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Rentseeking for Spectrum Sharing: The 5.9 Ghz Band Allocation

Scholarship Abstract The battle over rules governing 5.9 GHz airwaves offers important lessons in both the creation of property rights and applied public choice. Set aside . . .

Abstract

The battle over rules governing 5.9 GHz airwaves offers important lessons in both the creation of property rights and applied public choice. Set aside in 1999, the 75 MHz “Car Band” band was designated by the U.S. Federal Communications Commission (FCC) to support emerging vehicle telematics and computerized driving. Transportation regulators and automakers, including General Motors, Ford, and BMW, claimed this would efficiently promote road safety, fuel savings, and collision avoidance, as dedicated bandwidth would operate under a “spectrum commons” regime designed to favor such applications. While anticipated services gradually developed, the 5.9 GHz band did not. Spectrum inputs outside the “Car Band” accommodated driving applications, while the general development of wireless networks shifted social priorities. Eventually, Internet services companies such as Comcast, Google and Microsoft claimed the 75 MHz allocation was wastefully large and that switching access rules to favor WiFi would generate net benefits. Suggested for possible reallocation by the U.S. Department of Commerce since 2012, the FCC issued an order in 2020 to split the baby: 45 MHz of the band would be shifted to Wi-Fi, with 30 MHz remaining dedicated for Intelligent Transportation Systems. The FCC’s 2020 “Cost Benefit Analysis” purports to quantify the trade-offs involved, but upon scrutiny fails to plausibly value Wi-Fi services or to even consider the relevant opportunity costs. The costly, delay-intensive and ad hoc policy process (whose costs are additionally ignored by the FCC) begs for further development of auction mechanisms to rationalize alternative rights assignments.

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Telecommunications & Regulated Utilities

FCC Should Tread Carefully in Crackdown on Digital Discrimination

Popular Media The infrastructure bill that President Joe Biden signed in November 2021 included a provision requiring the Federal Communications Commission to prevent discrimination in access to broadband internet based on . . .

The infrastructure bill that President Joe Biden signed in November 2021 included a provision requiring the Federal Communications Commission to prevent discrimination in access to broadband internet based on race, ethnicity, color, religion, or national origin.

Read the full piece here.

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Telecommunications & Regulated Utilities

FCC Auctions and the Benefits of Unlicensed Spectrum

TOTM What should a government do when it owns geese that lay golden eggs? Should it sell the geese to fund government programs? Or should it . . .

What should a government do when it owns geese that lay golden eggs? Should it sell the geese to fund government programs? Or should it let them run wild so everyone can have a chance at a golden egg?

That’s the question facing Congress as it considers re-authorizing the Federal Communications Commission’s (FCC’s) authority to auction and license spectrum. Should the FCC auction spectrum to maximize government revenue? Or, should it allow large portions to remain unlicensed to foster innovation and development?

Read the full piece here.

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Telecommunications & Regulated Utilities

ICLE Reply Comments on Wireline Broadband Deployment

Regulatory Comments ICLE’s reply comments on the Further Notice of Proposed Rulemaking (FNPRM) in the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment.

Introduction

We thank the Federal Communications Commission (FCC) for the opportunity to offer these reply comments on the Further Notice of Proposed Rulemaking (FNPRM) in the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment.

Ensuring that broadband connectivity is deployed effectively and efficiently to all Americans is among the FCC’s most important priorities. As Chair Rosenworcel has observed:

We are about to invest billions in high-speed infrastructure nationwide. It’s essential that we have policies in place that make sure these dollars are used in a cost-effective way and that pole attachment policies facilitate, rather than impede, broadband buildout.[1]

The Infrastructure Investment and Jobs Act (IIJA) allocated $65 billion to help the Commission and the National Telecommunications and Information Administration (NTIA) facilitate further deployment and adoption.[2] Private investment in broadband networks also continues to grow, with $2 trillion spent since 1996, including $86 billion in 2021 alone.[3]

This attention and funding could be wasted, however, due to roadblocks that stand in the way of deployment and threaten to reduce the efficacy of federal investment. Inflation remains at very high levels, which diminishes the practical reach of IIJA funds. Moreover, NTIA has signaled its interest in promoting policy goals that may divert some funding away from targeting the needs of the unserved.[4] Given this backdrop, it is crucial that the Commission exercise its authority to remove barriers to deployment.

