Cable MVNOs Subscribership Continues to Climb in 2023

Cable wireless mobile virtual network operators (MVNOs) are effective intermodal competitors in today's communications marketplace. An article published in Fierce Wireless on October 27 of this year summarizes third quarter growth in cable MVNO services by the two largest services, Comcast's Xfinity Mobile and Charter's Spectrum Mobile:

Comcast yesterday reported the company added 294,000 wireless lines in Q3 2023. Comcast now has 6.2 million wireless lines in total. In contrast, Charter today reported it added 594,000 wireless lines in Q3, bringing its total wireless lines to 7.2 million.

My August 1 blog post observed that in the second quarter of 2023, Xfinity Mobile gained 316,000 lines and Spectrum Mobile gained 648,000 lines. 

 

Significant growth potential remains for both cable MVNO services within their respective geographic footprints. And as noted in the Fierce Wireless article, the cost-efficiency and competitiveness of those services is likely to improve in the near future as a result of buildouts of their own wireless infrastructure using small cells and licensed CBRS spectrum. Deployment of such networks as well as increased offloading of mobile traffic onto cable MVNO wi-fi networks, will make hybrid cable MVNOs less and less "virtual" and make their services less costly to provide by reducing their reliance on leasing wholesale access to mobile cellular networks. 

 

Importantly, the mobile broadband choices offered by cable MVNO services did not exist when the FCC imposed public utility regulation on mobile broadband Internet access services in the 2015 Title II Order. That order proffered "switching costs" for mobile broadband consumers and supposed incentives and ability by mobile providers to unreasonably discriminate against their own subscribers as supposed justifications for imposing public utility regulation. Commentsfiled with the FCC by the Free State Foundation in July 2017 explained that those rationales were not persuasive. In late 2023, competition from cable MVNOs further undermines those rationales for imposing public utility regulation. Any wireless provider that blocks or throttles their own subscribers' access to legal content via the Internet or otherwise unreasonably discriminates against their own subscribers risks massive loss of subscribership. Instead of foisting new regulatory restrictions on mobile broadband providers to address non-existent harms, the Commission should maintain the pro-market, pro-investment, and pro-innovation federal light-touch policy set forth in the 2018 Restoring Internet Freedom Order. 

Maine May Join the State Privacy Law Club

Might the Pine Tree State in 2024 become the fourteenth state to pass a comprehensive data privacy law – and thereby further compound the problem of multiple, conflicting state statutes? It's possible. The Maine legislature's bicameral Judiciary Committee considered "An Act to Create the Data Privacy and Protection Act" (LD 1977) at a hearing two weeks ago.

LD 1977 is modeled on the American Data Privacy and Protection Act (ADPPA), a piece of federal legislation that easily cleared the House Commerce Committee back in August 2022 before losing forward momentum. That LD 1977 takes its lead from the ADPPA is somewhat ironic, as one of the primary motivating factors driving the ADPPA was the problem of a "patchwork" of state-specific laws, a problem that LD 1977 threatens to exacerbate.

To make matters worse, LD 1977 problematically diverges from the ADPPA by including an extremely broad private right of action. Specifically, Section 9620(2) states that:

A violation of this chapter or a rule adopted under this chapter with respect to the covered data of an individual constitutes an injury to that individual. The injured individual may bring a civil action against the party that commits the violation, except that an individual may not bring a civil action against a small business.

Possible remedies include actual damages or statutory damages starting at $5,000 per violation, whichever are greater; punitive damages; attorney's fees and costs; and injunctive and declaratory relief. A "small business" is a "covered entity" or "service provider" (but not a "data broker") that (1) generates less than $41 million in annual revenues, and (2) does not collect or process the personal data or more than 200,000 individuals.

Something else to consider: as I described in "Maine's ISP-Only Privacy Law Will Not Protect Consumers," an April 2020 Perspectives from FSF Scholars, Maine adopted a privacy law in June 2019 that singles out broadband Internet service providers (ISPs), requiring them – but not other participants in the broader online ecosystem, such as "edge providers" like Alphabet, Meta, and Amazon – to obtain "opt-in" consent from customers before using their personal information.

At an absolute minimum, any additional privacy legislation must acknowledge – and address – this disparate treatment of broadband ISPs.

Biden Administration, Democratic Senators: Fund the Affordable Connectivity Program

As the clock ticks steadily toward the moment in early 2024 when the Affordable Connectivity Program (ACP) runs out of money, the Biden White House and a group of 32 Democratic Senators recently added their voices to the bipartisan chorus calling for additional funding.

