FWA and Cable MVNO Services Gains Continue in Mid-2024

Fixed wireless access (FWA) residential broadband services as well as cable wireless mobile virtual network operator (MVNO) services are the faces of cross-platform competition in today's communications marketplace. Second quarter results for 2024 show continued growth of these services.

On July 31, T-Mobile announced that it added 406,000 FWA subscribers during the second quarter of 2024, upping its overall FWA subscriber total to 5.6 million. On July 22, Verizon announced that it added 378,000 FWA subscribers for a total of 3.8 million. On July 24 AT&T announced that it added 139,000 subscribers to its AT&T Internet Air service, reportedly growing its total FWA subscriber count to about 350,000.

News articles – including this June 6 LightReading article, "FWA in the USA: Getting ready for Phase 2," which helpfully summarizes different analyst takes on the future of the service – indicate that FWA continues to pose a particularly strong competitive challenge to cable broadband services. 

However, cable broadband providers continue attracting new subscribers to their MVNO wireless service offerings. According to a July 26 announcement by Charter Communications, its Spectrum Mobile service added 557,000 subscribers during the second quarter of 2024. At the quarter's end, Spectrum Mobile had 8.8 million subscribers. Additionally, Comcast announced on July 23 that it had gained 322,000 subscribers to Xfinity Mobile during the second quarter, increasing its subscriber total to 7.2 million. 

 

As I wrote in a blog post on May 3 of this year, "[t]he proper response by the FCC to the growth of FWA and cable MVNO in the communications market should be to emphasize market competition as a safeguard to consumer welfare rather than stringent government regulation." At that time, I observed that the Commission chose the wrong response on April 25 by re-imposing Title II public utility regulation on wireline and wireless broadband Internet Access services. However, the Sixth Circuit issued an order imposing a stay on the FCC's Safeguarding and Securing the Open Internet that keeps the regulation from going into effect while the legal challenge before the court proceeds to the merits. Free State Foundation President Randolph May responded to the court's stay order in an August 2 press release titled "The FCC Should Turn to Productive Endeavors." 

 

One productive endeavor that the Commission should be pursuing is increased spectrum availability for commercial use. As FSF President May and I wrote in FSF’s July 2024 public comments to the FCC for its forthcoming Communications Marketplace Competition Report:

 

To further promote competition, innovation, and investment in the broadband marketplace, the Commission should work proactively to make more spectrum available for commercial use and by removing regulatory barriers to broadband deployment… There is particularly strong demand for additional mid-band spectrum. The Commission ought to prioritize the lower 3.1-3.45 GHz band for study and prompt repurposing… Although proposals for repurposing different bands are at different stages of development and each faces unique challenges, the Commission should advance every proposal for spectrum that may realistically be suitable for commercial uses – whether on a licensed or unlicensed basis. A larger spectrum supply will enable more competitors to serve more Americans with next-gen services. 

FWA and Cable MVNO Services Make More Gains in Early 2024

The reality of cross-platform competition in today's communications marketplace is evidenced by the continued growth of fixed wireless access (FWA) residential broadband services as well as cable wireless mobile virtual network operator (MVNO) services.

On April 25, T-Mobile announced that it added 405,000 FWA subscribers during the first quarter of 2024, bringing its overall FWA subscriber total to over 5 million. Verizon announced that it added 203,000 FWA subscribers during the first quarter, resulting in a total of 3.4 million. AT&T announced that it added 110,000 subscribers to its new FWA service during the first quarter, increasing its total FWA subscriber count to more than 200,000. 

It is reported that T-Mobile set an initial target of having 7-to-8 million FWA subscribers in 2025 and that Verizon has set a target of 4-to-5 million FWA subscribers for next year. Additionally, New Street Research reportedly has predicted that AT&T will be adding approximately 180,000 FWA subscribers per quarter during the remainder of 2024, with potential increases over the quarters that follow. It is reported that there is some difference in outlook among market analysts such as TD Cowen and Moffett Nathanson regarding how much competitive pressure FWA will put on cable broadband in the near term. 

 

Meanwhile, cable broadband providers continue attracting new subscribers to their MVNO offerings. According to an April 26 announcement by Charter Communications, its Spectrum Mobile service added 486,000 subscribers during the first quarter of 2024. At quarter's end, Spectrum Mobile had 8.3 million subscribers. Additionally, Comcast announced that it had gained 289,000 subscribers to Xfinity Mobile, increasing its subscriber total to 6.9 million. 