In this proceeding, we believe that means seeking reform and clarification of inefficient pole-attachment rules that lead to cost overruns and deployment delays.[5] The docket includes numerous comments that document various ways utility-pole owners sometimes shift costs onto attachers.[6] What’s more, several different types of pole owners are subject to FCC jurisdiction in this area, multiplying the problems across many different bargaining parties, including providers such as incumbent local exchange carriers, privately owned public-utility providers, and investor-owned poles.[7]

The aim of pole-attachment rules should be to equitably assess costs in a way that ensures the attachment process does not inefficiently serve to extract rents.  As the Commission notes, the Wireline Bureau focused on these potential inefficiencies when it “clarif[ied] that it is unreasonable and inconsistent with Section 224 of the Communications Act, the Commission’s rules, and past Commission precedent, for utilities to impose the entire cost of a pole replacement on a requesting attacher when the attacher is not the sole cause of a pole replacement.”[8] In short, a rule that unilaterally imposes replacement costs on a given attacher—while potentially expedient from an administrative perspective—is unlikely to provide an economically optimal outcome. At the same time, depending on the condition of the pole, shifting all or most costs onto the pole owner may also be inadvisable.

With that in mind, a strict “sole cause” standard for determining the resolution of pole replacements is likely inefficient. As we discuss below, such standards can lead to hold-up and hold-out problems that negatively affect broadband deployment. We believe the current formula can be refined to ensure that deployment funds aren’t unjustifiably captured as rents. As others in the docket have maintained,[9] the formula should be adjusted to ensure that the allocation of pole-replacement costs more closely reflects the incremental costs and benefits to each of the parties.

In particular, the allocation should account for the depreciated value of the pole being replaced, as well as the incremental costs and benefits of larger and newer poles to pole owners, incumbent attachers, and anticipated future attachers, as well as the incremental costs to pole owners of early replacement. The remainder of this comment summarizes these considerations and offers some broad recommendations.

Before discussing our view of how to amend the pole-replacement-cost formula, we would like to express again our support for the idea commonly voiced in the docket that pole-replacement disputes should be placed on the Accelerated Docket. As many commenters note in the record, delays in resolving pole disputes can seriously delay or entirely jeopardize some deployment projects.[10]Fundamentally, the focus of this proceeding—as well as most of the federal funding that has been devoted toward expanding broadband—regards how best to connect locations that are far out on the cost curve. Delays are very costly and reduce the number of households served. Encouraging disputes to be settled in a timely fashion can only help to close the digital divide.

Download the full comments here.

[1] Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment (“FNMRPM”), FCC 22-20 (Mar. 16, 2022) https://docs.fcc.gov/public/attachments/FCC-22-20A2.docx.

[2] Drew Clark, Commerce Department’s NTIA Releases Details for Funds Distributed Under IIJA, BroadbandBreakfast (May 13, 2022) https://broadbandbreakfast.com/2022/05/commerce-departments-ntia-releases-details-for-funds-distributed-under-iija.

[3] 2021 Broadband Capex Report, USTelecom (Jul. 18, 2011) https://ustelecom.org/research/2021-broadband-capex-report.

[4] Kristian Stout, To Close the Digital Divide, Broadband Infrastructure Funds Must Be Spent Efficiently, Truth on the Market, (May 27, 2022) https://truthonthemarket.com/2022/05/27/to-close-the-digital-divide-broadband-infrastructure-funds-must-be-spent-efficiently.

[5] NCTA notes in its petition that, in hard-to-connect rural areas, as much as 25% of a project’s cost could be attributable to pole-attachment disputes. Petition of NCTA for Expedited Declaratory Ruling, In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (Jul. 16, 2020), at 5-9, available at https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf. Pole owners dispute this number. For example, AT&T says that only 0.35% of requests it received resulted in the need for replacement. Robert Vitanza, David Chozempa, & David Lawson, Comments of AT&T (Corrected), AT&T (“AT&T Comments”) at 7-8 (Jun. 29, 2022) https://www.fcc.gov/ecfs/search/search-filings/filing/ NCTA, on the other hand, says about 8% of requests might need pole replacement. Ultimately, this is an empirical question the Commission needs to resolve. That said, the IIJA and BEAD programs are overwhelmingly focused on those households that are underserved and who are, by definition, more expensive to connect. Thus, it can be possible both for AT&T to be correct generally that pole-attachment disputes are rare, as well as for NCTA to be correct specifically about the extent of the problem in rural areas when pole replacements are needed.