Created by the Infrastructure Investment and Jobs Act (IIJA), the ACP provides a monthly subsidy – up to $75 on qualifying Tribal lands and in certain high-cost areas, $30 elsewhere – that eligible lower-income households can apply toward a high-speed Internet access subscription. It also makes available up to $100 for the purchase of a connected device.

At the end of August, more than 20 million households had signed up for the ACP. Consequently, it is expected that the $14.2 billion initially appropriated will have been spent by some point early next year.

In an August 2023 post to the FSF Blog, I highlighted calls, from both sides of the aisle, for Congress to appropriate additional money to the ACP. I also noted that Free State Foundation President Randolph May, on multiple occasions, has urged Congress to extend the ACP – but also to "revise the program's eligibility requirements to target its limited resources to those most in need."

More recently, panelists at a Broadband Breakfast online event on October 11, 2023, spoke of the ACP's importance – one, Debra Lathen, President, Lathen Consulting LLC, described it as "critical" to the success of the $42.45 billion Broadband Equity, Access, and Deployment (BEAD) program.

In addition, 32 Democratic Senators, led by Jacky Rosen (NV), wrote in a letter to congressional leaders dated October 19, 2023, that, "as you finalize a government appropriations package, we urge you to include full funding for the ACP as well as a long-term solution that provides a sustainable, responsible funding stream, so that millions of Americans don't lose access to critical connectivity services."

And in an October 20, 2023, letter to House Speaker Pro Tempore Patrick McHenry, Shalanda D. Young, Director of the Office of Management and Budget, highlighted the importance of additional funding to "avoid the risk that millions of Americans lose access to affordable high-speed internet."

According to Communications Daily (subscription required), the White House is "is expected to seek about $4 billion in additional money for the [ACP] as part of a second part of the supplemental federal funding request it will send to Congress this week."

MEDIA ADVISORY: FSF Scholars Submit Ex Parte Regarding the FCC's Digital Discrimination Proceeding

Free State Foundation President Randolph May and Director of Communications Policy Studies Seth Cooper submitted the attached written ex parte presentation to the FCC emphasizing the importance of the agency following Congress’s directive to account for “technical and economic feasibility” in considering alleged complaints of digital discrimination. Below are two paragraphs excerpted from the beginning of the ex parte submission:

In Section 60506(a) of the Infrastructure Investment and Jobs Act of 2021, Congress expressly stated that, in implementing the Commission's mandate to take steps to ensure that all Americans benefit from equal access, the agency must consider issues of “technical and economic feasibility.” Congress thereby dictated that broadband providers must remain free to make informed business judgments regarding matters such as the size of their investments in relation to the availability and cost of capital, the geographic reach of planned deployments by the provider and competitors, the cost of the underlying technologies employed considered for deployment, the timing of new deployments, and other similar considerations. They are all market-related factors affecting economic feasibility assessments.

The congressional requirement that economic feasibility factors be taken into account requires acknowledgement by the Commission that deployment and non-deployment decisions of broadband providers to certain locations routinely, and necessarily, involve business judgements that have absolutely nothing to do with invidious discrimination. When confronted with a complaint alleging discrimination, in addition to the above considerations, “economic feasibility” is properly informed by factors such as: (1) whether a grant-making entity (say, in the BEAD context) delineates the deployment areas that are being subsidized; (2) whether the area subject to question is receiving, or is slated to receive, federal or state subsidized build-outs; (3) whether another provider is already providing service, or is slated to offer service, at comparable speeds and with comparable quality of service metrics; (4) regulatory or procedural requirements that increase costs prohibitively; and (5) whether the provider does not provide service in the complainant’s area using the technology the complainant prefers. As explained in FSF’s comments and reply comments, when broadband providers make deployment decisions based on economic feasibility reasons such as those above, the Act forbids the Commission from treating those decisions as wrongful.

PRESS RELEASE: The FCC's Proposal to Impose Public Utility Regulation on Internet Providers Is Deeply Flawed

 

In response to the FCC’s adoption of a notice of proposed rulemaking to reclassify Internet service providers as common carriers, Free State Foundation President Randolph May issued the following statement:

“Despite the over-the-top scare tactics and doom-and-gloom predictions employed by Chairwoman Rosenworcel and net neutrality proponents throughout 2017 in opposing the Restoring Internet Freedom Order, the FCC’s own rulemaking notice doesn’t purport to claim there is any present evidence of consumer harm to justify imposing a costly intrusive public utility regime on Internet service providers. Instead, the proposal concededly is based on conjecture about what ‘could' or ‘might' occur at some time in the future. For this reason alone, today’s proposed agency action will go down in history as one of the most egregious overreaches in regulatory history. Rather than “net neutrality,” the proposed strict government control of Internet providers by the imposition of public utility regulation might more properly be called “net neutering." 