 

The proper response by the FCC to the growth of FWA and cable MVNO in the communications market should be to emphasize market competition as a safeguard to consumer welfare rather than stringent government regulation. Unfortunately, the Commission took the latter approach on April 25 when it voted 3-2 to subject broadband Internet access services to public utility regulation. The Free State Foundation filed comments and reply comments in the FCC’s Safeguarding and Securing the Open Internet proceeding that opposed public utility regulation. 

AT&T Launches 5G Fixed Wireless Access Service

On Tuesday, AT&T announced the introduction of AT&T Internet Air, its 5G fixed wireless access (FWA) home Internet service, in 16 markets including Los Angeles, Philadelphia, and Detroit. Previously offered only to existing digital subscriber line (DSL) customers in certain areas, the expanded offering of AT&T Internet Air represents yet another milestone in the rapid rise of FWA as a viable competitive alternative to traditional wireline high-speed home Internet access.

In "Fixed Wireless Access Is Boosting Rural Broadband and Consumer Choice," an April 2022 Perspectives from FSF Scholars, FSF Director of Policy Studies and Senior Fellow Seth L. Cooper touted not only FWA's ability "to connect several million Americans in rural and small markets," but also to compete with wireline providers for home Internet customers in more populated markets. This announcement that AT&T is targeting major cities with its FWA service, along with the rapid FWA subscriber gains of T-Mobile, Verizon, and U.S. Cellular, confirm both of those predictions.

Source: AT&T Blog

In a blog post earlier this month, Mr. Cooper highlighted second-quarter FWA subscriber numbers from T-Mobile (509,000 net additions, for a total of 3.7 million), Verizon (384,000 net additions, for a total of 2.3 million, and U.S. Cellular (over 100,000 total subscribers). Notably, these services did not exist prior to 2021.

According to the Leichtman Research Group, T-Mobile and Verizon combined have added over 800,000 FWA subscribers for 5 quarters in a row. In the second quarter of 2023 alone, they added almost 900,000 subscribers – compared to less than 10,000 new cable broadband subscribers and a loss of nearly 62,000 by the top wireline phone companies.

In Comments filed in the FCC's 2022 Communications Marketplace Report proceeding, Free State Foundation scholars argued that the Commission should:

[C]ease its exclusively piecemeal evaluation of broadband marketplace competition that continues to rely on "siloed" service definitions. Instead, it should evaluate competition with a broader "broadband market" definition that takes into account fiber, cable, mobile, FWA, and satellite platforms. This broader outlook would more accurately reflect market realities and be a better guide to formulating Commission policy.

Cable MVNOs and FWA Continue to Gain Subscribers in 2023

One of the most intriguing facets of today's communications marketplace is the intermodal competition enabled by cable wireless mobile virtual network operators (MVNOs) and fixed wireless access (FWA) residential broadband services offered by mobile wireless providers. In late July, both cable MVNOs and FWA providers released positive quarterly reports for the second quarter of 2023, providing an updated picture of these increasingly popular services.

During the second quarter of this year, the gains continued for cable MVNO Charter's Spectrum Mobile. According to its quarterly report that was released on July 31, Spectrum Mobile added 648,000 lines during the end of the quarter. That brought Spectrum Mobile's total to more than 6.6 million mobile lines. And Comcast's Xfinity, which released its quarterly report on July 27, had 316,000 net wireless line additions during the quarter. Xfinity now has just under 6 million wireless lines. 

 

Meanwhile, T-Mobile released its quarterly report on July 27. T-Mobile had 509,000 net subscriber additions for FWA high-speed Internet service, and it ended the quarter with 3.7 million FWA subscribers. Also, Verizon released its quarterly report on July 25. Verizon had 384,000 net additions for its FWA service, bringing its FWA subscriber total up to almost 2.3 million. Notably, U.S. Cellular reported on August 1 that it has surpassed 100,000 subscribers to its FWA service. 

 

Both cable wireless MVNO and FWA services depend on spectrum – both unlicensed and licensed. Right now, the most pressing need is more licensed spectrum to support 5G wireless services, including FWA. The best thing that Congress can do to fill this need is to pass H.R. 3565, the Spectrum Reauthorization Act of 2023. For more on this legislation, see FSF Senior Fellow Andrew Long's July 21 blog post, "Congress Should Reinstate the FCC's Spectrum Auction Authority."

