TMT with Mike O'Rielly – Ep 14: Role & Treatment of Media Industries

Episode 14 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 29. In this episode, titled "The Role and Treatment of Today's News and Media Industries," Mr. O'Rielly has a conversation with guest Danielle Coffey, President & CEO, News/Media Alliance. Streaming video of the episode is now available: 

Small Claims Board Providing Copyright Owners Access to Justice

On October 22, the U.S. Copyright Office released a "Key Statistics" report on the Copyright Claims Board. The Board was established under the Copyright Alternative in Small-Claims Enforcement Act (CASE Act), passed by Congress in December 2020 and signed into law by President Donald Trump. The Board serves as a voluntary, virtual forum for resolving disputes over alleged copyright infringement claims where the damage amount in controversy is $30,000 or less. Both sides must agree to resolve their dispute at the Board, and its decisions are enforceable in federal court.  

According to the information provided by the Copyright Office, as of September 2024, nearly 1,000 claims have been filed with the Copyright Claims Board. Also, 63% of such claims involved self-represented individuals, and 46% of the cases were for smaller damages of less than $5,000. 

 

The Board appears to be performing a useful function by providing copyright owners with a cost-effective venue to protect and enforce their intellectual property (IP) rights in creative works, such as photos, movies, and music recordings. For a copyright owner to hire an attorney and bring an infringement case in federal court, he or she typically must be willing to spend tens of thousands of dollars.  

 

Free State Foundation President Randolph May and I recommended the creation of such a small claims venue in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Webinar Panel Weighs FCC's Proposed AI Political Ad Regulation

On October 7, Free State Foundation President Randolph May moderated a webinar, "The FCC's Proposal to Regulate Political Ads Using Artificial Intelligence." Video of the webinar is now available online. The Federalist Society-hosted webinar featured a panel discussion on the Commission's proposed rulemaking that would require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political candidate and political issue ads that contain content generated using artificial intelligence (AI). The proposed rulemaking also would require notice filings in online political files regarding ad usage of AI, and impose obligations on broadcasters (and cable and DBS operators) to act when informed by "credible third parties" that the ads being transmitted contain AI-generate content. 

The FCC's novel regulation of political ads with AI-generated content raises important questions about the scope of the agency's authority and the policy merits of the proposal. Those topics are ably tackled by the webinar panel, consisting of FCC Commissioner Brendan Carr, Public Knowledge President Christopher Lewis, as well as Prof. Bradley Smith, a former FEC Chairman. To learn more, check out the webinar video. 

On September 19, the Free State Foundation filed initial comments in the FCC's novel AI political ad regulation proceeding. And FSF filed reply comments on October 7. text

Maine Satellite Plan Casts Doubt on BEAD Program Approach

As reported by Broadband Breakfast (subscription required), the Maine Connectivity Authority (MCA) has announced that it will allocate upwards of $5 million toward the purchase of Starlink terminals for every remaining "unserved" location in the state. What's more, the contract with Starlink "is expected to include capacity guarantees to ensure that the state-purchased terminals can connect to internet service at the newly established speed benchmark of 100/20 Mbps."

Universal access? Check. Speeds that satisfy the FCC's recently updated "broadband" benchmark? Check. A price tag roughly one-twentieth that of fiber? Check. So why, then, will the MCA spend an additional $278 million in federal subsidies from NTIA's Broadband Equity, Access, and Deployment (BEAD) Program to connect "underserved" locations to fiber?

Despite their marketplace-proven ability, technologically speaking, to deliver the speeds that consumers demand – and that the Infrastructure Investment and Jobs Act, the statute that created the BEAD Program, specifies – from day one NTIA has discouraged the use of BEAD Program subsidies to deploy non-fiber broadband distribution platforms.

As I pointed out in "BEAD Program Technological Neutrality 'Fix' Falls Short," an August 2024 Perspectives from FSF Scholars, even recent changes to NTIA's BEAD Program rules approving the use of satellites and unlicensed spectrum do so only under very limited circumstances – to be specific, when the price tag for fiber exceeds a state-specified price ceiling aptly labeled the Extremely High Cost Per Location Threshold (EHCPLT).

Other distribution technologies – cable broadband, fixed wireless access using licensed spectrum, and so on – likewise are eligible for BEAD Program subsidies only if the fiber cost exceeds the EHCPLT.

The MCA's announcement that it will make Starlink terminals available to all 9,000 unserved locations in the state at a cost of just $599 per location, plus free shipping and professional installation, highlights the degree to which NTIA's approach leads to inefficiencies and waste.

Evidence that proves this point can be found in the very same press release announcing the purchase of Starlink terminals: "[i]n 2025, MCA will facilitate the investment of an additional $350 million in broadband infrastructure through the [BEAD] Program to serve the remaining 5% of locations in Maine that currently have slow and unreliable internet service."