Chairman Rosenworcel claims that public utility regulation is justified because the Internet is now 'essential' like water and electricity, and providers of those services are most often public utilities. This claim is misguided because, unlike water and power companies, Internet service providers operate in a facilities-based competitive marketplace, and one that is steadily growing increasingly competitive. Regardless of whether Internet service should be characterized as ‘essential’ for some purpose or another, in light of the competitive conditions in which Internet providers operate, likening them to water and electric utilities is especially inapt. Food and clothing are 'essential' too, but no one suggests they should be subjected to public utility regulation. If they were, there almost certainly would be less food and clothing available because, as most economists acknowledge, public utility regimes almost always, over time, suppress investment and innovation. This is because of the regulatory costs imposed and uncertainties created regarding regulators’ decisions.

As but one example in this instance of such inevitable regulatory uncertainties that necessarily disincentivize investment and innovation, the FCC is proposing to adopt what it calls a 'general conduct standard.' But the conduct standard is inherently ambiguous and subject to abuse, based as it is on ad hoc determinations of ‘reasonableness’ and 'totality of the circumstances' evaluations.  

Rather than proposing regulatory solutions for non-existent problems, at a time when Congress has appropriated over $100 billion to promote ubiquitous broadband deployment, especially to unserved areas, and to support adoption, it would make far more sense for the FCC and the Biden Administration to devote their full attention and resources to implementing these programs in an efficient and cost-effective manner, with as little fraud and abuse as possible.

On top of the reasons why, as a matter of policy, the FCC’s proposal is so seriously flawed, as I have explained elsewhere, it is very unlikely to survive judicial review because Congress has not clearly authorized the Commission to take an action of such major economic and political significance. Indeed, Congress has rejected several attempts to amend the Communications Act to provide the FCC with such authority.”

Please direct any press inquiries to Mr. May at info@freestatefoundation.org

Recent Free State Foundation Resources Regarding Net Neutrality:

Seth L. Cooper, Net Neutrality Regulation Is Not a Public Safety Measure, October 17, 2023

 

Randolph J. May, Net Neutrality Redux: A Fight Over First Principles, October 16, 2023

 

Seth L. Cooper, FCC Ambiguous 'General Conduct' Standard Is Bad Policy and Likely Unlawful, October 13, 2023

Randolph J. May, There’s Little Question Net Neutrality Is a Major Question, September 28, 2023

 

Randolph J. May, Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers, September 21, 2023

 

Randolph J. May, Don’t Regulate Internet Providers as Public Utilities – Again!, July 6, 2023 

 

USTelecom Report Shows Price Drops and Speed Increases for Broadband Services

On October 11, USTelecom released its "2023 Broadband Pricing Index." This latest edition of the BPI report found that prices for fixed wireline broadband services – DSL, cable, and fiber-to-the-home – declined between March 2022 and March 2023. According to the BPI Report, inflation-adjusted prices for providers' most popular broadband speed tier decreased by 18.1% and prices for their fastest speed tier option went down 6.5%. Additionally, between 2015 and 2023, inflation-adjusted prices for the most popular speed tier declined 54.7% and prices for the highest speed tier option dropped by 55.8%. 

Also, the BPI Report found that, between 2015 and 2023, "download speeds offered in the most popular tier increased by 141.5%, while upload speeds increased by nearly 285%" and that "[i]n the fastest-offered tier, download speeds increased by 117.1%, with upload speeds up by nearly 90%."

 

The BPI Report also shows Consumer Price Index (CPI) trends for broadband Internet services compared to other goods and services. Between 2015 and 2023, costs for consumer goods and services rose by 28%, according to CPI-U, but consumer prices for the most popular and the fastest speed options went down by 37% and 39%, respectively. 

 

The report relies on the FCC's Urban Rate Survey of the largest 14 wireline broadband providers that collectively serve 90% of all terrestrial fixed broadband services sold in the U.S. The 2023 BPI Report is available on USTelecom's website. FSF Senior Fellow Andrew Long wrote about the 2022 BPI Report in a June 2022 blog post and about the 2021 BPI Report in a May 2021 blog post. 