On Intermodal Competition for Broadband, the FCC's Competition Report Falls Short

On January 24, Free State Foundation published Senior Fellow Andrew Long's Perspectives from FSF Scholars, "On Video, the FCC's Competition Report Falls Short." In that incisive paper, Mr. Long focuses on the 2022 Marketplace Competition Report's treatment of the competitive market and Commission policy for video programming distribution. The evidence of video programming distribution market transformation brought about by the observable ongoing subscriber declines for multi-channel video programming distributor (MVPD) services and by continuing increases in subscriptions for Internet-based alternatives is overwhelming. This transformation has uprooted the perceived analog cable distribution bottleneck upon which the legacy video regulatory apparatus depended. Yet many outdated restrictions on MVPD services remain firmly in place. And Mr. Long makes a strong case that the FCC's report is not fully compliant with the RAY BAUM's Act of 2018's requirements that the Commission identify laws and regulations that pose barriers to competitive expansion of existing providers of communications services and that the agency lay out an agenda for addressing those challenges.

But there is another area in which the FCC's 2020 report comes up short: assessing intermodal competition in the broadband Internet services market. As acknowledged by the report, the RAY BAUM's Act states: "As part of its evaluation, the Commission must consider all forms of competition, including 'the effect of intermodal competition, facilities-based competition, and competition from new and emergent communications services.'" Yet the report never engaged in any substantive assessment of the effects of competition across different broadband technology platforms. Perhaps the closest the report gets is in paragraph 157, which touches on wireline/wireless substitutability:  

Many households continue to subscribe to both fixed and mobile broadband service, suggesting that these separate services offer benefits that are either complementary or independent of each other. Technological innovation in and increased deployment of both the mobile wireless and fixed broadband services markets have broadened consumers’ possible choices of how to access the Internet. 

This shortcoming of the 2022 report is the subject of Commissioner Brendan Carr's statement partially approving and partially concurring in the report: 

When we adopted the Commission’s prior Communications Marketplace Report in 2020, I voted to approve in part and concur in part because, in my view, we could have gone further in recognizing the converged market for connectivity. I continue to have that view this go around. 

FSF's comments to the FCC for its 2020 Communications Marketplace Report also called for a shift away from the siloed approach to discrete service technologies and toward a more serious intermodal competition assessment. To that end, FSF scholars recommended that the Commission adopt a product market definition that encompasses different technologies that provide broadband Internet services. (Those same views were expressed in short form in comments filed by FSF for the 2022 report.) FSF's comments for the 2020 report regarding intermodal competition assessments could double as a critique of the 2022 report, as competition from and among fiber, 5G, FWA, and cable MVNOs continues to increase. 

Communications Marketplace Report Nears Release

On December 13, the 2022 Communications Marketplace Report was put on circulation at the FCC, indicating that the report is nearing approval. The Commission is required to prepare and release the report by the end of the year.

Free State Foundation President Randolph May, Senior Fellow Andrew Long, and I filed comments and reply comments in the FCC's 2022 Communications Marketplace Report proceeding. As FSF's July 2022 comments stated available data from 2020 and 2021 support the conclusion that the broadband and video services markets are effectively competitive" and that "each of these markets increasingly is characterized by effective intermodal competition." Regarding the broadband Internet access services, our comments cited a host of data regarding competing provider coverage, next-generation network deployment, speeds, and pricing that point to the competitive and innovative state of the market. 

 

In the time since FSF's comments were filed, news stories and reports – about fixed broadband speed improvements, fiber broadband subscriber growth, fixed wireless access (FWA) service subscriber growth, multi-gigabit cable broadband"10G" network rollouts by Comcast and by Charter Communications, subscriber growth in cable competitive mobile virtual network operator (cable MVNO) services, projected growing demand for 5G mobile data, mobile wirelessbroadband affordability, fixed broadband speed improvements, strong wireless network investment, speed increases for 5G wireless networks, and more – appear to confirm the effectively competitive state of the broadband market.

 

Furthermore, FSF's August 2022 reply comments emphasized policy actions that the FCC should take to promote continued investment, innovation, and competition in the broadband and video markets. Regarding broadband inputs, the reply comments emphasized repurposing of spectrum for commercial use, particularly in the lower 3 GHz, the 4 GHz, 7 GHz, and 12 GHz bands. And on the infrastructure siting front, FSF's reply comments recommended that the Commission: (1) declare that fees charged by local governments for deploying wireline facilities in rights-of-way that exceed reasonable costs effectively prohibit broadband services, contrary to Section 253(a); and (2) adopt presumptive reasonableness timeframes of 60-days and 90-days for local governments to act on permit applications involving existing and new wireline facilities in rights-of-way. 

 

Hopefully, the 2022 Communications Marketplace Report will recognize the continuing reality of the competitive state of the broadband market (as well as the video market). Expect to hear more from Free State Foundation scholars following the release of the forthcoming report.