According to my back-of-the-envelope math, $350 million in total subsidies works out to almost $12,000 per "underserved" location – that is, locations with Internet access at speeds equal to or greater than 25/3 Mbps but less than 100/20 Mbps. That amounts to a nearly 20X premium for a fiber-based solution as compared to the cost of satellite-based service.

Incidentally, Volume 2 of Maine's Initial Proposal, which was approved by NTIA in June, does not identify a specific EHCPLT. Instead, it indicates that the MCA intends at some point in the future to set the EHCPLT so high that, in virtually all cases, fiber will win the day:

If it is determined that a small number of locations in a given PSA should be served with alternative technologies allowed through the EHCPLT process to ensure maximum impact of BEAD funding, MCA will consider allowing non-fiber service to a minimal number of locations. All other locations in the PSA will otherwise be served by FTTH.

Accordingly, the extent to which satellites and other non-fiber distribution platforms will be eligible for BEAD Program funding likely will be extremely limited.

The BEAD Program's underlying congressional goal is to connect locations still without "broadband" – Internet access at speeds of 100/20 Mbps – in a cost-effective manner. The fact that, in Maine, far more federal taxpayer dollars will be spent on "gold-plated" fiber infrastructure to upgrade "underserved" locations than what is being spent to connect "unserved" locations strongly suggests that NTIA's approach is fundamentally flawed.

TMT with Mike O'Rielly – Ep 13: Changing Satellite Regulatory Environment

Episode 13 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 17. This episode, titled "The Changing Satellite Regulatory Environment," features a conversation between Mr. O'Rielly and guest Tom Stroup, President of the Satellite Industry Association (SIA). Their conversation ranges from market change over the last decade with new entrants and new services such as low-earth orbit (LEO) satellite networks, dramatically improved broadband satellite network capacity and speed capabilities, the importance of access to spectrum for satellite providers – including potential expanded use of the 18 GHz band for satellite services, the 2024 State of the Satellite Industry Report, export reform, broadband subsidy programs and policy, direct-to-mobile (or direct-to-cell) integrated offerings through satellite provider partnerships with terrestrial wireless providers, and more. 

U.S. Broadband Providers Made Strong Capital Expenditures in 2023

Capital expenditures by U.S. broadband providers totaled $94.7 billion in 2023, according to the 2023 USTelecom Capital Expenditure Report. USTelecom's report was released on October 18. 

According to USTelecom, the $94.7 billion figure is the second highest annual industry capex in 22 years. USTelecom's 2023 report indicates that U.S. broadband providers have invested over $2.2 trillion in network infrastructure since 1996. In reports for prior years, USTelecom has noted that its capex estimates likely are conservative because they have not included investment by small U.S. broadband providers or U.S. satellite broadband providers.

Continuing strong investment is a clear indicator of a competitive broadband market environment. On July 6 of this year, the Free State Foundation offered many other data points about the market's vibrancy in public comments it submitted in the FCC's 2024 Communications Marketplace Report proceeding. Additionally, on October 7, FSF submitted public comments to the FCC in the agency’s proceeding for the upcoming Eighteenth Section 706 Report. Those comments include data points supporting the conclusion that broadband service is being reasonably and timely deployed to all Americans. Sustaining that progress in deployment will depend on private market investment remaining high and undeterred by regulatory barriers. 

PRESS RELEASE: The FCC Latest Inquiry Regarding 'Data Caps' Avoids Economics in Favor of Anecdotes

Regarding the FCC’s newly-initiated proceeding to examine so-called "data caps" imposed by broadband providers, Free State Foundation President Randolph May issued the following statement: 

If I were a cynic, I might think the FCC's newly launched inquiry into "data caps" is just a political ploy with an election looming. But I'll just deal with the issue on the merits. The FCC's news release announcing the inquiry contains snippets of “stories” related by persons claiming to be adversely impacted by the practices of some broadband providers who charge higher prices for heavier usage. But, tellingly, the release contains not one single word regarding the economics of building out and maintaining ever faster, more reliable broadband networks. There is no apparent recognition that the heaviest users impose greater costs on broadband networks, and that, in reality, so-called "data caps" are just a form of "usage-based pricing" common in many different market segments.

 

Of course, if broadband networks grew freely on trees, and the costs of building and maintaining them didn't have to be recovered primarily by the users of the networks, it would be far easier to indulge in the polemics of those who advocate for unlimited usage for all at the same low price. But that's not reality. The FCC can't be an "economics free zone" relying on stories it collects if it expects the private sector to continue to invest enormous amounts of capital — over $2 trillion - just in the last two decades to build out and maintain increasingly faster, more reliable broadband networks.

 

To be sure, there are those who will always need financial assistance to obtain Internet services. But there are ways to provide subsidies to those in need without destroying incentives that lead to economic efficiencies that benefit all consumers.

