Executive Summary

Our response to the National Telecommunications and Information Administration’s (“NTIA”) request for comments (“RFC”) is broken into two parts. The first part raises concerns regarding what we see as the NTIA’s uncritical acceptance of certain contentious assumptions, as well as the RFC’s pre-commitment to a particular political viewpoint. The second part responds to several of the most pressing and problematic substantive questions raised in the RFC.

The RFC appears intended to invite comments that conform to a pre-established commitment to interventionist policy. The heuristics and assumptions on which it relies anticipate the desired policy outcome, rather than setting a baseline for genuine input and debate. Unfortunately, these biases also appear to carry over to the substantive questions. These comments offer four substantive observations:

First, that interoperability is not a panacea for mobile-apps ecosystems. There are risks and benefits that attend interoperability and these risks and benefits manifest differently for different groups of end-users and distributors. Specifically, some users may prefer “closed” platforms that offer a more curated experience with enhanced security features.

Second, considerations of security are intrinsic to determining whether interoperability is feasible or desirable. Centralized app distribution is what allows platforms like the App Store to filter harmful content through a two-tiered process of both human and automated app review. Such control over the ecosystem’s content would necessarily be relinquished if third-party app distribution and payment systems were allowed on “closed” platforms.

Third, determinations of “user benefit” in the mobile-app ecosystem must account for both end-users and developers. Where the interests of the two sides of the market conflict, total output—rather than price—should be the relevant benchmark.

Fourth, there is no objective “correct balance” between security and access. Some end-users and developers prefer more curated and ostensibly safer ecosystems, while others are most concerned with the sheer quantity of options. The NTIA should not substitute its own preferences for the revealed preferences of millions of users and distributors.

Read the full comments here.

Introduction

On behalf of the International Center for Law & Economics (ICLE), we thank the Commission for the opportunity to comment on this Notice of Inquiry in the Matter of Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination (“NOI”). The NOI states that “one of the Commission’s foremost goals is to ensure that every person in the United States has equal access to high-quality, affordable broadband internet access service… Every person across our Nation deserves—and must have—equal access to this crucial technology in the increasingly digital world; a person’s zip code should not determine their destiny.”[1]

Despite this high-minded rhetoric, the NOI does not focus on extending broadband deployment to those who are actually unserved—i.e., to those who lack any broadband Internet options at all.[2] In fact, the word “unserved” does not appear in the NOI at all. The notice instead focuses on eliminating “digital discrimination of access based on income level, race, color, religion, or national origin.”[3] This group is deemed to be the “underserved,” a designation the NOI defines not by reference to their relative inability to access broadband Internet service, but by their membership in categories that “have been historically underserved, marginalized, or adversely affected by persistent poverty or inequality.”[4] Thus, the NOI includes in the ranks of the “underserved” individuals who do have the ability to access broadband service, although potentially at slower speeds than some of their neighbors.

Getting faster Internet to those who live where broadband service already exists—or assisting them in paying for access to that service which already exists—is a fundamentally different problem than that faced by Americans who lack Internet access because they live in geographic areas without broadband infrastructure. We thus caution the Commission that this rulemaking may distract from the pressing need, demonstrated by the FCC’s own broadband-deployment data, to build out broadband networks in those hardest-to-reach areas.

The Commission asks whether broadband-deployment decisions are being made based on impermissible “income discrimination.” But as we explain in greater detail below, differences in the levels of broadband service available to the richest and poorest census blocks are insignificant relative to the differences in availability between lowest population-density census blocks and even the next- lowest population-density census blocks.[5] Indeed, the issues raised in NOI largely do not speak to the need to alleviate the significant deficit of broadband infrastructure in the most rural areas of this country. While the NOI presumes that discrimination is to blame for differences in the availability of higher-speed tiers of broadband service, the data and the underlying economics tell a different tale.

Underpinning the stark differences in broadband availability between urban and rural areas is the underlying cost of deployment. Population density serves as a supply-side constraint on buildout decisions because it is cost-prohibitive to build a network to serve only a very few potential subscribers. Similarly, those differences that can be observed in the deployment of the highest-speed tiers in urban centers—which are far less pronounced, in comparison to the urban-rural divide—are similarly the result of providers’ judgment about the likelihood to recoup their investments, not willful decisions to discriminate on the basis of income or protected racial or religious characteristics.

It is undoubtedly important to examine patterns of deployment to discover how best to connect underserved communities. But if we are to overcome those obstacles that have impeded reaching every potential broadband consumer, it is essential that the FCC carefully consider how and why investment decisions are made in broadband markets. ICLE has researched these questions extensively and we offer, in addition to these comments, that commissioners and FCC staff may wish to read the more fulsome analysis offered in our 2021 paper, “A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture.”[6]

In short, we question the NOI’s framing of broadband-connectivity issues as a matter of “discrimination.” We would assert that the project to eliminate “digital discrimination of access based on income level”[7] does not usefully forward efforts to connect the underserved. While there remains much work to be done to connect the underserved, the FCC is already well aware of the technical, economic, regulatory, and geographical issues that can impede deployment and has for years been doing important work on these issues. The Commission should continue this important work and should avoid the unhelpful framing of “discrimination.”

