory hurdle to the completion of a pro-competition, pro-consumer transaction. As explained in a blog post from last month, the FCC approved the Verizon/Frontier on May 16. In its order, the FCC found that there are no potential transaction-related public interest harms and that there are some likely public interest benefits from the transaction. Verizon's and Frontier's wireline services operate in different geographic territories, meaning consumers do not lose a choice of providers as a result of the merger. Moreover, Verizon is more likely to invest in and improve service in Frontier territories than Frontier would absent the merger. Verizon's acquisition of Frontier means that fiber will reach more Americans – sooner.

 

Even with the approval by Connecticut regulators, the Verizon/Frontier merger is reportedly subject to pending reviews by state regulators in Pennsylvania and California. This raises the process issue of whether overlapping reviews of proposed mergers by state regulators are likely to provide added public benefits or more likely to result in extra costs and delays due to redundant reviews. This is not a new issue; it was the subject of my December 2010 Perspectives from FSF Scholars, "Multiple Government Regulatory Reviews Burden Telecom Mergers with Too Many Conditions." Therein, I discuss the problem of compounding process costs and regulatory conditions that can result from redundant merger reviews. 

 

One approach for a more efficient, streamlined process for mergers involving interstate communications service providers is to enable a sole federal agency review process in which state regulators are encouraged to provide input regarding state-specific concerns. 

 

Also, the FCC could adopt rules or issue a declaratory order setting forth limits on state regulatory conditions for merger approval as well as limits on state-level merger review process shotclocks. Actions by state regulators that transgress those limits and conflict with federal law would be subject to federal preemption. Certainly, this approach is viable in the interstate wireless communications services context, as merger review by state public utility commissions effectively constitutes state-level restrictions on market entry contrary to Section 332(c)(3) of the Communications Act. 

 

Hopefully, Pennsylvania and California will promptly conclude their reviews of Verizon/Frontier and allow fiber broadband to timely deploy to more Americans. 

Strong Network Investment by U.S. Broadband Providers in Tumultuous 2020

Capital expenditures in networks and connectivity infrastructure by U.S. broadband providers totaled $79.4 billion in 2020, according to US Telecom's 2020 Broadband Capex Report. US Telecom's report was released on September 22.  

The $79.4 annual expenditure total is impressive considering the seismic economic disruptions and setbacks suffered by much of the U.S. economy in 2020. Last year's investment by U.S. broadband providers brings the total network capital investment by U.S. broadband providers since 1996 to a whopping $1.9 trillion. And as US Telecom's report points out, its estimates over the years likely are conservative since they exclude annual investment by small U.S. broadband providers as well as U.S. satellite broadband providers. Small providers and satellite providers made perhaps $2 billion in network investments in 2020. 

As I and other Free State Foundation scholars have pointed out in prior publications, continuing strong investment enabled U.S. broadband networks to successfully carry surging data traffic induced by COVID fears and government-imposed lockdowns in 2020. 

For more, see the 2020 Broadband Capex Report as well as a brief article about it by US Telecom's Mike Saperstein.  

FCC Ruling on Pole Attachments Will Clear Obstacles to Broadband Deployment

On July 29, the FCC's Wireline Competition Bureau issued a Declaratory Ruling to clarify to important points regarding the Commission's pole attachment rules. The ruling prohibits "blanket bans" by utility pole owners on attachments to any portion of a pole. It also prohibits utility pole owners from requiring attachers to give up their rights under the law and the Commission's rules without receiving corresponding benefits. The Declaratory Ruling is a follow-up to the Commission's 2018 Wireline Infrastructure Order. 

Blanket bans as well as attempts to coax attachers to give up their rights for no gain can significantly impede broadband infrastructure deployment. The FCC's Declaratory Ruling clears away those obstacles, and likely will facilitate speedier deployment to unserved Americans. The Commission should be credited for taking this action.  

As mentioned in my July 28 blog post, the Commission is now considering a worthy petition that, if adopted, would reduce barriers to attaching fiber cables to replacement utility poles in unserved areas and expedite resolution of pole attachment complaints. 

New Wireline Order Will Advance Fiber and 5G Deployment

On June 7, 2018, the FCC adopted a Second Report and Order that will accelerate the transition from legacy networks and services to next-generation networks and services and will eliminate FCC regulations that unnecessarily raise costs and slow broadband deployment. In March 2018, I authored a Perspectives from FSF Scholars titled “Reaching Rural America: Free Market Solutions for Promoting Broadband Deployment.” In the paper, I discussed ways Congress, the FCC, and state and local governments can remove barriers to entry into the broadband market to spur competition and advance deployment in rural and underserved areas. In particular, this wireline Order will reduce regulatory costs for broadband providers and advance the deployment of fiber and 5G networks.

A June 2017 paper by CMA Strategy and Corning found that the adoption of all of the proposed rules in the wireline Notice of Proposed Rulemaking (NPRM) would increase fiber broadband penetration by 26.7 million premises (residential and businesses), which corresponds to over $45 billion in capital investment. The paper also found that adoption of the full NPRM would increase 5G broadband penetration by 14.9 million premises, which corresponds to $24 billion in capital investment. For both fiber and 5G providers, over 95% of the $69 billion would be invested in rural and suburban areas. That means that the FCC’s wireline Order could lead to an additional $42.8 billion in capital investment from fiber providers in rural and suburban areas and an additional $22.8 billion in capital investment from 5G wireless providers in rural and suburban areas.

By expediting application processes and eliminating unnecessary requirements designed for legacy networks, the Second Report and Order in addition to a Report and Order adopted in November 2017 will modernize regulations and could lead to an additional $69 billion in fiber and 5G broadband investment.