Commission to Vote on IP Transition Item at March Open Meeting

In a March 4 blog post, FCC Chairman Brendan Carr announced that at its March 26 open meeting the Commission will vote on a draft notice of proposed rulemaking (NPRM) "that builds on our prior efforts to streamline copper retirement and reduce outdated regulatory burdens that force providers to maintain aging networks instead of investing in modern, high‑speed ones." In a news release released the same day, he highlighted the fact that "[t]his FCC decision will free up billions of dollars in private capital so that Americans in communities across the country can go from old and slow copper lines to modern, high-speed ones."

Among other things, the draft item would eliminate filing requirements; simplify the technology transitions discontinuance application process; and provide carriers with blanket authority to grandfather legacy services delivered via copper wire. It also would preempt state and local requirements that "have the effect of continuing to require carriers to provide legacy voice services" even after the Commission has authorized them to stop doing so.

In a companion proceeding that remains pending, the Commission proposed to exercise its Section 10 forbearance authority and relieve incumbent local exchange carriers (ILECs) from a statutory obligation to offer interconnection via legacy time-division multiplexing (TDM) equipment. Free State Foundation President Randolph May and I filed supportive comments in response to that NPRM, emphasizing that "[t]his is yet another key regulatory reform proposal that is crucial to advancing the implementation of the FCC's 'Build America' program by spurring the deployment and use of advanced broadband IP networks."

FCC Should Keep Verizon/Frontier Merger Clean From Extraneous Conditions

Today, April 2, Communications Daily reported on dueling ex parte filings in the Verizon/Frontier merger review proceeding. The Coalition for IP Transition has urged the FCC to condition any prospective agency approval of the merger on IP interconnection-related requirements. However, the Coalition doesn't identify any specific harms arising from the merger. Under prevailing agency precedents (even if sometimes breached to achieve pro-regulatory ends), merger conditions may only be imposed to remedy transaction-specific harms. 

In its ex parte filing, the Coalition for IP Transition raised what they call "the serious problems faced by competitorsbecause of the Applicants and other price cap Local Exchange Carriers ('LECs') refusals to interconnect on an IP-basis, despite offering IP services to other customers" (emphasis added). Notably, the Coalition addresses the practices of price cap LECs' generally, and not just those of Verizon and Frontier. Also, in the alternative to imposing conditions on the agency's prospective approval of the proposed Verizon/Frontier merger, the Coalition "urged the Commission to consider ordering all price cap LECs" to meet certain disclosure, IP interconnection, and access charge-related requirements. Such an order would require agency action through a separate, industry-wide proceeding. 

 

Thus, on its face, the Coalition's ex parte filing is addressed to matters pertaining to the entire voice services market. Accordingly, the Coalition does not raise potential harms that would arise from the Verizon/Frontier merger. Communications Daily reported that Verizon and Frontier responded by making those same points about non-transaction-specific matters. But one need not take the merging parties' word for it. The Coalition's filing makes it plain. 

 

Regardless of one's policy view about tech transitions from TDM to all-IP networks, network interconnection, and access charges in the voice services market, those matters should be addressed, if at all, through separate inquiry or rulemaking proceedings applicable to the entire market – and not through transactions involving only two merging parties. The Commission should not impose the non-transaction-specific conditions requested by the Coalition. 

 

Moreover, the Commission should be mindful that there is a dwindling amount of time left on the agency's informal "shot clock" for completing its review of the proposed Verizon/Frontier. During review periods, merging parties are vulnerable to lost economic opportunity and regulatory uncertainty costs that can undermine their competitiveness. The agency should complete its review and decide before the deadline expires, if not sooner. 

 

For a brief background on the Verizon/Frontier merger, see my blog post from February 5 of this year, "Verizon/Frontier Merger Would Make Fiber and Fixed Wireless More Competitive."

USF Tax Rises to Record High 36.6%

On March 13, the FCC's Office of Managing Director announced that the Universal Service Fund (USF) contribution factor for the second quarter of 2025 will be 36.6%. Absent intervention by the FCC's Commissioners, the proposed rate will soon go into effect. 

The expected rate hike to 36.6% appears to result in another new all-time high for the "USF Tax." It is far higher than the rate from a few years ago. 

 

The U.S. Court of Appeals for the Fifth Circuit rightly called USF surcharges an unconstitutional "USF Tax." They are imposed on voice consumers based on a percentage of the long-distance part of their monthly bills. The money paid by consumers is collected by the voice carriers and passed on to the Universal Service Administrative Company (USAC), the private corporation established by the FCC to administer the USF program and dole out subsidies to program recipients. 