Carriers Set Record With New Fixed Wireless Subscribers

On October 21 and 27, Verizon Wireless and T-Mobile each released their third quarter results for 2022. Both nationwide carries posted record numbers of net subscriber additions to their fixed wireless access (FWA) broadband services. Verizon Wireless reported an impressive 342,000 fixed wireless net additions – a quarterly record for Verizon Wireless. And T-Mobile reported that it added a record high 578,000 high speed Internet customers. Although T-Mobile did not provide a specific service breakdown for that category, its record-breaking figure apparently consists primarily of net additions to its FWA services.

FWA services, which are increasingly offered using 5G networks, are particularly important for their ability to connect costly and difficult-to-reach geographic areas of the country. For more on that point, see my April 2022 Perspectives from FSF Scholars, "Fixed Wireless Access is Boosting Rural Broadband and Consumer Choice." And along with cable mobile virtual network operator (MVNO) wireless services, FWA services are a vibrant form of intermodal competition in today's communications market. 

Cable Mobile Wireless MVNOs: 8.4 Million Subscribers and Counting

A September article by Jeff Baumgartner at LightReading spotlights the continued growth in wireless services offered by cable mobile virtual network operators (MVNOs) offered by Comcast's Xfinity Mobile, Charter Communications' Spectrum Mobile, and Altice USA's Optimum Mobile. According to the article, at the end of the second quarter of 2022, those three cable MVNOs added a combined 703,000 mobile lines for a total of 8.4 million. Although that figure reportedly amounts to less than 3% of the U.S. mobile wireless market, the article cited a MoffettNathanson estimate that cable MVNOs gained almost 44% of net mobile adds for that quarter. And the 8.4 million figure for cable MVNO subscriber lines is up from the 6.5 million total from a year prior that was noticed in my August 2021 blog post.  

The LightReading article is particularly interesting because it highlights an analysis of mobile postpaid plans by categories by Navi. According to the article, "Navi's Q2 2022 Wireless Plan Scoring Report" apparently ranks Spectrum Mobile the highest among competing mobile providers in the entry-level and value categories, with Xfinity Mobile also performing strongly in the value category. As the article observes, cable MVNO services are offered in discount bundles with residential cable broadband Internet access services. 

My blog post on May 2 of this year noted that Comcast and Charter are looking to expand their Wi-Fi and cable network offloading capabilities to more cost-effectively provide cable MVNO services. Added to that intriguing development is Cox Communications' August 29 announcement of its launch of a three-city pilot for its Cox Mobile MVNO service. Suffice to day, the continued growth of cable MVNO networks will likely remain interesting to watch in 2022 and beyond. 

Mobile Broadband Speeds Now Match 2020 Fixed Speeds

When the Free State Foundation filed Comments in the FCC's 2020 Communications Marketplace Report proceeding, average fixed broadband download speeds were roughly 130 Mbps, according to Ookla. Today, the most recent Ookla data (May 2022) shows that average mobile broadband download speeds are 130 Mbps. So, in just two short years, mobile broadband speeds caught up to the performance of fixed networks in 2020. Of course, today speeds for fixed networks are higher than they were in 2020.

This fact highlights the growing senselessness of the Commission's continued refusal to recognize intermodal competition in the broadband marketplace. Rather than acknowledge that broadband providers of all stripes compete with each other, the Commission slices the broadband marketplace into separate techno-functional categories. Mobile wireless is its own market in the Commission's view, and that market excludes any competition from high-speed wireline deployments by cable and fiber providers.

The accelerating network performance of mobile broadband, likely driven by the rollout of 5G service, makes clear that broadband providers compete intermodally. Of course, as noted above, the speed of fixed networks also improved over the last two years, and now exhibit average download speeds above 220 Mbps, per Ookla's May 2022 data. But even if they hadn't, and mobile network speeds were par with fixed network speeds, it is more than reasonable to assume that many customers might have canceled their fixed subscriptions. The improvements made by mobile networks may have driven fixed networks to make their own upgrades to maintain their speed advantages.

That's clear evidence of intermodal competition.

The Commission should abandon its techno-functional categories and instead assess competition in the "broadband marketplace." That broader market definition would account for intermodal competition between fixed, mobile, satellite, and any other types of broadband providers. It will be increasingly difficult to ignore intermodal competition as more evidence of it emerges from the competitive broadband market conditions today.

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 Gives the First Amendment Its Due in Cable Leased Access Proposal

On June 6, the FCC will vote on a proposed order and rulemaking to modify its analog-era leased access rules, including its dispute procedures and rate formula. To its credit, the Commission factors First Amendment free speech protections into its proposed modifications of its leased access rules. Indeed, the Commission expressly recognizes that leased access requirements, which restrict the editorial and speech rights of cable providers, are constitutionally on shaky ground. This is an important point that Free State Foundation scholars have been making for several years. 