Report Highlights Link Between Spectrum Policy and National Security

A new report published by the Center for Strategic & International Studies (CSIS) warns that absent a heightened focus on our national spectrum policy, "[t]he security of the United States as a market democracy is at stake." In the simplest of terms, online activity is only as secure as the underlying apps and network infrastructure over which it occurs. If that software and hardware is to come from trusted sources, policymakers must foster an environment in which America's mobile marketplace maintains a powerful say in global technology development, "especially as autocratic nations seek to dominate."

In Part 1 of "Concrete National Security Benefits of Spectrum Allocation for Commercial 5G," CSIS Strategic Technologies Program Senior Fellow Clete Johnson identifies two "difficult technical feats" that the U.S. must and can accomplish if it is to achieve the scale necessary to drive technology development down a secure and trusted path. The first is to better harmonize frequency use, as "[t]he more that U.S. spectrum use is harmonized with that of allies and global markets, the more scale trusted suppliers have for secure technology development." The second is to allocate sufficient spectrum so that capacity does not constrain the economic might of American consumers.

Harmonizing the frequencies allocated to 5G (and successor standards) is essential to achieving economies of scale because technology development is frequency specific: equipment developed for one band typically cannot be used in other bands. As the report points out, however, "the United States is becoming a mid-band spectrum 'island,' operating largely outside the core globally harmonized spectrum bands. If this trajectory continues, the U.S. technology ecosystem will be confined to a U.S.-only spectrum 'dialect' that lacks global influence and scale."

Allocating sufficient spectrum to satisfy growing mobile broadband demand, meanwhile, maximizes the economic ability of 350 million American consumers to shape global technology decisions. As the report explains:

U.S. wireless companies need sufficient spectrum resources to collaborate with like-minded nations in innovating and manufacturing advanced wireless technologies and components – including chipsets, software, radios, and more – for use in both the commercial and federal sectors…. The existing disparity between U.S. licensed mid-band spectrum allocations as compared to the rest of the world has become a major national security challenge, as it has created a platform for China to shape the near-term and future technology environment to its strategic advantage.

The report proposes several ways to address this situation. They include:

• Reframing the spectrum deficit as "an optimization challenge, not a scarcity problem."
• Moving from a "zero-sum" mindset that pits government and commercial uses against each other to a collaborative environment that promotes "static" and, in the longer term, "dynamic" spectrum sharing solutions.
• Restoring the FCC's spectrum auction authority.
• Aggressively pursuing harmonization opportunities, which may include the 7/8 GHz band, so that America speaks the same "frequency 'language'" as its allies.

The report's forthcoming Part 2 primarily will focus "on the importance of agile spectrum management capabilities in the context of electronic warfare."

PRESS RELEASE: FSF Continues to Oppose the FCC's Proposal to Regulate Political Ads Using AI

Free State Foundation President Randolph May and Director of Policy Studies Seth Cooper submitted reply comments today to the FCC continuing to oppose the agency’s proposal to require broadcasters, cable, and satellite operators to include a disclaimer in all political ads using AI. Below are the first two paragraphs from the Free State Foundation reply comments:

"In these reply comments, we emphasize two primary points. First, even comments filed by parties sympathetic to the proposed rulemaking acknowledge that the Notice’s definitions of terms are ambiguous and easily misunderstood. The key definition of 'AI-generated content,' on which the whole proposal depends, is especially problematic because it seemingly is so vague and overly broad that it would require a disclaimer for virtually all political ads.

 

Second, commenters rightly recognize that the Commission’s proposal to rely on a 'credible third party' to trigger FCC action for an alleged failure to comply with its rules is susceptible to political manipulation, or at least the appearance of it. It is naïve to suggest that, during heated political campaigns, and in today’s charged political environment, that there will be agreement regarding the true independence, dispassionate judgement, and expertise of ‘credible' third parties. Any proposal to rely on such supposed credible third parties almost certainly would not find widespread public acceptance.”

TMT with Mike O'Rielly – Ep 12: First Amendment & Media Environment

Episode 12 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on October 9. This episode, titled "The First Amendment and Today's Media Environment," features a conversation between Mr. O'Rielly and guest Richard T. Kaplar, President & CEO of the Media Institute. Their discussion includes topics such as media consolidation and media ownership rules, the Net Vitality 3.0 report on global Internet ecosystem leaders, and the Madison Project.

MT with Mike O'Rielly – Ep 11: Wireless Broadband & BEAD

Episode 11 of "TMT with Mike O'Rielly," a videocast featuring former FCC Commissioner and Adjunct Senior Fellow at the Free State Foundation Michael O'Rielly, was released on September 26. In the episode, titled "WISPs' Wireless Broadband Offerings & BEAD Funding," Mr. O'Rielly is joined by guest David Zumwalt, President and CEO of WISPA – The Association for Broadband Without Boundaries. The conversation touches on matters such as spectrum, concerns about the Biden Administration’s favoritism for fiber in implementing the Broadband Equity, Access and Deployment (BEAD) Program and the subsequent change to that policy, concerns about federal subsidies being used to overbuild in areas already being served by small wireless providers, and more. 