 

The Supreme Court granted a writ of certiorari in FCC v. Consumers' Research, a case involving the issue of whether the USF contribution mechanism is constitutional under the Article I, Section 1 Legislative Vesting Clause. The Court will hold oral arguments in the case on March 26. 

 

USF reform is one of the topics that is sure to be part of the discussion at the Free State Foundation's upcoming Seventeenth Annual Policy Conference – #FSFConf17. The conference will be held in Washington, D.C. on March 25. Conference registration and the conference agenda are available online. 

Legacy Copper Lines Divert Resources from Broadband Upgrades

Participants in an AT&T Policy Forum on Tuesday made a compelling case that "carrier of last resort" regulations – specifically, the costly obligation to maintain little-used legacy copper lines – divert resources away from broadband network construction.

Titled "Network Modernization: Connecting Changes Everything," the forum featured a fireside chat between Jonathan Spalter, USTelecom's President & CEO, and Chris Sambar, AT&T's Head of Network, Executive Vice President, Technology Operations.

During their conversation, Mr. Sambar revealed that AT&T spends upwards of $10 billion each year to maintain its copper lines – only 5 percent of which are still used.

Relatedly, on May 20, 2024, USTelecom published "Network Modernization: A Vital Step Toward Universal High-Speed Broadband," an Issue Brief highlighting the fact that "less than two percent of U.S. households today rely solely on landline connections."

Certainly in low-population-density areas where reliable wireless service is available, the rote enforcement of legacy rules requiring costly copper upkeep today does not serve the needs of residents.

More broadly, Congress, the FCC, and state regulatory bodies should update expeditiously their policies to redirect finite financial resources to their highest and best use: the construction of broadband infrastructure that brings twenty-first century connectivity – including enhanced emergency services – to rural communities.

As USTelecom concluded in its Issue Brief:

Consumer demand is driving the transition to universal broadband. But outdated regulations are pulling us back – siphoning off time and resources away from the goal of universal broadband to maintain old copper networks rather than speeding reliable, high-speed internet to everyone. We need a modern regulatory environment that advances rather than undercuts tech modernization. Achieving the shared goal of universal broadband requires a shared determination to look to the future, not remain stuck in the past.

USF Surcharge Rate Spikes to 34.5%

On September 13, the FCC's Office of Managing Director announced that the Universal Service Fund (USF) contribution factor for the fourth quarter of 2023 will be 34.5%. This appears to be a record high and a matter of concern for voice consumer welfare and for the future financial integrity of the USF. Absent any unlikely intervention by the FCC's Commissioners, the proposed rate will soon kick in.

The 34.5% figure may not be as high as the prediction of a 36.2% rate for the quarter that was recently was made by an analyst – and discussed in Free State Foundation President Randolph May's September 6 blog post, "How Do You Spell 'Unsustainable'? U-S-F!" But 34.5% is unreasonably high and burdensome on voice consumers. The recent rate increase provides another reminder that a future financial derailment of USF remains an alarming realistic concern that Congress should address. 

 

As briefly noted in my blog post from March 15 of this year, "Consumers Still Burdened as FCC Sets USF Surcharge Rate at 29%" – the USF contribution factor is used to determine the line-item surcharge on voice consumers' monthly bills. The surcharges effectively are taxes on voice consumers to pay for USF programs. 

 

On August 25, the Free State Foundation submitted comments to the Universal Service Working Group lead by Senators Luján and Thune. In those comments, we recommended that Congress replace the current USF system with a broadband-oriented regime that is more focused on supporting low-income Americans and more politically accountable. 

FCC Takes Further Steps to Stem the Tide of Illegal Robocalls

American consumers to continue to receive extraordinarily high volumes of unwanted and illegal robocalls. Youmail estimated that nationwide robocalls in the month of May 2022 totaled 4 billion. 

The FCC has recently announced the latest steps that it has taken to address the problem:

• On May 19, the Commission announced that nine state attorneys general have joined the agency's existing agreement with a majority of states "to share evidence, coordinate investigations, pool enforcement resources, and work together to combat illegal robocall campaigns and protect American consumers from scams." (The Commission's partnership with other states was the subject of an April 2022 blog post).

• On May 20, the Commission released an order in which it places new obligations on gateway providers that are the entry point for calls to the U.S. that originate from foreign countries. The requires gateway providers to: (1) "develop and submit traffic mitigation plans to the Robocall Mitigation Database" (2) "apply STIR/SHAKEN caller ID authentication to all unauthenticated foreign-originated Session Initiation Protocol (SIP) calls with U.S. North American Numbering Plan (NANP) numbers"; and (3) "respond to traceback requests in 24 hours, block calls where it is clear they are conduits for illegal traffic, and implement 'know your upstream provider' obligations."