In Part II, we detail some of the important factors that guide broadband providers’ investment decisions and that drive competition in specific markets. There is no reasonable model (nor data) that would suggest broadband companies have engaged in discrimination against racial, ethnic, or religious minorities—or even against lower-income consumers—as that would imply that they have systematically sacrificed profits due to animus.

In Part III, we offer an approach to implement Section 60506 of the Infrastructure Investment and Jobs Act that applies insights from the law & economics of broadband buildout. It is not accurate to categorize the process firms undertake to evaluate the likelihood of recoupment as “discrimination” on the basis of “income level, race, ethnicity, color, religion, or national origin.”[8]

Thus, rules to proscribe “digital discrimination” ought to focus on cases where explicit and demonstrable discriminatory intent played a role in broadband providers’ investment decisions.

In Part IV, we counsel the FCC that it is economically infeasible to require equivalent broadband infrastructure across all territories irrespective of the likelihood that providers will be able to recoup their investment. Mandates that providers make unprofitable deployment decisions in some areas would necessarily require either that they raise prices in other areas or that they be subsidized directly by the government. The former (i.e., cross-subsidization) is generally infeasible, as higher-income territories tend to have more competitive markets. Thus, we recommend that the FCC and the federal government consider user subsidies (e.g., connectivity vouchers) to encourage more options for lower-income consumers.

Read the full comments here.

[1] Notice of Inquiry, In the Matter of Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, GN Docket No. 22-69 (Feb. 23, 2022), at para. 1 [hereinafter “NOI”].

[2] Currently defined by the FCC as 25/3 Mbps for terrestrial fixed broadband and 10/1 for mobile broadband. See Fourteenth Broadband Deployment Report, In the Matter of Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, GN Docket No. 20-269 (Jan. 19, 2021), at para. 12 (defining terrestrial fixed broadband), para. 15 (defining mobile broadband) [hereinafter “Fourteenth Broadband Deployment Report”].

[3] NOI, supra note 1, at para. 2 (quoting 47 U.S.C. § 1754(b)(1).

[4] Id. at para. 3, n.5; para. 40 (both quoting Executive Order 13985).

[5] See Part II.B below.

[6] Geoffrey A. Manne, Kristian Stout, & Ben Sperry, A Dynamic Analysis of Broadband Competition: What Concentration Numbers Fail to Capture (ICLE White Paper, Jun. 2021), available at https://laweconcenter.org/wp-content/uploads/2021/06/A- Dynamic-Analysis-of-Broadband-Competition.pdf [hereinafter “ICLE Broadband Competition Paper”].

[7] NOI, supra note 1, at para. 2

[8] 47 U.S.C. § 1754.

 

These days, there isn’t a lot of harmony in the world of technology policy. But there is a bright spot of bipartisanship in a section of our airwaves: the 5.9 GHz band. In 2020, the FCC voted unanimously to modernize the rules in this spectrum to allow both Wi-Fi and automotive safety tech to operate. This win-win was celebrated by proponents of car safety and broadband alike. But today the Department of Transportation (DOT) is working on a study that may purposely have been designed to undo this decision. At a time when broadband is more important than ever, we should not undo this popular and bipartisan policy.

Read the full piece here.

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.

ICLE Director of Law & Economics Programs Gus Hurwitz joined the Cardinal Institute’s podcast Forgotten America to discuss the logistical, political, and philosophical questions surrounding broadband in rural America. The full episode can be found here.

The Honorable Maria Cantwell Chairwoman Committee on Commerce, Science, and Transportation United States Senate	The Honorable Roger Wicker Ranking Member Committee on Commerce, Science, and Transportation United States Senate
The Honorable Frank Pallone Chairman Committee on Energy and Commerce U.S. House of Representatives	The Honorable Cathy McMorris Rodgers Ranking Member Committee on Energy and Commerce U.S. House of Representatives

 

Dear Members of Congress,

Following years of careful study, in 2020 the FCC took bipartisan action to allow both unlicensed broadband and automotive use of the 5.9 GHz band, clearing the way for billions of dollars in economic value and innovation.

The Department of Transportation’s (“DOT”) recently announced study appears to be designed to undermine the FCC’s decision, spurred by interests’ intent on re-asserting a claim that the automotive industry should control the entire band. DOT is conducting this action without seeking public comment and appears to be relying on improper technical assumptions and methodologies.

Accordingly, the undersigned organizations urge you to stop this misguided effort. DOT should be focusing its efforts on bringing the automotive industry’s new cellular vehicle-to-everything (“C-V2X”) technology to vehicles. Instead, we are concerned that DOT will attempt to use a study that is both procedurally and technically flawed to pressure the FCC to roll back its bipartisan decision on the 5.9 GHz band. This would be another instance of government agency dysfunction run amok.