 

The findings of the BPI Report are particularly significant now that the FCC has opened its Safeguarding and Securing the Open Internet proceeding and proposed to subject broadband Internet access services to public utility regulation. The continuing improvements in network speeds and the consumer-friendly pricing trends on broadband service plans are strong indicators that the broadband marketplace is competitive. Certainly, these market developments do not justify imposing stringent new regulation on broadband services. The Commission should not impose public utility regulation on broadband networks but maintain its market-oriented framework that has helped promote the private investment in competitive wireline broadband networks. For more on this point, see Free State Foundation President Randolph May's September 21, 2023, Perspectives from FSF Scholars, "Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers."

Over 40 Republican Senators Tell FCC to Say No to Net Neutrality

In a letter that was released earlier today, Senators John Thune (R-SD), ranking member of the Commerce Committee's Subcommittee on Communications, Media, and Broadband, and Ted Cruz (R-TX), ranking member of the Commerce Committee, called FCC Chairwoman Jessica Rosenthal's proposal to subject broadband Internet access services to public utility regulation under Title II of the Communications Act a "historic mistake."

More than forty GOP Senators, including the entire Senate Republican leadership team, added their names to the letter.

In the letter, the Senators warn that "[r]e-imposing heavy-handed, public-utility regulations would threaten the progress our country has made since 2017, and it would steer our country out of the fast lane and into a world of less competition, less choice, less investment, slower speeds, and higher prices."

They also emphasize that, because "the FCC lacks this statutory authority over broadband internet access," any attempt to reclassify broadband under Title II "will not survive judicial review."

In a September 26, 2023, press release posted to the FSF Blog, Free State Foundation President Randolph May characterized Chairwoman Rosenworcel's proposal as "foolhardy," made similar predictions regarding its ability to survive application of the "major questions doctrine," and cautioned that, despite claims to the contrary, it inevitably would result in rate regulation.

A Reader on Net Neutrality and Restoring Internet Freedom: A Relevant Book for 2023

On September 28, the FCC released a draft proposed notice of rulemaking that would reclassify broadband Internet services as a "telecommunications service" under Title II of the Communications Act and reimpose every or near every aspect of the repealed 2015 Title II Order. At its upcoming October 19 public meeting, the full Commission will vote on whether to approve the draft and issue the proposed rulemaking for public comment. Free State Foundation President Randolph May offered his initial reaction to the anticipated release of the draft in a September 26 press release.  

In 2017, the Free State Foundation filed initial comments and reply comments in the Restoring Internet Freedom proceeding that led to the Commission's repeal of the Title II Order and return to broadband Internet access services as an "information service" under Title I of the Communications Act. (Additionally, FSF filed comments in April 2020 in the Restoring Internet Freedom Order remand proceeding.)

 

The draft proposed rulemaking in the new Safeguarding and Securing the Open Internet proceeding amounts to an effectively wholesale return to the Title II Order, premised largely upon the same premises upon which the Title II Order was adopted. The draft presents the same issues of serious concerns regarding rate regulation, vague general conduct standard, harm to innovation in paid prioritization agreements that could benefit consumers, and more that several Free State Foundation scholars addressed in the FSF Press's 2018 book A Reader on Net Neutrality and Restoring Internet Freedom, edited and with an introduction by FSF President Randolph May and I. The chapters in that book – which defend the market-oriented light-touch regulatory approach to broadband under the RIF Order and identify problems with public utility regulation of broadband Internet services under the Title II Order – remain extremely relevant in 2023. 

Copies of A Reader on Net Neutrality and Restoring Internet Freedom are still available for purchase at outlets such as Amazon and Barnes & Noble. The book is recommended reading for anyone who wants a refresher on the policy debate over net neutrality regulation or who are new to the debate and want to be brought up to speed.

Expect FSF scholars to say more in the days ahead about the Safeguarding and Securing the Open Internet proceeding and FCC Chairwoman Jessica Rosenworcel's draft proposal to reimpose public utility regulation on broadband services. 

Supreme Court Declines to Hear Case on Direct Copyright Infringement

On October 2, the Supreme Court denied certiorari in ABKCO Music, Inc. v. Sagan (2022). I wrote about this case in my September 20 Perspectives from FSF Scholars, "Supreme Court Should Clarify the Law on Direct Infringement of Copyrighted Works." By declining to grant review of the case, the court unfortunately passed up the opportunity to set the law straight that a defendant that orders and participates in an infringement can be liable for direct infringement even if the defendant did not personally perform the literal act of copying the copyrighted work. 