• On June 6, Chairwoman Rosenworcel signed a Memorandum of Understanding on combatting robocalls with the top Canadian government agency official for telecommunications. 

It is widely known that majority of unwanted robocalls to American consumers originate from outside the U.S. Hopefully, these actions taken by the FCC will help reduce the mass number of illegal robocalls and ID-spoofing scams that target consumers. 

The D.C. Circuit Upholds Removal of Legacy Investment Barriers

A decision by the D.C. Circuit on November 3 sets an important precedent for paring back 25-year-old forced-access regulation of communications networks. The court's ruling in Comptel v. FCC upheld the Commission's 2019 UNE Forbearance Order, which lifts certain legacy unbundling and resale requirements. Wireless and VoIP have long since eclipsed copper wire-based voice services, and the consumer benefits from intermodal competition made the old restrictions unnecessary. The D.C. Circuit's decision provides solid legal support for future agency actions to lift outdated regulations and encourage deployment of next-generation networks. 

The Telecommunications Act of 1996 requires incumbent local exchange carriers (ILECs) to make their facilities available to direct competitors at government-set rates. Back in the early 1990s, ILECs using copper wire-based Time Division Multiplexing (TDM) technologies were the dominant providers of local voice services. The 1996 Act's forced-sharing requirements, it was supposed, would enable competitors to lease capacity from ILEC facilities while building out their own facilities, thus leading to facilities-based competition among wireline voice providers. 

At issue in Comptel v. FCC was the Commission's decision in the 2019 UNE Forbearance Order to cease enforcing unbundling mandates regarding analog loops at government-set rates and to also cease enforcing its avoided-cost resale obligations. Under those obligations, ILECs must resell their retail service at wholesale, and at regulated rates, to their competitors.  

In reviewing the record, the D.C. Circuit observed the stunning difference in the voice service market today compared to more than two decades ago:

Rather than the near-complete monopoly that incumbents had as recently as 1996, now incumbents account for just 12% of all voice connections (both wired and mobile voice plans) and 37% of all wireline telephone connections (the subset of all voice connections that are physical rather than wireless—e.g., TDM copper, cable, and fiber). Lines sold through the unbundled copper loops account for less than 0.5% of all voice connections (less than 2% of wireline connections) and resold lines account for just over 1% of all voice connections (3% of wireline connections). Further, the Commission found that next-generation voice services like mobile phones and Voice Over Internet Protocol (VoIP) services are rapidly growing, whereas traditional copper wire voice services are declining in both market share and in absolute terms. 

Data released since the 2019 UNE Forbearance Order shows that consumers migration to wireless and VoIP services continues. According to an order released by the Commission on October 28 of this year: "Incumbent LECs' wireline voice subscriptions now account for… only 9% of all voice subscriptions across all technologies." Observing further migration in the residential and enterprise services markets away from TDM switched access lines, the order stated that "[t]he widespread deployment of 5G wireless networks will only accelerate this process."

 

Importantly, in Comptel v. FCC, the D.C. Circuit upheld the analytical basis for the Commission's deregulatory action in view of today's voice services market:

The Commission looked, reasonably in our opinion, at the whole national market for voice transmission, and the incumbents' share of that market is declining rapidly. Indeed, from the point of view of the incumbents, alarmingly. Far from the market behemoths the incumbents were in the late 90s, they look more like the sick men of the voice transmission market. Their copper wire advantage is of rapidly declining importance. It is myopic to look at the incumbents' possession of copper loops as giving them meaningful market power in the national voice market. And therefore what earthly economic reason would justify requiring them to provide their copper wire services to competitors at a subsidized price? 

Also important was the D.C. Circuit's unwillingness to limit the Commission's forbearance authority because that agency declined to grant deregulatory relief several years earlier. The D.C. Circuit rejected the notion that the Commission's 2010 Qwest Phoenix MSA Order precluded the grant of relief in the 2019 UNE Forbearance Order. As the court pointed out, the two orders and their contexts were decidedly different. Whereas the 2010 order denied forbearance relief from nationwide regulation in a specific geographic area using a different kind of market power analysis, the 2019 order granted nationwide relief based on an assessment of national market conditions that demonstrated vibrant intermodal competition. 