Congress designated the FCC as the nation’s arbiter of commercial spectrum. The FCC’s 5.9 GHz decision is based on sound science and engineering and will best serve both the broadband and automotive safety needs of the country. The FCC’s approach:

1. uses the lower part of the band to strengthen Wi-Fi networks at a time when, as the pandemic demonstrated, Americans rely on these networks more than ever to access jobs, education, healthcare, and financial services; and
2. designates the upper part of the band to revitalize the Intelligent Transportation Service (ITS) by allowing C-V2X technology to replace the failed dedicated short-range communication (DSRC) This advances the future of ITS, since DSRC was not deployed by the automotive industry in any meaningful way outside of a handful of pilot projects.

The FCC undertook a lengthy, full, and fair public rulemaking that expressly considered the views of all stakeholders, from consumer advocates and technology companies to the DOT, state transportation agencies and vehicle manufacturers. The result was a bipartisan and unanimous decision that adopted careful technical rules to protect neighboring automotive services.

The FCC’s decision is also critical for American jobs, as unlicensed technologies add hundreds of billions of dollars to the U.S. economy every year and economists calculate that enabling access to part of the 5.9 GHz band will add more than $28 billion by 2025. In fact, this spectrum has been used for the past two years to provide consumers with additional bandwidth to meet increased demand during the pandemic.

C-V2X advocates repeatedly told the FCC that 30 megahertz of spectrum would be sufficient for C-V2X to deliver time-critical safety messages and applications. Rather than relitigate the FCC’s bipartisan decision on a spectrum matter that is squarely in its jurisdiction, DOT should focus on helping the automotive industry deliver on those vehicle-safety promises.

Spectrum is a finite asset, and after a twenty-year grant of exclusive use of the band, the FCC was right to not allow these critical mid-band frequencies to lay fallow any longer. Given the importance of the 5.9 GHz band to the country, the federal government must speak with a unified voice on spectrum. Congress should direct the DOT to drop this post-Order testing immediately.

Respectfully submitted,

American Library Association
Benton Institute for Broadband & Society
Center for Rural Strategies
Council for Citizens Against Government Waste
Digital Progress Institute
International Center for Law & Economics
Next Century Cities
Open Technology Institute at New America
Public Knowledge
R Street Institute
Wireless Internet Service Providers Association (WISPA)

ICLE Executive Director Ian Adams joined the Regulatory Transparency Project’s Fourth Branch Podcast to discuss proposed rules that would require mandatory switching on U.S. railroads. The full episode is embedded below.

Though details remain scant (and thus, any final judgment would be premature),  initial word on the new Trans-Atlantic Data Privacy Framework agreed to, in principle, by the White House and the European Commission suggests that it could be a workable successor to the Privacy Shield agreement that was invalidated by the Court of Justice of the European Union (CJEU) in 2020.

Read the full piece here.

Comments of the International Center for Law & Economics

Before the Surface Transportation Board

STB Ex Parte No. 711 (Sub-No. 1)

Reciprocal Switching

Submitted Feb. 14, 2022

On behalf of the International Center for Law & Economics, a nonpartisan nonprofit that promotes the use of law & economics methodologies to inform public-policy debates, I offer the following comments to express concern about the potential finalization and promulgation of the Surface Transportation Board’s (STB) 2016 Notice of Proposed Rulemaking (NPRM) regarding the imposition of a reciprocal-switching requirement for U.S. freight-rail operations.

The STB’s renewed efforts on reciprocal switching have come as part of a push by the administration to spur competition in the U.S. economy.[1] This proceeding responds specifically to a call by President Joe Biden to: “strengthen regulations pertaining to reciprocal switching agreements.”[2] Unfortunately, like much of the administration’s broader effort, the regulatory solutions the STB offers are in search of competition problems, evidence of which remains conspicuously absent. Worse, the STB offers these new regulations on the basis of a docket that is now dated and that itself relied on even older data.[3] As a procedural and factual matter, the STB should use this proceeding to abandon consideration both of the 2016 NPRM, specifically, and of a reciprocal-switching mandate altogether.

Toward that end, these comments speak to the manifest infirmities of the proposal under consideration by examining how the STB has failed in its statutory duty to identify a problem suitable for regulatory redress; by identifying the proposed solution’s most likely outcomes and exploring how poorly they satisfy the Proposed Rule’s stated goal; and by detailing the inevitable costs associated with promulgating the Proposed Rule.

Competition within the freight-rail sector and the larger U.S. economy is vital to the nation’s economic health, and by the STB’s most recent assessment, is robust.[4] But the role of regulation is to make markets regular in a manner that fosters efficiency, not to reflect the whims or will of a regulator to the detriment of a disfavored party.

Read the full comments here.

[1] Executive Order 14036, 86 FR 36987-36999, “Promoting Competition in the American Economy.” July 9, 2021. https://www.federalregister.gov/d/2021-15069.

[2] Ibid.

[3] Docket No. EP 711, Docket No. EP 711 (Sub-No. 1), 81 FR 51149-51165,“Petition for Rulemaking To Adopt Revised Competitive Switching Rules; Reciprocal Switching.” Aug 3, 2016. (NPRM). https://www.federalregister.gov/d/2016-17980.

[4] Laurits Christensen Associates report to Surface Transportation Board, “A Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that might Enhance Competition.” November 2009. https://www.stb.gov/wpcontent/uploads/files/docs/competitionStudy/Executive%20Summary.pdf.