As I wrote in "FCC Over-Regulation of Video Services Undermines Free Speech, a 2012 Perspectives from FSF Scholars paper:

The Supreme Court's First Amendment jurisprudence holds that content-based restrictions are presumptively unconstitutional and that government is generally prohibited from telling speakers what they must say. But many of the FCC's regulations applicable to video service providers include access or forced sharing mandates. Some agency restrictions are even based on speech content. These continuing legacy regulations governing video services infringe upon the editorial choices of MVPDs. Court precedents recognize that MVPDs are entitled to First Amendment protection. The logic of the Court's relevant First Amendment decisions therefore renders significant aspects of current federal regulation of MVPDs' free speech constitutionally suspect. …The FCC's leased access regulations [] pose First Amendment problems. Under the statute, MVPDs lose "editorial control over any video programming" on the leased channel capacity. Rate controls constitute another facet of leased access regulations, which are another variety of forced access regulation. MVPDs are subject to FCC-set maximum amounts that independent video programmers can be charged for leasing channel capacity.  

Previously, legacy cable regulations, including leased access rules, were upheld under the intermediate scrutiny standard because of perceived cable video programming distribution bottlenecks in the early 1990s. Under intermediate scrutiny, speech of cable operators may be restricted so long as the regulation furthers an important government interest by means substantially related to further that interest. 

But by the time of my May 2011 blog post on ending legacy cable regulation we already were long past the days when cable operators possessed a 91% or more nationwide market share. And we already were long past the days when consumers' only option for subscription video services was a single local cable provider. Data from the Commission's Communications Marketplace Report (2018) reflect a video services ecosystem featuring competitive cable, direct broadcast satellite (DBS), and online platforms for video programmers to distribute content to consumers. As I summed things up in a February 2019 Perspectives paper:

For video services, the report found that at the end of 2017 all or nearly all U.S. consumers have access to three competing multi-channel video programming distributors (MVPDs). Some consumers had access to four. Furthermore, MVPDs lost subscribers to competing broadcast TV and – especially – to online video distributor (OVD) services. Whereas MVPDs lost 3.6 million video subscribers in 2017, a drop to 94 million, 16.6 million TV households (13.9%) relied exclusively on over-the-air (OTA) TV broadcast signals, up from 15.7 million TV households (13.2%) in 2017. Top three OVDs Amazon Prime, Netflix, and Hulu exceeded 125 million subscriptions in 2017, up from about 103 million in 2016. And "Virtual MVPDs" such as SlingTV and DIRECTV NOW climbed from 2.2 million subscribers to 4.8 million. 

In a June 2018 blog post titled "Improving the FCC's Cable Leased Access Proposal," I again pointed out that the old rationale for leased access rules no longer holds up. Therein I wrote that "the Commission should expressly identify the First Amendment problem posed by the leased access requirements in today’s competitive video market." Furthermore, I wrote: "If the Commission believes it is powerless to eliminate completely the leased access requirements, it should ameliorate the First Amendment problem," perhaps by predicating enforcement of its leased access rules on findings of market power.

Commendably, the Commission's proposed order and rulemaking states: "We agree that dramatic changes in technology and the marketplace for the distribution of programming cast substantial doubt on the constitutional foundation for our leased access rules." It goes on to say: 

[W]e now find that the First Amendment concerns raised by commenters provide additional reason to interpret the statutory obligations of Section 612 in a manner that reduces burdens on the speech of cable operators. We do so here by, among other things, eliminating the Commission rule requiring that cable operators make leased access available on a part-time basis.

The Commission's proposed order would vacate faulty 2008 rules that were never implemented and modify pre-2008 procedural requirements. And its proposed rulemaking would modify its leased access rate formula. Also, the Commission again asks if leased access requirements continue to withstand First Amendment scrutiny, and what discretion the Commission has to reduce the burdens on speech posed by those rules. By this admirable approach, the FCC rightly gives due respect to the First Amendment free speech interests that are burdened by leased access rules. 

FCC Should Finally Grant CenturyLink Forbearance on Broadband Enterprise Services

Amidst overseeing the transition from legacy telephone services to all-IP networks, why would the FCC put competitive broadband services back under legacy telephone regulations? Or rather, why would it single out one provider of broadband services for legacy regulations? Regrettably, that’s exactly what the FCC is doing when it comes to CenturyLink’s broadband enterprise services.