Competition and Federal Law Preclude COLR Regulation of Wireless

The California Public Utilities Commission (PUC) has an open rulemaking proceeding in which it is considering whether to impose "carrier of last resort" (COLR) regulation on wireless voice providers. COLR rules are outdated and unjustifiable in today’s competitive market environment. And federal law preempts state COLR regulation of wireless voice providers.

A voice services carrier designated as a COLR typically is required to serve all customers within a territory, even if that means requiring them to build out their networks. COLRs must obtain permission from regulators before exiting the market. Also, COLRs typically are required to charge rates that are limited to what the regulating authority deems “just and reasonable.” 

COLR obligations are premised upon the existence of local monopoly conditions for voice telephone services. But those conditions do not exist anymore. Instead, today's voice market gives consumers choices among competing providers. As comments filed by CTIA on September 30 with the California PUC observed: 

Wireless providers in California operate in an intensely competitive market where “there are multiple providers that compete for wireless subscribers” and “consumers have the ability to switch providers” if they wish to do so. Due to this fierce competition, wireless providers in California experience customer switching rates between 9% and 34%.

FSF President Randolph May made a similar point about the competitive landscape for voice services and the outdatedness of COLR obligations in a blog post from June of this year:

In an era before consumers in almost all areas of the country, including California, had more than a single option from which to choose for the provision of basic voice telephone service, it may have made sense for the government to have the power to require that a service provider be designated as the Carrier of Last Resort. Needless to say, nowadays, consumers in most all areas have several options for acquiring voice telephone service from various providers that employ different technologies – copper wires, coaxial cable, fiber, cellular, satellite, and hybrid networks combining these facilities.

Additionally, Section 332(c)(3)(A) of the Communications Act contains a state preemption provision that effectively precludes states from imposing COLR obligations on wireless providers. The statute provides, in relevant part, that “no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service.” CTIA’s comments correctly point out that “[r]ate regulation has always been a key element of COLR regulation” and point out various ways that the California PUC regulates the rates of COLRs. Any attempt by California regulators to control the basic rate for wireless service would be preempted by federal law. 

 

Moreover, any COLR obligation that required a wireless provider to build out its network to serve customers surely would be preempted as a regulation of entry under Section 332(c)(3)(A). Indeed, any state COLR regulation regarding wireless providers exit likely would clash with the FCC’s decision, in its 1994 CMRS Order, to forbear from exit approval requirements for wireless providers. As CTIA’s comments described that order:

The FCC specifically elected to forbear from exercising its statutory authority to require CMRS providers to obtain approval for market exit for specific policy reasons, including that “barriers to exit may also deter potential entrants from entering the marketplace” and “the time involved in the decertification process can impose additional losses on a carrier after competitive circumstances have made a particular service uneconomic,” such that “forbearance will better serve the public interest by avoiding the social costs identified in this paragraph.”

COLR obligations impose costs on voice providers, and those costs can undermine a provider’s competitiveness. For the California PUC, the better policy for voice consumers, and the lawful one, would be to promote competition and not undermine it with outdated COLR regulations. 

DIRECTV, DISH to Join Forces in Battle for Video Subscribers

Today DIRECTV announced its plans to acquire EchoStar's video programming distribution platforms – the DISH TV direct broadcast satellite (DBS) service and the Sling TV virtual multichannel video programming distributor – to more effectively compete in a rapidly evolving marketplace increasingly dominated by streaming alternatives.

This is not the first time that the two DBS operators have attempted to combine. In October 2002, the FCC effectively blocked their proposed merger by designating their application for a full evidentiary hearing, concluding that "the likelihood of the merger harming competition in the multichannel video program distribution ("MVPD") market outweighs any merger-specific public interest benefits."

Source: directv.com

But over the last 22 years, the widespread deployment of broadband Internet access has turned the video distribution competitive landscape on its head. As I have documented, most recently in a July 2024 post to the FSF Blog, for many years traditional MVPDs – cable operators and DBS providers – have been losing subscribers, financial quarter after quarter, while streaming competitors have been growing by leaps and bounds. By contrast, back in 2002, Netflix – which reported 278 million global streaming subscribers at the end of the second quarter of this year – was still solely in the business of mailing out DVDs. And Hulu, Amazon Prime Video, Disney+, Apple TV+, and Paramount+ did not exist at all.

Given the undisputable dramatic changes that have occurred in the marketplace since DIRECTV and DISH TV first sought to combine, this transaction must be evaluated in an entirely new context. Specifically, by providing DIRECTV with the additional scale needed to compete effectively, it seems that it will generate undeniable pro-consumer benefits. And given the relatively dominant position of streaming alternatives, it certainly doesn't appear to present any competition concerns.