 

Citing the Supreme Court's decision in NCTA v. Brand X (2005), the D.C. Circuit acknowledged that "agencies are expected to reevaluate the wisdom of their policies in response to changing factual circumstances." According to the D.C. Circuit: "[h]ere, the FCC explained how the market had evolved and concluded—we think reasonably—that intermodal competition is now sufficient to discipline prices." And the court reiterated its precedents that the Section 10 forbearance authority imposes "no particular mode of market analysis or level of geographic rigor," as it leaves the Commission free to "tailor the forbearance inquiry to the situation at hand." 

 

As the D.C. Circuit stated, "our precedent and Commission precedent is clear: the Commission may forbear to encourage the deployment of next-generation facilities." Indeed, the decision in Comptel v. FCC should encourage future exercises of the Commission's unique forbearance authority to clear away legacy telecommunications regulation. The nation's gigabit and 5G future – and consumer welfare – depend on competing communications providers investing in their own facilities rather relying on forced access regulation and government price controls.  

FCC Proposes Order to Remove Old Unbundling and Resale Requirements

The FCC has released the tentative agenda for its October 27 public meeting. Among the items scheduled for a vote, is a draft Report and Order that would eliminate several unbundling and resale requirements. The deregulatory proposal that preceded this order was the subject of my February 2020 Perspectives paper, "FCC Should Go Full Speed Ahead in Removing Unbundling Regulations." As briefly explained in that paper, the rationale for unbundling regulation has long since gone up in smoke, as voice markets are competitive and the retail market share for incumbent local exchange carriers is a fraction of what it was in 1996. The draft order builds upon agency precedent that recognized the market's competitiveness as the basis for removing outdated unbundling regulations. 

The Commission's draft order embodies compromises struck between ILECs and competitive local exchange carriers. If adopted, the Commission's draft order would constitute an important deregulatory achievement in doing away with costly requirements that have outlived any usefulness they once held for consumers and enable communications providers to dedicate additional resources to next-generation broadband networks. Notably, the draft order provides transition periods for eliminating unbundling regulations in competitive areas, and it retains unbundling requirements in areas where there apparently is less competition.

In two paragraphs, the Commission's draft order sums up the competitive and innovative progress that compels the agency's proposed transition to a less-regulatory policy:

22. The communications marketplace has dramatically transformed since Congress passed the 1996 Act. Incumbent LECs controlled 99.7% of the local telephone service market at that time. Incumbent LECs’ wireline voice subscriptions now account for only approximately 39% of all wireline voice subscriptions and only 9% of all voice subscriptions across all technologies. The fixed voice marketplace, once monopolized by incumbent LECs, now includes cable companies offering VoIP, fixed wireless providers, over-the-top VoIP providers, as well as competitive and incumbent LECs. As for fixed broadband, incumbent LECs are just one of many intermodal competitors, providing only about 22% of residential broadband subscriptions at or above 25/3 Mbps, which the Commission has defined as advanced telecommunications capability. As of December 31, 2019, 99% of Americans had access to three providers of mobile voice and broadband. Finally, as the Commission found in the BDS Order, the enterprise market is subject to “intense competition,” with 95% of census blocks with business data services demand in price cap MSAs, representing 99% of business establishments, featuring at least one competitive provider in addition to the incumbent LEC. 

 

23. The communications marketplace has also seen rapid technological change. In the enterprise services marketplace, DS1 and DS3 loops, dominated by incumbent LECs, have been increasingly replaced by packet-based services, provided by a range of providers who benefit from a “considerably more level playing field” compared to TDM-based services. The copper-to-fiber and TDM-to-IP transitions have also increasingly reached residential consumers, as incumbent LECs have been retiring last-mile copper and replacing it with fiber or fixed wireless technologies. And of course, American consumers have themselves transitioned to newer technologies, increasingly moving from fixed legacy voice to fixed or nomadic voice over Internet protocol (VoIP) and mobile voice services, and from DSL to broadband provided over fiber and fixed and mobile wireless. The widespread deployment of 5G wireless networks will only accelerate this process.

Strong U.S. Wireless Investment in 2019 Enabled Solid Performance Amidst Lockdowns

Today, CTIA released its 2020 Annual Survey. The survey highlights show stunning growth in mobile wireless networks and performance in 2019, including $29.1B in U.S. capex in wireless networks, about 46,000 new cell sites built, over 20 million new U.S. wireless subscriptions for a total of 442.5 million subscriptions, and 37.1 trillion megabytes of wireless data consumption. Importantly, the tremendous investment by the U.S. wireless industry in 2019 helped ensure that mobile wireless networks successfully accommodated surging data and wireless traffic in early 2020 amidst the first several weeks of lockdowns. That accomplishment sets U.S. networks apart from other nations in which speeds declined when faced with rising traffic. Be sure to check out the wireless industry's 2020 Annual Survey Highlights at CTIA's website. 