As explained in my Perspectives paper, the Second Circuit went off course in Sagan by improperly applying the "volitional conduct" requirement for direct infringement liability. The lower court wrote that "direct liability attaches only to 'the person who actually presses the button.'" But that is at odds with a copyright owner's "exclusive rights to do and to authorize" under Section 106 of the Copyright Act. As the Supreme Court observed, in Sony Corp. of America v. Universal City Studios, Inc. (1984), "an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner."

 

By refusing to hear the case, the court lets stand the Sixth Circuit's decision that unduly narrows the traditional understanding direct infringement and that conflicts with decisions in at least other circuits. For instance, in Society of the Holy Transfiguration Monastery, Inc. v. Gregory (2012), the First Circuit emphasized that an infringer includes "one who authorizes the use of the copyright work without actual authority from the copyright owner" – quoting Sony. And in Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. (1992), the Ninth Circuit recognized that "infringement by authorization is a form of direct infringement."

 

For now, it is to be hoped that other lower courts will decline to follow the Sixth Circuit's misapplication of the volitional conduct requirement and unduly narrow definition of direct infringement that undermines the ability of copyright owners to enforce their exclusive rights. 

Delaware Privacy Law Makes a Dozen – or a Baker's Dozen?

First State Governor John Carney signed the Delaware Personal Data Privacy Act (the DPDPA) into law on September 11, 2023.

For those keeping score, Delaware increases the number of states to have passed a comprehensive data privacy law either to twelve – "Delaware Becomes Twelfth State to Enact Comprehensive Privacy Law" – or thirteen – "The 'First State' Officially Becomes the Thirteenth State with a Comprehensive Data Privacy Law" – depending on how one defines "comprehensive."

And for those concerned with the confusion and cost caused by the growing patchwork of inconsistent state laws, the fact that commenters cannot agree even on what the current total is underscores the extent of the problem.

In "More States Compound the Dreaded Privacy 'Patchwork' Problem," a July 2023 Perspectives from FSF Scholars, I noted that the DPDPA cleared the Delaware legislature on June 30, 2023. I also made the case that:

[T]he … "patchwork" of laws has become so complicated that interested observers can no longer agree even on the precise number of comprehensive data privacy statutes that have been passed. That fact alone speaks volumes about how difficult it has become for both companies and consumers to make sense of the ever-evolving regulatory landscape – and how important it is for Congress to establish a uniform national data privacy framework that preempts state laws.

For what it's worth, I am one of those keeping score – and I do include the Florida Digital Bill of Rights (FDBR) for a running total of thirteen. While many provisions of the FDBR apply only to companies with at least $1 billion in annual gross revenues, its requirements regarding the handling of "sensitive personal data" apply to all for-profit businesses. As such, "it undeniably represents yet another item on the growing list of data privacy statutes with which businesses must grapple."

Senate Bill Would Improve Permitting for Broadband Projects on Federal Land

On September 21, Senators John Barrasso and Kyrsten Sinema introduced the Closing Long Overdue Streamlining Encumbrances to Help Expeditiously Generate Approved Permits (CLOSE THE GAP) Act. The purpose of the bill is to make permitting processing faster and more efficient for broadband infrastructure projects on federal lands.

Among other things, the CLOSE THE GAP Act would require federal land management agencies – namely, National Park Service, Bureau of Land Management, Bureau of Reclamation, U.S. Fish and Wildlife Service, Bureau of Indian Affairs, and Forest Service  – to adopt new rules for streamlining the process for considering and approving broadband project applications on federal lands. Within a year of the Act becoming law, the Secretary of the Interior would be required to adopt regulations that, the maximum practical extent, require federal land management agency permitting processes be "uniform and standardized." Also, the regulations must require that applications to locate or modify broadband facilities must be granted on a "competitively neutral, technologically neutral, and nondiscriminatory basis." And agency cost recovery fees for locating or modifying facilities must be cost-based. 

 

Additionally, the CLOSE THE GAP Act would make it easier to monitor the status of broadband infrastructure projects by making those projects trackable under the Permitting Dashboard that was established pursuant to the Fixing America's Surface Transportation (FAST) Act of 2015. The Permitting Dashboard is "an online tool for Federal agencies, project developers, and interested members of the public to track" federal environmental reviews and authorization processes for "large or complex infrastructure projects." Additionally, the bill would establish online portals for submissions of Standard Form-299 Applications (SF-299s), which are standard forms required by federal land management agencies in applying for access to rights-of-way, leases, licenses, or permits involving federal lands. 