In all, DIRECTV enumerates three specific benefits that will result:

• It "will allow DIRECTV to better meet consumers' demands for smaller packages at lower price points"
• It "[p]ositions DIRECTV to provide better integration of direct-to-consumer services"
• It "[i]mproves EchoStar's financial profile to continue the deployment of its 5G Open RAN wireless network"

With regard to "smaller packages at lower price points," an August 21, 2024, open letter written by DIRECTV Chief Content Office Rob Thun argued that, absent "fundamental change" to the way that traditional MVPDs are able to package their services, "costs will continue to soar, consumer satisfaction will erode, and the entire ecosystem will suffer."

In today's press release, DIRECTV Chief Executive Officer Bill Morrow is quoted as saying that "[w]ith greater scale, we expect a combined DIRECTV and DISH will be better able to work with programmers to realize our vision for the future of TV, which is to aggregate, curate, and distribute content tailored to customers' interests."

Jim Tozzi and the Center for Regulatory Effectiveness

 Over the past couple of years there's been much change in administrative law, and much of it positive in my view. The Supreme Court's adoption of the Major Questions Doctrine in West Virginia v. EPA, the overturning of the Chevron deference doctrine in Loper Bright Enterprises v. Raimondo, and the limitation on the SEC's ability to seek civil penalties in SEC v. Jarkesy are examples of recent decisions reorienting administrative law to check overly aggressive administrative agencies.

Periodically I like to remind readers of the sometimes overlooked contributions of Jim Tozzi. Among other accomplishments, Jim played a leading role in the 1970s and 1980s as a senior official of the Office of Management and Budget in establishing centralized review of proposed regulations of the executive agencies and requiring cost-benefit analyses. These were early steps in the direction of formalizing processes intended to promote increased efficiency, effectiveness, transparency, and accountability in agency policymaking initiatives.

If you want to learn more about Jim Tozzi -- one of the more interesting, but lesser known Washington legends  -- and Jim's contributions of the development of administrative law, along with his take on some current issues, I recommend a visit to his Center for Regulatory Effectiveness website. Or if you happen to encounter Jim, just ask him about the "early days" of regulatory reform and you'll be in for a treat!

 

Court Hears Arguments on Challenges to FCC's Digital Discrimination Order

On September 25, the U.S. Court of Appeals for the Eighth Circuit heard oral arguments in the case of Minnesota Telecom Alliance v. FCC. The case involves several legal challenges against the FCC's November 2023 Digital Discrimination Order. One of those challenges is to the Order's imposition of unintentional disparate impact liability on broadband Internet service providers (ISPs). Section 60506 of the Infrastructure Investment and Jobs Act of 2021 authorizes the Commission to adopt rules prohibiting intentional digital discrimination of access to broadband Internet services based on one's membership in a protected class. However, the Order exceeds the agency's statutory authority by imposing unintentional disparate impact liability on ISPs.

The Free State Foundation's March 2023 public comments in the Commission's digital discrimination proceeding addressed the legal authority conferred on the Commission:

The text of the Infrastructure Act requires an intent-based definitional standard for digital discrimination. Section 60506(b) authorizes the Commission to adopt rules that prevent digital discrimination "based on" the specific categories of income level, race, ethnicity, religion, or natural origin. The Infrastructure Act's inclusion of the words "based on" in connection with suspect or prohibited classifications and – most significantly for purposes of statutory interpretation – the absence of any broader catchall terms such as "results in" or "otherwise adversely [a]ffects" indicates that proof of intent is a necessary element of any successful claim of "digital discrimination." 

When Congress enacted the Infrastructure Act, it was aware of Supreme Court precedents regarding the use of such catchall terms. Yet Congress declined to include such catchall terminology in Section 60506. 

 

Oral arguments before the Eighth Circuit also addressed the claim that the Order's overreach upon overreach contravened the Supreme Court's Major Questions Doctrine. The Free State Foundation's April 2023 reply comments concluded that the FCC's expansive interpretation of Section 6506 – including the imposition of disparate impact liability, in particular – makes it likely that the order would run afoul of the Major Questions Doctrine. According to the Supreme Court’s decisions in West Virginia v. EPA (2023) and Biden v. Nebraska (2023), there are certain "extraordinary cases" involving decisions of such "political and economic significance" that a "clear congressional authorization" by Congress is required for the agency to exercise the powers it claims. However, Section 60506 does not contain clear congressional authorization authorizing the FCC to subject seemingly every facet of broadband ISPs business and deployments to unintentional disparate impact liability. 

Charter, Comcast, and Broadcom Partner on Faster DOCSIS 4.0 Chipsets

At this week's Society of Cable Telecommunications Engineers® (SCTE) TechExpo 2024, cable operators Charter Communications and Comcast announced an agreement with chipmaker Broadcom Inc. to develop chipsets compatible with both versions of the DOCSIS 4.0 specification: Full Duplex DOCSIS 4.0 (FDX) and Extended Spectrum DOCSIS 4.0 (ESD).