The FCC Should Drop its Interstate Access Charge Proposal

The FCC is considering changes to its rules for interstate telephone access charges. There is seeming appeal in the Commission's proposal to eliminate ex ante pricing regulation and tariffing regulation for interstate voice services. Unfortunately, its proposal would face state regulatory obstacles, destabilize the Universal Service Fund, and create a First Amendment problem – while conferring no real benefit on consumers. The Commission should drop the proposal. 

The Commission's rules impose ex ante pricing regulation and tariffing obligations on the portion of local telephone service used to originate and terminate interstate long-distance calls. States have jurisdiction to impose similar obligations on the intrastate portion of such service. Pursuant to Section 203 of the Communications Act, the Commission imposes five different tariff access charges that are meant to align the rates with the costs of providing interstate voice service. Those charges also furnish a basis for calculating Universal Service Fund contributions.  

The Commission's Notice proposes to find that "widespread competition among voice services makes ex ante pricing regulation and tariffing of Telephone Access Charges unnecessary to ensure just and reasonable rates or to otherwise protect customers." There is an important underlying point here. It is no longer the case that voice services are a monopoly. And incumbent local exchange carriers are no longer dominant suppliers. Quite sensibly, the Commission is "concerned that the costs of regulating and tariffing Telephone Access Charges are likely to exceed the benefits, because they impose costs on carriers and hinder carriers' ability to quickly adapt to changing market conditions." 

The Commission proposes to require that voice service providers detariff end-user interstate access charges. And it proposes to ban voice providers from listing interstate access charges on their monthly bills to consumers. But none of this is intended or expected to reduce prices for consumers. Rather, the agency's aim is to make those bills simpler or, supposedly, transparent. 

Yet as Commissioner Michael O'Rielly pointed out in his statement accompanying the Notice: "I find it somewhat strange and ironic to characterize these charges as deceptive, when it was the FCC that established the various access charges and all of their confusing terminology in the first place, and the item proposes to continue to use the charges as proxies for calculating rate-of-return carriers' Universal Service Fund support." Indeed, consumers who peruse their bills might likely be confused by the sudden changes to rates and disappearance of those fees. 

Aside from providing no real benefit to consumers, the Commission's proposal runs into trouble on at least three fronts. First, the proposal depends on the unlikely proposition that state jurisdictions would cooperate in shifting carriers' interstate recovery costs onto intrastate service rates. There is no good reason to think state public utility commissions would go along with significant increases to rates under their jurisdiction. Many state regulators have expressed their opposition to the Commission's proposal. 

Second, the Commission's proposal would disrupt universal service revenues that are tied to interstate access charges. Absent access charges, the Commission would have to come up with a workable replacement method for calculating universal service contributions. So far, neither Commissioner O'Rielly nor numerous voice carriers believe that the agency has come up with such a replacement. Universal service shouldn't be put at such a risk. 

Third, the Commission's proposal to ban inclusion of access charges on consumers' monthly bills raises a First Amendment issue. Under the Supreme Court's test set forth in Central Hudson Gas & Electric Company v. Public Utilities Commission of California (1985), non-misleading commercial speech regulation is permitted where the government can show: (1) it advances a substantial government interest; (2) it directly and materially advances that interest; and (3) it is not more extensive than necessary to achieve that interest. But for reasons recognized by Commissioner O'Rielly, interstate access charges are not deceptive. The Commission would have difficulty showing that its proposed ban would protect individuals from specific and significant harm – and that such a ban would directly and materially achieve that purpose. 

Broader deregulatory reform is needed for voice services. But that reform must come from Congress. In our book #CommActUpdate: A Communications Law Fit for the Digital Age, Free State Foundation President Randolph May, myself, and several colleagues urge Congress to take up that task. The current disparate treatment of voice, video, and data services, based on legacy techno-functional constructs, should be replaced with a market-oriented framework that applies to all digital communications services. Prescriptive rule-based regulation should be jettisoned and competitive concerns should be addressed through case-by-case adjudications based on market power analysis.

Until Congress acts, the Commission should exercise its forbearance authority and pursue deregulatory reforms where it can reduce unnecessary restrictions and costs as well as provide on-balance benefit to consumers. The Commission is on the right track, for instance, in its proposal to pare back unbundling regulations. But, despite its seeming appeal, as a practical matter, the interstate access charge proposal takes a wrong track, and the Commission should discard it. 