 

Furthermore, the CLOSE THE GAP Act includes exemptions from the National Environmental Policy Act for broadband infrastructure on federal lands that previously received permit approval as well as exemptions from NEPA and the NHPA for collocations of radio towers on existing towers as well as for removal or replacement of radios on existing towers. These exemptions and others included in the bill would reduce likely unnecessary permitting expenses and delays in building out broadband infrastructure.

 

The permitting process reforms included in the CLOSE THE GAP Act are particularly important in western states like Wyoming and Arizona, where large geographic areas are designated as federal lands. In the past few years, Congress has dedicated over $100 billion to expanding access to broadband services, including about $65 billion in the Infrastructure Investment and Jobs Act of 2021. In order to help ensure that those substantial sums are spent timely and efficiently to bring broadband access to unserved and underserved areas, improved permitting processes should be a priority of Congress. Senators Barrasso and Sinema are to be applauded for introducing the bill. The Senate should give the legislation timely consideration. 

 

The House of Representatives has pending legislation that would streamline permitting processes for broadband deployments on federal lands. For more, see my FSF Blog post from April 23 of this year, "Subcommittee Looks at Legislation Promoting Broadband Infrastructure Buildout," and my May 2023 post, "House Committee Passes Reforms for Broadband Infrastructure Siting on Federal Property." 

 

(Note: A Senate bill number for the CLOSE THE GAP Act has yet been provided. This post will be updated with the number and link to the filed bill when it is made available.) 

PRESS RELEASE: FCC Proposing to Reimpose Net Neutrality Regulations Is Foolhardy

Free State Foundation Randolph May issued the following statement regarding FCC Chairwoman Rosenworcel's proposal to reimpose net neutrality regulations: 

It is foolhardy for the FCC to embark on yet another attempt to impose public utility-like regulations on Internet service providers. As a matter of policy, it's wrong to go down this road again when there's no evidence of a problem justifying new burdensome regulations. And as a matter of law, it's a big blunder because it's very likely the Supreme Court will determine that any FCC action reimposing net neutrality regulations is a "major question" and Congress has not clearly authorized the agency to exercise the power it claims. It would make a lot more sense, and benefit consumers, if the Commission would just devote its resources to important matters within its authority, such as ensuring that the multi-billions of dollars in subsidies it's responsible for disbursing are used effectively and efficiently, without fraud or abuse, to promote broadband deployment and adoption?

 

And don't believe for an FCC minute that the Chairwoman Rosenworcel and her Democrat majority colleagues intend to foreclose rate regulation of ISPs' offerings. These actions may not be called "rate regulation" but rather prohibitions on usage-based pricing or free data applications, or some such. The effect will be rate regulation.

Major Questions Doctrine Is a Major Obstacle to Net Neutrality Regulation

On September 20, attorneys Donald B. Verrilli, Jr. and Ian Heath Gershengorn published a white paper titled "Title II 'Net Neutrality' Broadband Rules Would Breach Major Questions Doctrine." The co-authors served respectively as former Solicitor General and Acting Solicitor General in the Obama Administration. The paper's co-authors are right in identifying the ascendant major questions doctrine as a major legal impediment to any future attempt by the FCC to re-impose Title II public utility-like regulations on broadband Internet access services. According to Messrs. Verrilli and Gershengorn:

The Supreme Court will surely consider the question whether to classify broadband as a Title II telecommunications service subject to common carrier regulation to be a “major question”—that is, one involving a matter of major economic and political significance… The statutory text on which the Commission proposes to hang its hat lacks the clear statement of authority that the Supreme Court demands. Nothing in Title II of the Communications Act itself or in any other statute gives the Commission the clear and unambiguous authority to classify broadband as a Title II telecommunications service subject to common carrier regulation, and the Commission cannot reasonably conclude otherwise. 

The paper's co-authors trace the Supreme Court's recent major questions decisions – including the June 2023 decision in Biden v. Nebraska and helpfully lays out the factors that the court uses to assess whether Congress provides "clear congressional authorization for agency action" on a matter of major economic and political significance. They provide straightforward analysis of relevant provisions in the Communications Act of 1934 as well as the Telecommunications Act of 1996, concluding that clear congressional authorization is lacking for prospective Title II regulation of broadband by the FCC. Additionally, the co-authors explain why the Supreme Court's 2005 decision in NCTA v. Brand X Services – which upheld the FCC's decision to classify broadband Internet services as a Title I "information service" and not as a Title II "telecommunications service" does not justify Title II reclassification but forecloses it. 