Just this month the FCC took public comments on a proposal to keep those services under the thumb of last-century telephone regulations. But forward-looking communications policy should reflect technological advancements and competitive market realities. And just administration of those policies should scrupulously avoid disparate treatment of market participants. The FCC’s proposal fails on both accounts.  

The enterprise broadband market is highly competitive. There are no dominant carriers. CenturyLink’s rivals have long since been granted forbearance from dominant carrier rate regulations and Computer Inquiry tariff requirements. Straightforward application of FCC precedents calls for forbearance relief from dominant carrier regulations for CenturyLink. At long last, the FCC should grant CenturyLink forbearance from those outdated regulations, and stop singling it out for disfavored regulatory status.

Enterprise broadband services offer high data speed and capacity capabilities through Ethernet and other IP-enabled technologies. Such services are highly sought after by enterprise customers with unique communications and information technology needs. Enterprise broadband customers are typically sophisticated and informed, soliciting customized offerings and bargaining with providers. Nationwide, the broadband enterprise services market has numerous competing providers, including AT&T, Cox, Charter, Frontier, Verizon, Comcast, and Level 3.

Through its Enterprise Broadband Orders (2006-08) the FCC expressly concluded that the market for packet-switched broadband services was "highly competitive." The FCC likewise recognized that the demand for such services is sufficient to incentivize deployment and entry by competitors absent such regulation. The Enterprise Broadband Orders granted Section 10 forbearance relief to several incumbent local exchange carriers (ILECs), including AT&T, Embarq, Qwest, and Verizon.

The U.S. Court of Appeals for the District of Columbia Circuit expressly upheld the FCC's analytical approach and granting of forbearance relief in Ad Hoc Telecommunications v. FCC (2009). As the D.C. Circuit wrote: "Perhaps an obvious point, but a decision that gives owners of telecommunications lines more control over access to those lines tends to increase the incentive for competitors to build competing lines."

Inexplicably, some of CenturyLink's Ethernet and other broadband enterprise offerings are still subject to dominant carrier and Computer Inquiry tariff obligations. Those regulations are a vestige of last-century copper-based local telephone monopoly conditions. Subjection to dominant carrier regulations hampers Century Link’s ability to offer nationwide flat-rate pricing options to potential enterprise customers. Corresponding tariff obligations require CenturyLink to give its competitors advance notice of its price offerings. This gives competitors a jump in luring away potential enterprise customers.

With CenturyLink’s marketplace rivals operating free from dominant carrier constraints, the regulatory disparity is obvious. For that matter, the FCC’s disparate treatment of CenturyLink’s broadband enterprise services constitutes an administrative form of unequal treatment under the law. Court precedents applying the Administrative Procedures Act's "arbitrary and capricious" standard hold that federal agencies cannot treat like cases differently. The same criteria must be applied in an equal manner to all parties petitioning for regulatory exemptions.

Disconcertingly, the FCC has taken public comments on its proposal to change the rules on CenturyLink. In particular, the FCC has proposed to jettison its dynamic, forward-looking analytical framework from its Broadband Enterprise Orders. Instead, the FCC would subject CenturyLink’s petition to the same type of telephone monopoly-style framework set out in the Qwest Phoenix MSA Order (2010). The FCC plans on issuing an additional data collection request to coincide with its new approach to enterprise broadband services.

By over-relying on static market indicators, narrow market definitions, and misconceptions regarding pricing in networked services that are highly regulated, Qwest Phoenix MSA Order imposed unjustifiably high hurdles to forbearance relief. Acknowledging it offered no quantitative analysis, the Order stacked the deck against forbearance relief by adopting a burden-shifting analytical framework. That is, the Order demanded forbearance petitioners put forth evidence conclusively proving a negative; namely, that they did not exercise market power sufficient to keep prices above what the Commission deemed competitive levels. In that instance, the Order ignored petitioner Qwest’s steep losses in market share to rivals and excluded any competitive effects from wireless alternatives.

Significantly, the FCC now appears set to disregard the fact that the Qwest Phoenix MSA Order's framework applied specifically to legacy voice services, not to broadband services. According to paragraph 39 of the Order:

Indeed, a different analysis may apply when the Commission addresses advanced services, like broadband services, instead of a petition addressing legacy facilities, such as Qwest’s petition in this proceeding. For advanced services, not only must we take into consideration the direction of section 706, but we must take into consideration that this newer market continues to evolve and develop in the absence of Title II regulation.

Whatever the Qwest Phoenix MSA Order's shortcomings, the FCC had good reason for recognizing regulatory distinction between legacy voice services and broadband services. The D.C. Circuit wrote in Ad Hoc Telecommunications: "Broadband services do not correspond to the old telephone-cable regulatory divide," and credited both Congress and the FCC for recognizing that "regulation of broadband can pose different issues and challenges than regulation of local telephony."