FCC Order Encourages Blocking of Bad Robocalls

At its July 17 public meeting, the FCC took its latest step to curb unwanted and unlawful robocalls. The Commission adopted an order to implement the TRACED Act by establishing rules for two safe harbors from legal liability for voice service providers that block robocalls that they believe are unwanted or harmful. Those legal safe harbors will encourage voice service providers to combat unwanted and unlawful robocalls. Paragraph 19 of the Commission's order sums up the action taken in its order:

[W]e adopt a safe harbor from liability under the Communications Act and our rules for terminating voice service providers that block calls based on reasonable analytics designed to identify unwanted calls, so long as those take into account information provided by STIR/SHAKEN (or, for non-IP based calls, any other effective call authentication framework that satisfies the TRACED Act) when such information is available for a particular call. And we establish a second safe harbor enabling voice service providers to block traffic from bad-actor upstream voice service providers that continue to allow unwanted calls to traverse their networks. Finally, we require that blocking providers furnish a single point of contact to resolve unintended or inadvertent blocking, and emphasize that, when blocking, they should make all reasonable efforts to ensure that critical calls, such as those from Public Safety Answering Points (PSAPs), are not blocked and that they should never block calls to 911. 

Importantly, the order includes provisions for allowing blocked callers to reach voice service providers and seek the undoing of blockages of legit calls. The point of the safe harbors is to incentive blocking of unwanted and illegal calls and thereby protect consumers – and not to censor speech. This is an important measure adopted by the Commission and hopefully will lead to the reduction of bad robocalls. 

US Telecom Report for 2020 Spotlights Booming Broadband

Earlier this month, US Telecom released its report "Industry Metrics and Trends 2020: The Broadband Boom." Among the report's key projections for 2020:

• 84% of U.S. households (109 million) will subscribe to fixed broadband by the end of 2020;

• Wireless will account for 79% of voice connections, compared to 4% for traditional phone lines;

• 6% of U.S. households will use traditional phone lines, while 65% will be wireless-only and 29% will be Internet-based voice service, mostly from cable operators; and

• Traditional switched telephone subscriptions will be 24 million, down from 186 million in 2000. 

US Telecom's report data and projections regarding the decline of switched access lines and the concomitant rise of wireless and VoIP service are particularly striking, yet not at all surprising in light of trends over the last several years. 

A public policy implication of such dramatic declines in traditional voice services should be the elimination of the FCC's unbundling and resale regulations. The Commission has an ongoing proceeding in which it proposes to remove certain unbundling mandates. For more, see my February 13 Perspectives from FSF Scholars paper, "FCC Should Go Full Speed Ahead in Removing Unbundling Regulations."   

Consumers Receive High Volumes of Spam Calls, Low Volumes of Spam Texts

Americans are inundated with high numbers of unwanted robocalls, but they receive much lower numbers of unwanted text messages. A survey released in December by Zipwhip, a leading provider of text messaging solutions for businesses, shows that whereas 51% of respondents "often" receive spam over the phone, only 18% "often" receive spam texts. 

The survey findings reaffirm the importance of the Commission's Title I non-regulatory policy for texting. Given the freedom and flexibility to implement solutions, text messaging service providers – not Title II public utility-like restrictions – have successfully curbed unwanted messages. Those providers should remain free to pursue innovative solutions to maintain quality of service. 

According Zipwhip's survey, about 51% responded that they receive spam "often" over the phone and 83% receive spam at least "somewhat often" over the phone. Furthermore, 70% receive spam "often" over email and 92% receive email spam at least "somewhat often." However: "Only 18% of respondents said they get text spam 'often' and only 17% said they receive scam attempts 'often.' Most said they 'rarely' receive these types of messages (41% and 40% for spam and scam, respectively)." Illegal scam rates also are notably higher for voice calls and emails than for texts.

Importantly, the Zipwhip survey figures regarding low rates of unwanted texts vindicates the FCC's determination in its Wireless Messaging Service Order (2018) that text messaging services are lightly- or non-regulated "information services" under Title I of the Communications Act. That determination was amply supported, first and foremost, by the fact that wireless text messaging service capabilities fit the statutory definition of "information services." But the Commission also justified its Title I classification of wireless text messaging services with the compelling policy rationale that entrepreneurial innovation protects subscribers from spam and unwanted texts better than the strictures of public utility regulation. The 2018 Order stated: "In the absence of a Commission assertion of Title II regulation, wireless providers have employed effective methods to protect consumers from unwanted messages and thereby make wireless messaging a trusted and reliable form of communication for millions of Americans." Survey findings of markedly lower rates of unwanted communications via text messaging compared to other media platforms indicate that, a year after the 2018 Order, the policy for non-regulation of texting is succeeding in protecting consumers.