Network hardware and modems incorporating Unified DOCSIS chipsets eventually will enable downstream speeds up to 25 gigabits per second (Gbps) over existing hybrid fiber-coaxial (HFC) broadband facilities. In addition, they will leverage Artificial Intelligence and machine learning to improve network management and security.

T-Mobile/UScellular Transaction Likely to Benefit Wireless 5G Consumers

On September 13, T-Mobile filed a public interest statement with the FCC in support of its proposed transaction with US Cellular. If approved, the T-Mobile/UScellular transaction likely would produce pro-competitive results. The merger would benefit UScellular subscribers by giving them access to a 5G mobile wireless network with faster speeds and higher data capacity. It also would enhance residential broadband competition by expanding consumer access in UScellular's service regions, especially in rural areas. On its face, the proposed combination does not appear to pose any significant competitive harm. The Commission should conduct a timely review of the T-Mobile/UScellular transaction and issue its decision within the agency’s 180-day shot clock.

The proposed T-Mobile/UScellular deal reportedly would result in T-Mobile acquiring UScellular's wireless operations, subscribers, and about 30% of its spectrum licenses for $4.4 billion. UScellular is a multi-regional wireless provider that serves about 4.5 million subscribers – or about 1% of the nation’s mobile wireless services market. Its subscribership has been declining in recent years. Strong competition from cable hybrid wireless mobile virtual network operators (MVNOs) Spectrum Mobile and Xfinity Mobile partly account for US Cellular's declines. Moreover, UScellular has lagged behind AT&T, T-Mobile, and Verizon – the three major nationwide mobile wireless providers in 5G network deployment.

Revenue reductions resulting from subscriber losses, as well as the burdens of servicing $2.9 billion in debts, are limiting its resources for future network investment. If UScellular were to continue operating as a standalone mobile provider, its competitiveness would probably diminish further.

T-Mobile's public interest statement presents a prima facie case that its proposed transaction with UScellular will bring public interest benefits that outweigh any potential competitive concerns. Today's dynamic wireless market provides the analytical context for the proposed T-Mobile/UScellular deal. As explained in the Free State Foundation’s June 2024 public comments to the FCC for its forthcoming 2024 Communications Marketplace Competition Report, there is effective competition among the mobile wireless segment of the broadband market. In 2022 and 2023, the three nationwide wireless providers significantly upgraded and expanded their 5G network coverage. Additionally, aspiring national provider EchoStar (which recently acquired DISH Network) announced in March of this year that its 5G network covers over 70% of the U.S. population. The large footprints of Xfinity Mobile and Spectrum Mobile also support competitive 5G wireless services to at least 16 million subscribers and counting.

Moreover, the T-Mobile/UScellular transaction is unlikely to reduce wireless competition. T-Mobile faces little challenge from UScellular due to its small market share, with a footprint that spans only about 10% of the nation's geographic territory. T-Mobile is the second-largest wireless provider, with nearly 126 million total subscriptions versus UScellular's 4.5 million. T-Mobile makes its pricing and service terms on a nationwide basis, and thus UScellular's presence in a given area is unlikely to impact T-Mobile's price offerings. According to the public interest statement, T-Mobile and UScellular do not have an overlapping competitive presence in only about 37% of the Cellular Marketing Areas (CMAs) that are implicated by the proposed transaction.* If the it is approved, most consumers would continue to have choices among nationwide providers T-Mobile, Verizon, and AT&T, and many consumers also would have choices among DISH Wireless and a cable wireless MVNO. 

Furthermore, T-Mobile's analysis indicates that the proposed acquisition of 30% of UScellular's spectrum portfolio would not trigger the FCC's spectrum screen analytical trigger in any cellular marketing area. This presumes that T-Mobile completes planned sales of certain spectrum licenses that it currently holds in the 800 MHz and 3.45 GHz bands. 

Under the terms of the proposed T-Mobile/UScellular transaction, UScellular subscribers would have the option of staying on their existing rate plans. T-Mobile estimates that at least some of UScellular's subscribers would experience a price decrease by changing to comparable plans offered by T-Mobile. If correct, and given existing competition in the market, the deal would not likely cause rates to increase for consumers. 

The transfer of spectrum licenses contemplated in the proposed T-Mobile/UScellular transaction triggers the FCC's review of the transaction under its public interest standard. The Commission's merger review process includes opportunity for public comments that could shed added light on the proposed deal. The agency will undertake its examination of the representations made in the public interest statement – including information redacted from public view – and it will more closely examine the potential effects in local markets. However, at this stage of the proceeding, the T-Mobile/UScellular transaction appears to be a strong candidate for approval. 

Importantly, the Commission should complete its transaction review within the agency's informal 180-day shot clock. Delays in completing reviews can accelerate subscriber losses in small providers and have other harmful impacts.