The Broadband Enterprise Orders recognized that forbearing from these regulations incentivizes additional investment in broadband infrastructure and enhances competition in the broadband enterprise services market. Those precedents better reflects technological advances of the last decade and today’s marketplace realities. Legacy telephone regulations are ill-suited to advanced information technologies in dynamic markets. For such markets, the burden should be on the regulators or pro-regulation parties to offer evidence of market power and likely consumer harm before government imposes restrictions.

Since the Enterprise Broadband Orders, those services have been further deployed and the market has become even more competitive. There is no evidence that CenturyLink has market power. Discarding agency precedents set in its Enterprise Broadband Orders and continuing to single out CenturyLink for disparate treatment would be the epitomize arbitrariness and capriciousness.

FCC Report Reconfirms the Reality of Wireless Innovation and Competition

On Friday, March 21 the FCC released its 16th Wireless Competition Report. Information and estimates compiled in the new Report cover the course of wireless innovation and competition since 2010. Report descriptions and data regarding wireless products and services put into concrete terms what anyone paying attention to the wireless market would already know; namely, the wireless market is indeed "effectively competitive."

Wireless market providers continue to create and make available to consumers new products, services, and pricing choices, with consumer prices decreasing in many instances. Meanwhile, the wireless market is characterized by heavy private investment, infrastructure deployment, and network upgrades. All this is spurring job creation, cutting business costs, and increasing workplace productivity to benefit the entire economy.

Dynamic markets like wireless are the success stories of free market enterprise. And their vibrancy is best preserved by a minimal regulatory environment.

Consider the following dozen indicators of wireless marketplace innovation and competition, as revealed in the FCC's report:

• Consumer choice among mobile service providers prevails. As of October 2012, 99.3% of the population is served by 2 or more mobile voice providers, 97.2% by 3 or more, 92.8% by 4 or more, and 80.4% by 5 or more. Additionally, as of October 2012, 97.8% of the population is served by 2 or more mobile broadband providers, 91.6% by 3 or more, 82% by 4 or more, and 68.9% by 5 or more.

• Mobile subscriptions continue to climb. "[A]t the end of 2011 there were 298.3 million subscribers to mobile telephone, or voice, service, up nearly 4.6 percent from 285.1 million" from a year before. Also, "there were 142.1 million subscribers to mobile Internet access services at speeds exceeding 200 kbps in at least one direction, up from the 97.5 million were reported for the end of 2010, and more than double the 56.3 million reported for year-end 2009."

• Upgrades to next-generation broadband wireless networks are proceeding. As of November 2012, "[Verizon's] LTE network covered more than 250 million POPs," with "[p]lans to expand LTE nationwide in 2013." As of November 2012, "[AT&T's] LTE network covered 150 million POPs," with "plans to deploy LTE to…250 million POPs, by the end of 2013, and to 300 million by the end of 2014." Also, "[a]s of September 2012, [Sprint's] LTE service is offered in 19 cities and plans to deploy LTE to 100 additional cities within the next several months and to complete LTE build-out by the end of 2013." The FCC's order approving the T-Mobile/MetroPCS merger was based, in significant part, on the post-merger potential to further LTE deployment. And providers such as Clearwire, Leap, U.S. Cellular, and C-Spire already have 4G services available, with further expansions underway.  

• Wireless-only households are increasing even more. "As of the second half of 2011, just over one-third, or approximately 34 percent, of all U.S. households were wireless only, up from 29.7 percent in the second of 2010 and 24.5 percent in the second half of 2009." And that number should be expected to continue its upward trajectory since "[a]pproximately half of all adults aged 18-24 and aged 30-34 lived in wireless-only households, while nearly 60 percent of adults aged 25-29 did so."

• Smartphone consumers now a growing majority. "[A]mong those who acquired a new cell phone in the second quarter of 2012, 67 percent opted for a smartphone, up from 30 percent in the fourth quarter of 2009. As of the second quarter of 2012, 55 percent of U.S. mobile subscribers now own smartphones."

• Consumer mobile data consumption is sharply increasing. Average consumer data consumption rose to 500MB/month at the end of 2011, up from over 200MB/month in 2010 and 150MB/month in 2009. For that matter, "mobile data traffic more than doubled from 226.5 billion MB in the last six months of 2010 to 525.7 billion MB in the second half of 2011."