Zipwhip survey figures regarding the high rates of robocalls and emails are consistent with other reports. According to YouMail's Robocall Index, about 58.5 billion robocalls were sent nationwide in 2019. A YouMail analysis found that while about 27% of robocalls provided consumers with important alerts or reminders for things such as a school closure or doctor's appointment, the remaining 73% of robocalls are unwanted or spam. And about 25% of robocalls are illegal scams. It is elsewhere estimated that spam constituted around 55% of global email traffic in 2019. 

The problem of unwanted robocalls and the closely related problem of caller ID spoofing prompted Congress to pass the TRACED Act, which President Trump signed into law on December 31, 2019. Under the TRACED Act, voice service providers are required to make available to consumers – free of charge – technologies to authenticate calls and block robocalls. The Act extends the statute of limitation and increases fines for making unwanted robocalls. Additionally, the Act directs the FCC to undertake rulemakings to further ensure subscribers are protected from one-ring scams as well as other unwanted calls or texts. 

In its implementation of the TRACED Act, the Commission should rightly take aim at the sky-high number of scam calls as well as other unwanted robocalls. And it should exercise its oversight authority over voice service providers to ensure consumers are protected. At the same time, it is imperative that the Commission adhere to its Title I policy for text messaging, which has an established track record in protecting consumers. 

FCC Report on 911 Taxes Identifies States' Improper Use of Funds

On December 19, the FCC published its 11th Annual Report on State 911 taxes, in which it found that nearly $198 million in 911 taxes charged to voice service consumers were improperly diverted to non-911 purposes in 2018. That's down from the $285 million in 911 tax revenues the FCC found were improperly diverted by states in 2017. However, the 11th Report reveals that New Jersey, New York, and Rhode Island continue to be the worst offenders. The 11th Report identified over $186 million in diverted 911 tax dollars from New Jersey and New York combined. It's important that FCC keep these states in the spotlight and that both the Commission and Congress consider measures to hold those states and others accountable.  

FCC Proposes Undoing More of its Unbundling Regulation

At its November 19 public meeting, the FCC is scheduled to vote on a proposed rulemaking that would update and pare back some of its legacy "unbundling" regulation "to reflect [competitive] marketplace realities and to remove unnecessary regulatory burdens that can inhibit the deployment of, and transition to, next- generation networks." This proposal appears to constitute another step in right direction by the Commission in reducing forced-access mandates that date back to the mid-1990s and were supposed to be temporary but have the effect of dis-incentivizing investment in new facilities.  

Roundup of Recent FCC Reform Actions

At its October 25 public meeting, the FCC took a number of actions, including a vote to approve its Effective Competition Order. This order was discussed in My Perspectives from FSF Scholars paper, "FCC Action Would Finally Eliminate Local Cable Rate Regulation." Additionally, the order is the subject of Free State Foundation President Randolph May's Media Advisory from October 4. Given the choice of video services consumers have today, the Commission's grant of relief from the last remains of early 90s-era local cable rate regulation is welcome.

Also at its October 25 public meeting, the Commission voted to approve a declaratory ruling that provides parity and prohibits discriminatory fees on VoIP services. My October 17 blog post discussed that ruling.  

At its September 26 public meeting, the Commission approved an order eliminating forms of access arbitrage involving the intercarrier compensation system. Prior blog posts called attention to that order. 

FCC Proposal for Would Provide Parity and Prohibit Discriminatory Fees on VoIP Services

At its October 25 public meeting, the FCC is set to vote on a proposed declaratory ruling to clarify federal law regarding state, local, and tribal government 911 fees and charges imposed on VoIP services. According to the proposed ruling:

[W]e hereby declare that the VoIP 911 Fee Parity Provision prohibits non-federal governmental entities from imposing 911 fees or charges on VoIP services in any manner that would result in a subscriber to such VoIP services paying a total amount of 911 fees or charges that exceeds the total amount of 911 fees or charges that the same subscriber would pay for a traditional telecommunications service with the same 911 outbound calling capability or same quantity of units upon which 911 fees are imposed for traditional telecommunications services. We find this statutory interpretation best effectuates long-standing goals to promote and enhance public safety by facilitating the rapid deployment of VoIP 911 services and to promote and facilitate the transition from legacy, TDM-based services to next-generation, IP-based services for the benefit of all Americans. 

The Commission's draft ruling states that "[t]his interpretation best comports with the text of the NET 911 Act as a whole [and] its legislative history." The NET 911 Act 's "VoIP 911 Fee Parity Provision" provides that "[f]or each class of subscribers to IP-enabled voice services, the fee or charge may not exceed the amount of any such fee or charge applicable to the same class of subscribers to telecommunications services."  