(*12/19/2024 - a correction has been made in this post to the percentage of CMAs in which the parties have an overlapping presence)

(*02/04/2025 - further edits have been made to more accurately refer to the transaction as an acquisition of assets and not a merger between the parties)

Internet Archive's Fair Use Defense Fails Again at Appeals Court

On September 4, the U.S. Court of Appeals for the Second Circuit issued its decision in Hachette Book Group, Inc. v. Internet Archive. The Second Circuit panel affirmed a District Court's March 2023 entry of summary judgment against Internet Archive for infringing the copyrights of four book publishers in 127 books.  

Internet Archive created unauthorized digital copies of those books as part of its "Free Digital Library" and mostly. Beginning in 2018, the Internet Archive made digital copies of those copyrighted books available online to the public. Starting in 2020, the Internet Archive provided the public access to those copyrighted books on a one-to-one owned-to-loaned ratio under a practice that the Internet Archive called "Controlled Digital Lending" or "CDL." The District Court found that all of the elements for infringement were established by the publishers, and the court rejected Internet Archive's fair use defense.

The Second Circuit's decision mostly tracked with the District Court's decision, concluding that "IA's lending of its 'own' digital books that 'are commercially available for sale or license in any electronic text format'" is not fair use. 

According to the appeals court, "because IA's Free Digital Library primarily supplants the original Works without adding meaningfully new or different features that avoid unduly impinging on Publishers' rights to prepare derivative works, its use of the Works is not transformative." Although the Second Circuit differed from the District Court in concluding that the alleged fair use was not commercial in nature, it nonetheless held that "because the Works in Suit are 'of the type that the copyright laws value and seek to protect,' the second fair use factor favors Publishers." The court determined that copying and posting the entirety of the work was not secondary to some other use that would offer significant functional benefits not associated with the original works and that "not only is IA's Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests it is intended to achieve that exact result." 

 

The Second Circuit further determined that "IA has not met its 'burden of proving that the secondary use does not compete in the relevant market[s]' and that “[i]ts empirical evidence does not disprove market harm, and Publishers convincingly claim both present and future market harm." The court concluded that "[a]ny short-term public benefits of IA's Free Digital Library are outweighed not only by harm to Publishers and authors but also by the long-term detriments society may suffer if IA's infringing use were allowed to continue." And it found that all of the fair use factors favored the copyright owners. 

 

Aside from its loss in Hachette, Internet Archive faces additional troubles due to alleged infringements of copyrighted music recordings." My September 2023 Perspectives From FSF Scholars, "Internet Archive to Face the Music for Mass Copyright Infringement," analyzes copyright infringement claims raised in UMG Recordings v. Internet Archive. At issue in that case is Internet Archive's "Great 78 Project," which allegedly copied, stored, distributed, and publicly performed thousands of copyrighted pre-1972 music recordings without authorization. 

 

The decision in Hachette may offer persuasive insights for the District Court in UMG Recordings, insofar as Internet Archive again relies on fair use as an affirmative defense to infringement claims. For starters, the "Great 78 Project" involves no apparent transformative use or significant functional new benefit not inherent in the original works themselves. Scratches or analog background noises from digital recordings of vinyl copies of pre-72 recordings being played on turntables are hardly transformative. Expect FSF scholars to have more to say in the future about the ongoing case of UMG Recordings v. Internet Archive.

Media Advisory - FSF Files Comments on FCC's Propose Rules for AI Generated Content in Political Ads

Media Advisory

September 19, 2024

Contact: info@freestatefoundation.org

Free State Foundation President Randolph May and Seth Cooper, Director of Policy Studies and Senior Fellow, submitted comments today in the Federal Communications Commission’s proceeding proposing to require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political ads that contain content generated by artificial intelligence (AI). These comments demonstrate that the Commission lacks statutory authority to adopt its proposed regulation of the content of political ads using AI and that, in any event, it would constitute unsound policy to do so.

The complete set of the Free State Foundation comments, with footnotes, is here.

 

Immediately below are the "Introduction and Summary" to the comments, without the footnotes.

Introduction and Summary

These comments are submitted in response to the Commission’s Notice proposing to require radio and TV broadcasters as well as cable and direct broadcast satellite (DBS) operators to include a disclaimer on all political ads that contain content generated by artificial intelligence (AI). They also would be required to include a notice in their online political files disclosing the ad’s use of AI. The Commission’s rush to adopt a novel AI political ad regulation is a misguided power grab – a combination of bad law and bad policy. The Commission should not adopt the proposed rule.

 

The agency lacks statutory authority for its proposed regulation of the content of political ads using AI. The Notice of Proposed Rulemaking cites Section 303(r) and other provisions of Title III of the Communications Act regarding the agency’s power to make rules and regulations necessary to carry out the Act’s provisions in the “public interest.” But the Commission has no traditional regulatory authority over the content of political ads on broadcast radio or TV, and none of those provisions cited in the Notice contain language that reasonably may be interpreted to authorize disclaimer and disclosure mandates for political ads featuring AI-generated content.