 

According to the paper's co-authors, with Title II amounting to a legal dead end for net neutrality regulation, other avenues should be preferred: 

Congress should enact legislation to resolve this issue once and for all. Absent that, the Commission could use its finite resources to pursue more legally defensible policy initiatives, such as adopting light-touch net neutrality rules under Section 706 of the Telecommunications Act, thereby avoiding Title II reclassification that would be inevitably doomed under the major questions doctrine.

The legal reasoning of Messrs. Verrilli and Gershengorn is persuasive that the FCC lacks statutory authority to impose Title II regulation on broadband Internet access services. And their paper is worthwhile reading. Both Congress and the FCC ought to carefully consider the points made in their paper. 

 

Aside from serious legal roadblocks to imposing Title II public utility-like regulation on broadband Internet services Free State Foundation President addressed policy reasons why such regulation would be a serious mistake in his Perspectives from FSF Scholars – originally published on September 21 as an op-ed in the Washington Examiner – "Reimposing Burdensome Net Neutrality Mandates Will Harm Consumers." And for additional legal background, see FSF President May's July 2022 Perspectives from FSF Scholars, "A Major Ruling on Major Questions."

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. 

SALE Act Would Put Valuable 2.5 GHz Band Spectrum Licenses into Use for 5G

On September 14, Sen. John Kennedy introduced the 5G Spectrum Authority Licensing Enforcement (SALE) Act -- S. 2787. The short and simple bill, if passed, would grant the FCC a 90-day window of authority to process and grant licenses that were won through the Commission's competitive bidding auction for the 2.5 GHz spectrum band.

In March of this year, the FCC's statutory authority to conduct competitive bidding spectrum license auctions lapsed. But what about the Commission's authority to issue licenses that were already won at previously completed auctions? The Commission concluded its 2.5 GHz band auction back in August 2022. It was announced that over 7,800 county-sized licenses were won by 63 bidders. T-Mobile won over 7,100 such licenses and by late September 2022, T-Mobile submitted long-form applications and paid $304 million to the Commission for those licenses. Chairwomen Jessica Rosenworcel reportedly has taken the position that the agency lacks even the authority to issue licenses won – and paid for – in previously completed auctions. As explained in my July 2023 blog post, "FCC's Unreasonable Delay in Withholding 2.5 GHz Band Spectrum Licenses," there is strong basis for disagreement with Chairwoman Rosenworcel's apparent legal conclusion.

The SALE Act would break the impasse and prompt the FCC to finally issue the 2.5 GHz band spectrum licenses to the rightful recipients. In his press release announcing the introduction of the SALE Act, Sen. Kennedy rightly acknowledges that wireless communications are important to his home state of Louisiana, and particularly to rural areas. The same holds true for the rest of the states and their rural areas. Mid-band spectrum is critically important for 5G wireless services. And valuable spectrum licenses that were fairly won at auction and paid for ought to finally be delivered to the auction winners and put into commercial use to benefit Americans.  Sen. Kennedy deserves credit for introducing the SALE Act. Hopefully, the Senate will quickly take up and pass the bill and the House of Representatives will follow suit. 

 

For more on this topic, see Senior Fellow Andrew Long's blog post July 2023 blog post, "Congress Should Reinstate the FCC's Spectrum Auction Authority," as well as his August 2023 blog post, "Commissioner Carr to Congress: Renew FCC's Auction Authority."

 

(Note: This post has been updated to include the Senate bill number and link for the SALE Act, S. 2787.) 

House Commerce Subcommittee to Hold Hearing on Video Marketplace

The House Energy and Commerce Committee's Subcommittee on Communications and Technology will hold a hearing tomorrow at 2 pm ET entitled "Lights, Camera, Subscriptions: State of the Video Marketplace." Promisingly, this hearing will focus, at least in part, on outdated regulations that inappropriately impede traditional video programming distributors' ability to participate in an increasingly competitive marketplace.