[6] See, e.g., Thomas Cohen, Re: Ex Parte Filing of the American Cable Association on Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84, Kelley Drye & Warren LLP (Mar. 26, 2018) https://www.fcc.gov/ecfs/file/download/ACA%20Poles%20Ex%20Parte%203-26-18%20(FINAL).pdf?folder=1032633296362 (“…utilities often fail to provide any explanation for the significant increases in project costs on the final bill and do not provide the information necessary to challenge the reasonableness of the make-ready charges. Mr. Shawn Beqaj (Armstrong) provided examples where a utility charged a new attacher for the correction of preexisting safety violations caused by others or for overdue improvements designed to bring poles into compliance with utility regulations”); Kris Anne Monteith, Declaratory Ruling By the Chief, Wireline Competition Bureau, Federal Communications Commission, (Jan. 19, 2021) https://www.fcc.gov/ecfs/search/search-filings/filing/106282945908521 (“A California fiber ISP whose mission is to bring fiber broadband networks to rural and remote areas experienced serious time delays and a large increase in project expenses when an investor-owned utility revealed that hundreds of its poles in some very rural and remote areas did not have test and treat survey inspections in a decade or more. This caused substantial delays in bringing broadband service to unserved communities during the COVID-19 pandemic. Further, this high pole failure meant that the project expense forecasts were too low, and so the return on investment went from 7-9 years upward to a level that made the project almost uneconomical.”); Matthew M. Polka, Thomas Cohen, & Ross J. Lieberman, Comments of the American Cable Association on the Notices of Proposed Rulemaking, American Cable Association (Jun. 15, 2017) https://www.fcc.gov/ecfs/file/download/ACA%20Infrastructure%20NPRM%20Comments%20(FINAL).pdf?folder=1061666240361 (“…an investor-owned utility in Minnesota charged Mediacom to fix violations on poles to which Mediacom had been attached for 20 years caused by the utility moving its equipment during pre-make-ready inspections for a new attacher.”); Rick Chessen, Neal M. Goldberg, Steven F. Morris, & Maria Browne, Petition for Expedited Declaratory Ruling, NCTA – The Internet & Television Association (Jul. 16, 2020) https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf (“ComEd refused to permit Crown Castle to attach to poles that had been ‘red tagged’ by ComEd until Crown Castle first pays to replace or reinforce those red tagged poles, even though the conditions that caused the red tag status existed prior to and are unrelated to Crown Castle’s proposed attachment.”); Christopher L. Shipley & Andrew Mincheff, Comments of INCOMPAS, INCOMPAS (Jun. 27, 2022) https://www.fcc.gov/ecfs/search/search-filings/filing/10629168805842(“INCOMPAS’ member IdeaTek, which operates in rural Kansas…has been allocated 100 percent of the replacement costs on applications that require make-ready and pole replacement, with no consideration given to the enrichment and benefit this confers to the utility or the current value or condition of the pole.”)

[7] See Public Notice: States that Have Certified that They Regulate Pole Attachments, Federal Communications Commission (Mar. 19, 2020) https://docs.fcc.gov/public/attachments/DA-20-302A1_Rcd.pdf. Note that this only applies across the 23 states that have not certified that they regulate pole attachments. Id.

[8] FNMPRM ¶ 2

[9] See, e.g., Re: WC Docket No. 17-84 – Accelerating Wireline and Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Connect the Future Coalition (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/e595c759-afb8-4e7d-a10f-35373238e59f?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Elizabeth Andrion & Maureen O’Connell, Comments of Charter Communications Inc., Charter Communications (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/355be4d0-4729-48d4-807a-640c5645c3e9?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; James E. Dunstan, Comments of TechFreedom, TechFreedom (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/4a3c5f41-de6e-4da5-a973-fd18d2ef9f39?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b.