As a general matter, VoIP and other IP-based services should not be subject to any regulatory burdens or fees that are not also imposed on non-IP based services. The Commission's proposed declaratory ruling on VoIP 911 fee parity is based on a straightforward reading of federal law and it is sound policy. The Commission should adopt the declaratory ruling.

FCC Should Follow District Court's Common-Sense Ruling on Autodialers

Free State Foundation President Randolph May and I have previously written about the federal ban on "autodialers" contained in the Telephone Consumer Protection Act (TCPA). In our Perspectives from FSF Scholars paper, "The FCC Should Stop Runaway Liability for Smartphone Owners," we called on the Commission to adopt a sensible definition of "autodialers" that tracks with a plain reading of the TCPA and its intent to combat commercial automated mass robocallers. Going forward, the Commission ought to consider the common-sense reading of the TCPA's "autodialer" provision by a federal district court's decision from September 2019. 

In Smith v. Premier Dermatology, Judge Jorge Alonso of the U.S. District Court for the Northern District of Illinois wrote:

[T]he plain text of the statutory definition provides that an ATDS [autodialer] is a device that (1) stores or produces telephone numbers that (2) were randomly or sequentially generated and (3) dials them automatically. 

Because the Court finds that the statutory definition is not ambiguous, it need not reach plaintiffs' arguments about "the context and the structure of the statutory scheme." …But even if the Court were to consider them, they are unpersuasive. 

The District Court's conclusion that the TCPA's language is unambiguous as well and interpretation of prohibited "autodialer" capabilities are both contrary to the Ninth Circuit's decision in Marks v. Crunch San Diego LLC(2018). As Mr. May and I explained in our Perspectives paper, the Ninth Circuit deemed the relevant statutory language and ambiguous and misinterpreted "autodialers" to include callers using equipment that is merely capable of dialing ortexting a stored telephone number. The court disregarded the TCPA's provision that autodialer equipment also must have number generating capability – and dial the telephone numbers automatically. In consequence, the Ninth Circuit's decision in Marks makes anyone with a smartphone potentially liable under the TCPA for making a single unwanted phone call or text. (I also addressed the autodialer issue in my Perspectives paper, "The FCC Should Halt Bogus Lawsuits Threatening Popular Texting Services.")

A federal district court decision does not create binding precedent. So the legal uncertainty caused by the Ninth Circuit's misguided decision in Marks remains a problem that requires the FCC's attention. However, the Commission should take stock of the District Court's sensible ruling in Premier Dermatology. And the Commission should adopt a narrower autodialer definition that targets mass robocallers while avoiding open-ended liability for all smartphone owners.

The Case for IP Captioned Telephone Service Reform

Free State Foundation President Randolph May makes the case for refashioning the Internet Protocol Captioned Telephone Service (IP CTS) in a market-oriented way in his latest Perspectives from FSF Scholars paper, "Reforming the FCC's Captioned Telephone Service Program." As explained in that paper, "IP CTS is a form of telecommunications relay service (TRS) that allows individuals with a hearing impairment to both read captions and use their residual hearing to understand a telephone conversation. Provision of IP CTS is undoubtedly important, and it is also a statutory duty under the Communications Act. Additionally, Mr. May offered a more detailed analysis and prescription for IP CTS reform in his previous and similarly-titled Perspectives paper, "Reforming the FCC's Internet Protocol Captioned Telephone Service Program." 

Report Indicates Robocallers are Making Heavy Use of Smaller Networks

On September 12, Transaction Network Services (TNS) released its "2019 First Half Robocall Investigative Report." According to the TNS Report: "The data suggest that while top carriers are making inroads in the fight against robocalls, VoIP providers and smaller regional carriers need to take more aggressive action as bad actors shift focus to their networks." The top six U.S. carriers represented 70% of total calls during the first half of the year, "but only 12% of high-risk calls are from numbers owned by these carriers." 

The TNS Report found that "[R]obocallers may shift focus to smaller, regional carrier networks." As pointed out in a September 12 USA Today article, many smaller carriers appear to be behind the major carriers in implementing STIR/SHAKEN technology to verify that numbers displayed on Caller ID actually placed calls. And it appears that efforts by major carriers may be responsible for reducing robocalls originating in their respective networks. 

As mentioned in my August 23 blog post, a dozen major carriers have entered into an agreement with all fifty State Attorneys General to combat illegal and unwanted robocalls and caller ID spoofing, including by implementing STIR/SHAKEN. On legislative efforts in Congress to protect consumers from scam and unwanted calls, see my April 15 blog post.