When announcing the hearing, House Energy and Commerce Committee Chair Cathy McMorris Rodger (R-WA) and Communications and Technology Subcommittee Chair Bob Latta (R-OH) stated the following:

Over the last decade, the video marketplace has undergone a transformative shift as more media content moves online. The introduction of streaming services expanded the options for consumers to choose where, when, and what content they view. While there is an unprecedented amount of content, like movies, TV shows, and news, available, the rise of these services creates challenges for traditional media providers who continue to compete despite being saddled with regulations. We look forward to discussing the evolution of this market, the steps Congress can take to ensure outdated regulations do not hinder innovation and competition, as well as how to bring the traditional marketplace into the 21st century.

Scheduled witnesses include:

• FuboTV Inc. Board Member and CEO David Gandler (witness testimony)
• National Association of Broadcasters President and CEO Curtis LeGeyt (witness testimony)
• Consumer Reports Senior Policy Counsel and Manager of Special Projects Jonathan Schwantes (witness testimony)
• America's Communications Association – ACA Connects President and CEO Grant B. Spellmeyer (witness testimony)

In a recent post to the Free State Foundation's blog, I presented the latest evidence of longstanding subscriber trends – specifically, that traditional video programming distribution platforms, both facilities-based and virtual, continue to shed customers while countless streaming services add them.

Consequently, and as I argued in "With Pay-TV on the Wane, Legacy Regulations Should Follow," a July Perspectives from FSF Scholars, "consumers have available more than sufficient choices to compel a comprehensive change in course away from government intervention … and toward the exclusive reliance upon efficiently operating market forces."

Perhaps tomorrow's hearing will serve as a significant step in that direction.

USTelecom Reports Record-Breaking Investment Broadband by Providers in 2022

Capital expenditures by U.S. broadband providers surged to $102.4 billion in 2022, according to USTelecom's "2022 Broadband Capex Report." USTelecom's snapshot report was released on September 8 of this year. 

The $102.4 billion annual capex total is up from $86 billion in 2021 and $79.4 billion in 2020. According to USTelecom's 2022 report, U.S. broadband providers have invested over $2.1 trillion in network infrastructure since 1996. In past reports, USTelecom has pointed out that these estimates likely are conservative because they exclude annual investment by small U.S. broadband providers as well as U.S. satellite broadband providers.

Strong private investment in next-generation networks is an intended result of the FCC's free market-friendly broadband policy that has been in place since early 2018. In its Restoring Internet Freedom Order (2018), the Commission recognized that "increased broadband deployment and subscribership require investment, and the regulatory climate affects investment." In that order, the Commission found that "reinstating the information service classification for broadband Internet access service is more likely to encourage broadband investment and innovation" than subjecting broadband Internet access services to public utility regulation." 

 

Following the Senate's confirmation of Anna Gomez to be the fifth Commissioner on September 7, it is widely anticipated that the FCC will be revisiting the statutory classification of broadband Internet access services. But the success of the Commission's existing market-oriented policy in promoting investment – including $102.4 billion in capital investment in broadband by private market providers in 2022 – deserves front-and-center attention when the debate over broadband regulatory policy ramps up. 

How Do You Spell 'Unsustainable'? U-S-F!

According to a report in Communications Daily, the estimable analyst Billy Jack Gregg projects the "USF contribution factor" will likely increase to 36.2% during Q4 2023, making it the “highest quarterly contribution factor in the history of the USF.” Based on two decades of observation, I'd say you can take Mr. Gregg's projections to the bank. Or maybe more appropriately in this instance, prepare to make a bit larger withdrawal from your bank to pay your telephone bill. 

Mr. Gregg stated total revenue collected will also be about $362 million less than the previous quarter.

 

Let me repeat what most readers already know. Revenue collected from the "USF contribution factor" – "surcharge," or "tax" if you want to call a spade a spade – continues to decline as more and more people abandon the traditional telephone services on which the surcharges are assessed. So, the surcharge has increased from 5.6% in 2000 to 12.9% in 2010 to 27.1% in 2020 to the now projected 36.2% for the last quarter of 2023.

You get the picture.

 

The current Universal Service Fund subsidy regime is unsustainable, and it must be meaningfully reformed. This is not to say that there should not be subsidies to support universal service goals, including support for low-income persons and for high-cost areas that otherwise would not be served. It is to say the legacy universal service regime is broken – and clearly unsustainable.

 

It needs to be replaced with a broadband-centric regime that is economically efficient, effective, transparent, and politically accountable. For a roadmap regarding how to accomplish that objective, please see the Free State Foundation's extensive comments submitted on August 25 to Senators Luján and Thune and the Universal Service Working Group.