[10] See, e.g., Ross J. Lieberman, Brian Hurley, Thomas Cohen, & Edward A. Yorkgitis Jr., Comments of ACA Connects on Second Further Notice of Proposed Rulemaking, ACA Connects (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/085b9a94-c9a3-41a0-975e-dbdd4bc7969f?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Randolph J. May, Seth L. Cooper, & Andrew K. Magloughlin, Comments of the Free State Foundation, Free State Foundation (Jun. 27, 2022) https://freestatefoundation.org/wp-content/uploads/2022/06/FSF-Comments-%E2%80%93-Accelerating-Wireline-Broadband-Deployment-by-Removing-Barriers-to-Infrastructure-Investment-062722.pdf; Steven Morris, Victoria Goldberg, Maria Browne, & David M. Gossett, Comments of NCTA – The Internet & Television Association, NCTA (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/9391ec57-88c4-43c1-8f5c-b8af2b23a626?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Matthew M. Polka, Ross J. Lieberman, Thomas Cohen, Edward A. Yorkgitis Jr., & J. Bradford Currier, Comments of the American Cable Association on the Notices of Proposed Rulemaking, American Cable Association (Jun. 15, 2017) https://www.fcc.gov/ecfs/file/download/ACA%20Infrastructure%20NPRM%20Comments%20(FINAL).pdf?folder=1061666240361 (“MetroNet…has been waiting more than a year for approval of applications for 160 pole attachments because the one employee responsible for reviewing applications was out on extended medical leave.”)

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Telecommunications & Regulated Utilities

Comments of ICLE In the Matter of Accelerating Wireline Broadband Deployment

Regulatory Comments We wish to highlight two primary concerns: that decisions by pole owners to delay maintenance and shift costs onto attachers are a significant impediment to deployment, and that there is a pressing need for the Commission to create an expedited process to resolve these disputes.

Introduction

Thank you for the opportunity to comment on this Further Notice of Proposed Rulemaking (FNPRM) in the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment. It is a broad aim of the U.S. government to extend broadband connectivity to all Americans.[1] However, a complicating factor in this regard is that Internet service providers (ISPs) need frequent access to utility poles to attach their equipment, which creates a point of friction that adds cost and slows deployment timetables.

These barriers to deployment can take many forms, some arising in areas over which the Commission does not have jurisdiction.[2] But with respect to those matters over which it does have jurisdiction, the Commission asks:

In this Second Further Notice, we seek comment on ways to eliminate or expedite resolution of pole replacement disputes by establishing clear standards for when and how utilities and attachers must share in the costs of a pole replacement that is precipitated by a new attachment request.[3]

Utility-pole attachments represent a critical component of deployment costs. Current estimates suggest that, in rural areas, as much as 25% of the cost of broadband deployment can be attributed to pole-replacement and upgrade issues.[4]  We wish to highlight two primary concerns: that decisions by pole owners to delay maintenance and shift costs onto attachers are a significant impediment to deployment, and that there is a pressing need for the Commission to create an expedited process to resolve these disputes. We have attached to these brief comments a paper published by the International Center for Law & Economics and that expands on these and related issues in greater depth.

Read the full comments here.

[1] Infrastructure Investment and Jobs Act, H.R. 3684, 117th Cong. (2021).

[2] The FCC lacks jurisdiction over poles owned by electrical cooperatives or municipal governments, and 28 states have not verified that they have regulatory authority over pole attachments. See Michelle Connolly, The Economic Impact of Section 224 Exemption of Municipal and Cooperative Poles (Jul. 12, 2019), available at https://www.ncta.com/sites/default/files/2019-07/NCTA%20Muni%20and%20Coop%20Poles%20Connolly%20Paper%20Ex%20Parte%20Filing%207-22-19.pdf. While not the subject of this proceeding, it should be noted that excessive attachment fees from these sources impede broadband build-out by slowing growth and raising the expense to consumers of broadband access. For example, pass-through literature finds that 56% to 70% of wholesale price increases are passed on to consumers while 5.0% to 6.4% of increased commodity prices are passed on to consumers. See Cost Pass-Through: Theory, Measurement, and Potential Policy Implications: A Report Prepared for the Office of Fair Trading, RBB Economics, (February 2014), at 156-57, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/320912/Cost_Pass-Through_Report.pdf. We believe the Commission should engage on this issue as an expert adviser to state authorities that may have influence over these deployment barriers.

[3] Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, FCC 22-20 (Mar. 16, 2022).

[4] Petition of NCTA for Expedited Declaratory Ruling, In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (Jul. 16, 2020), at 5-9, available at https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf.

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Telecommunications & Regulated Utilities

Antitrust and High-Tech: A Tale of Two Mergers

Scholarship Abstract Between 2016 and 2019, two proposed mergers captured much of the attention and resources of the Department of Justice, Antitrust Division (DOJ). The first . . .