• Consumer prices have seen decreases. Voice revenue per minute "has declined over the past 18 years, from more than $0.40 to the current $0.05," according to one estimate. Moreover, "the effective price per megabyte of data declined from $0.47 per megabyte in the third quarter of 2008 to about $0.05 per megabyte in the fourth quarter of 2010, which is roughly an 89 percent decrease."

• Private investment is sizeable and also increased. 2010 capital investment by wireless providers totaled between $23 and $25 billion, marking double-digit increases in investment from the year before. Those numbers exclude investment in spectrum licenses.

• The number of wireless apps continues to surge. U.S. consumers had access to over 1 million wireless apps by mid-2012. In addition, the "[t]otal number of applications downloaded from Apple’s App Store grew from 100,000 in 2008 to 25 billion in March 2012. By October 2012, Google Play for the Android operating system offered over 675,000 applications and had more than 25 billion total downloads.

• M-commerce services are growing. Although "[m]aking payments by mobile phone is not yet a mainstream payment method due to lack of awareness," "[p]aying-by-phone is playing a growing role in transactions made by U.S. consumers." In particular, "[a]bout 13 percent of U.S. bank account holders regularly use mobile banking services. As of August 2012, 61 percent of these mobile banking customers used their mobile devices to check transaction histories, 45 percent to check balances, and 31 percent to transfer money between accounts." Also, "in June 2012, 45 million smartphone owners accessed applications in the shopping and commerce category, an average of 17 times."

• Wireless infrastructure is expanding. "[T]otal cell sites in use by CTIA’s members was 283,385 as of year-end 2011. This represents an increase in the number of cell sites of 12 percent since December 31, 2010, of 15 percent since December 31, 2009, of 54 percent since December 31, 2005, and of 61 percent since December 31, 2004." This build-out is critical to ensuring upgrades to next-generation wireless networks. And "as infrastructure improves, transaction costs for businesses fall, including the costs of ordering, gathering information, and searching for services."

• Wireless continues to benefit the overall economy. "U.S. wireless providers directly employed 238,071 workers at the end of 2011, up from 184,449 in 2000, yielding an average job creation rate of around three percent per year," and "the mobile app economy employs an additional 466,000 workers." Also, "in 2011, the wireless industry accounted for $33 billion in productivity gains for U.S. businesses." Plus, "the wireless industry was responsible for 3.8 million U.S. jobs in 2011, directly and indirectly, and accounted for 2.6 percent of all U.S. employment."

Like its two predecessors, the 16th Wireless Competition Report "makes no formal finding as to whether there is, or is not, effective competition in the industry." Supposedly, "the complexity of the various inter-related segments and services within the mobile wireless ecosystem" is the reason for the FCC's non-conclusion. But that explanation is unconvincing. The tremendous growth in the wireless market's sophistication and intricacy points to the market's dynamism and competitiveness. (I made this point more extensively in prior Perspectives papers on the FCC's 14th and 15th Wireless Competition Reports, respectively.)

Most important, the FCC must preserve the minimal regulatory environment in which wireless has thrived. That was the basic point of my chapter on wireless policy in Communications Law and Policy in the Digital Age.

Among other things, preserving a minimal regulatory environment means keeping common carrier-like regulations away from wireless voice and broadband services as well as devices, operating systems, and applications. It also means eliminating regulatory barriers to deploying infrastructure. And the FCC must work to foster a light-touch regulatory environment for wireline services and fixed mobile functionalities that will increasingly work in tandem with wireless to offer consumers greater reliability and cost-effective services. The Report, for example, referenced expected adoption and use of new technologies such as small cells and seamless Wi-Fi offloading.

For that matter, the Report's findings, hopefully, should end calls for regulation of handset exclusivity business agreements between wireless handset manufacturers and service providers. Notwithstanding the Report's observation that Apple's iPhone exclusivity deal with AT&T ended in 2011, "[d]uring June 2011, 20 handset manufacturers offered a total of 297 handset models to mobile wireless service providers in the United States." This prompted the FCC to conclude that "[i]nnovative smartphones are available at a variety of price points and with both post-paid and pre-paid service plans."

A simple comparison of the wireless consumer experience from a dozen years go with today's experience should be reason enough for recognizing the dynamism of the wireless market. In that time, the market has transitioned from analog, voice-centric service to a digital, broadband-centric multimedia service of increasing sophistication and variety. Still, assembling the positive data points into a single report drives home the progress that wireless continues to make.

All told, the 16th Wireless Competition Report reconfirms the commonsense conclusion that the market for wireless services is effectively competitive. The task for Congress and the FCC is to ensure that a free market devoid of impediments exists to best ensure that the maximum benefits of the wireless market are bestowed upon consumers in the years ahead.