Moreover, the FCC’s proposal is likely to run afoul of the Major Questions Doctrine (MQD) as articulated in West Virginia v. EPA (2022) because it involves a question of “vast economic and political significance.” Proposing for the first time to regulate the use of AI in connection with political advertisements appears to be a paradigmatic case meeting the MQD criteria. As such, and because Congress has not clearly granted the FCC authority to adopt the rule it proposes, it’s very unlikely to survive judicial review.

 

By contrast, the Federal Elections Commission (FEC) is given much more explicit statutory authority to regulate significant aspects of political campaign ads under the Federal Election Campaign Act. This includes the FEC’s “exclusive jurisdiction with respect to the civil enforcement” of the Act. To date, however, the FEC has never determined it has jurisdiction to regulate political ads with AI-generated content under its “materially deceptive” statute – and the FEC may lack such authority. If the FEC lacks authority to regulate political ads with AI-generated content, then a fortiori the FCC certainly lacks similar authority under Communications Act provisions regarding broadcast, cable, and satellite services. 

Even if the FCC had the requisite legal authority, the proposal constitutes bad policy because it would apply to ads with AI-generated content that are not materially deceptive, likely causing many viewers to distrust the ads solely or primarily because of the boilerplate disclaimer or simply to “tune out” the disclaimers. Also, it would apply only to ads that are broadcast or transmitted by FCC-regulated services – and not by Internet outlets that garner an increasing share of political ads. Requiring disclaimers on ads shown by broadcast, cable, and satellite services when those same ads may be posted online to wider audiences without disclaimers will add to the confusion, especially since materially deceptive ads are more likely to appear online. Moreover, broadcasters (and cable and DBS operators) do not have inside knowledge about how given political ads were created; yet under the proposed regulation, apparently they would shoulder the burden of having to discern when generative AI was used. By focusing on broadcasters of political ads rather than the creators, the proposed regulation deviates from a more reasonable focus on ad creators that is taken in many nascent state laws regulating the use of AI in elections.

 

Additionally, the proposal would put the Commission in the untenable position of making judgments about “credible third parties” who raise complaints about ads, a matter in which the agency has no expertise. Government should not assume any role in designating third parties as “credible” or not credible for purposes of deciding whether political ads should be disclaimed, disclosed, or taken down. If it were to do so, it would inevitably, and justifiably, invite suspicion that its decisions are politically motivated. The proposed overly broad definition of “AI-generated content” likely would result in broadcast, cable, and satellite services requiring disclaimers for all or nearly all political ads as a regulatory risk aversion measure, rendering such disclaimers unhelpful, if not meaningless.

A PDF of the complete set of Free State Foundation comments, with footnotes, is here.

Survey Shows Sharp Increases in Mobile Data, Growth in 5G Home Broadband

On September 10, CTIA released its 2024 Annual Survey. The Survey Highlights report is available online. It shows the strong growth in mobile wireless connections, data usage, cell sites, and 5G Home connections during the year 2023.  

CTIA reported that wireless data traffic in the U.S. grew, as U.S. wireless networks supported 100 trillion MB of traffic last year, up from the nearly 74 trillion MB from the year before. Additionally, nearly 40% of wireless devices were 5G devices, for 216 million total active 5G devices in 2023, and the 558 million total wireless connections were up from 523 million from the year prior. Also, the total number of cell sites in the U.S. grew to 432,469 – up 24% from 2018. This continued growth was supported by annual wireless investment totaling $30 billion in 2023. Regarding 5G Home Broadband – or fixed wireless access (FWA) services – CTIA reported: "Over the past two years, 95% of net new broadband subscribers chose 5G home service—and importantly, 1 out of 5 net 5G home adds were entirely new home broadband subscribers." More stats are contained in the 2024 Annual Survey Highlights.

 

My July 30, 2023, blog post spotlighted CTIA's 2023 Annual Survey Highlights.

 

To fully realize the benefits of 5G connections, more spectrum will need to be available, especially licensed spectrum for commercial wireless uses. In January 2024, Free State Foundation President Randolph May published "Communications Law and Policy Priorities for 2024." One of those priorities is to "Reopen the Spectrum Pipeline and Act to Fill It." As FSF President May explained in a Media Advisory from March of this year, one constructive proposal for doing that is the Spectrum Pipeline Act of 2024 (S.3909).

 

Also, legislation for streamlining and speeding up permit processes for wireless infrastructure construction would help foster continued growth in wireless services and improve as well as increase connections for Americans. My blog post from August 7 identified one measure worth considering, the Accelerating Broadband Permits Act (S.4281), which is intended to help ensure the timely processing of permits for building new wireless infrastructure on federal lands.