Abstract

Between 2016 and 2019, two proposed mergers captured much of the attention and resources of the Department of Justice, Antitrust Division (DOJ). The first was the vertical merger of AT&T Inc. and Time Warner Inc.—a merger of a communications, media, and content distribution company (AT&T) with a content provider (Time Warner). The second was the horizontal merger of Sprint and T-Mobile—a merger of two mobile telephone companies. In general, vertical mergers are reviewed with greater leniency than horizontal mergers because the latter, by definition, eliminate a competitor in the relevant marketplace, which is not a concern with the former. Moreover, merger-specific efficiencies may be easier to demonstrate when a company merges with another company in its own supply chain. Even so, the DOJ challenged the vertical merger of AT&T and Time Warner but permitted (with conditions) the horizontal merger of Sprint and T-Mobile. As this Article sets forth, these seemingly distinct mergers were destined to be linked.

Even though the DOJ unsuccessfully blocked the AT&T-Time Warner merger, the companies are separating again only a few short years after finalizing their merger. The stated reason for the unwinding is arguably linked to the DOJ’s decision to permit the Sprint-T-Mobile merger. The competitive pressure created by the joined mobile telephone company—T-Mobile—has pressured AT&T to invest further in its own mobile telephone business. In other words, the DOJ’s initial fear, that the merged AT&T could use theoretical market power to anticompetitively charge higher consumer prices and raise rivals’ costs in content distribution, was never realized. In contrast, the DOJ’s humility in assessing potential efficiencies for a merged T-Mobile in the growing 5G mobile telephone market is already paying competitive dividends. The tale of these two mergers, therefore, provides interesting insights into modern merger review policies.

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Antitrust & Consumer Protection

The Return of (De Facto) Rate Regulation: Title II Will Slow Broadband Deployment and Access

TOTM President Joe Biden’s nomination of Gigi Sohn to serve on the Federal Communications Commission (FCC)—scheduled for a second hearing before the Senate Commerce Committee Feb. 9—has been . . .

President Joe Biden’s nomination of Gigi Sohn to serve on the Federal Communications Commission (FCC)—scheduled for a second hearing before the Senate Commerce Committee Feb. 9—has been met with speculation that it presages renewed efforts at the FCC to enforce net neutrality. A veteran of tech policy battles, Sohn served as counselor to former FCC Chairman Tom Wheeler at the time of the commission’s 2015 net-neutrality order.

Read the full piece here.

 

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Telecommunications & Regulated Utilities

Internet Speed: What Do Consumers Actually Demand?

TL;DR President Joe Biden has called for “future-proof” broadband infrastructure as part of his Build Back Better plan, and some members of the U.S. Senate want the Federal Communications Commission (FCC) to update its definition of broadband to comprise both download and upload speeds of at least 100 Mbps.

Background…

President Joe Biden has called for “future-proof” broadband infrastructure as part of his Build Back Better plan, and some members of the U.S. Senate want the Federal Communications Commission (FCC) to update its definition of broadband to comprise both download and upload speeds of at least 100 Mbps. States like California have likewise advanced bills to prioritize funding for infrastructure that supports 100 Mbps or greater download speeds. It is widely believed that the FCC will update the definition of broadband from the 2015 standard of 25 Mbps download/3 Mbps upload speeds.

But…

Studies of U.S. broadband usage suggest that typical consumers do not need upload speeds to be as fast as download speeds. Moreover, they typically require download speeds of less than 100 Mbps. Linking public funding to a required symmetrical 100 Mbps  speed tier, or using that tier as a benchmark to define adequate broadband deployment, would have negative consequences for broadband buildout.

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Telecommunications & Regulated Utilities

Returning to Agency Deference in Communications Law

Popular Media Policy is not settled quickly in communications law. The 1996 Telecommunications Act required incumbent telecommunications carriers to open their networks to competitors on regulated terms. It took . . .

Policy is not settled quickly in communications law. The 1996 Telecommunications Act required incumbent telecommunications carriers to open their networks to competitors on regulated terms. It took more than a decade, two trips to the Supreme Court, and several trips to the Court of Appeals for the D.C. Circuit to ascertain the meaning of this statutory requirement. The story is similar to the Federal Communications Commission’s (FCC) efforts since 1998 to fit consumer internet service into the same Telecommunications Act’s statutory framework, resulting in repeated trips to the Courts of Appeals and the Supreme Court.

Read the full piece here.

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Telecommunications & Regulated Utilities