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TL;DR President Joe Biden’s American Jobs Plan calls for “future proof” broadband infrastructure, with priority for broadband networks “owned, operated by, or affiliated with local governments, non-profits, and co-operatives―providers with less pressure to turn profits and with a commitment to serving entire communities.”
President Joe Biden’s American Jobs Plan calls for “future proof” broadband infrastructure, with priority for broadband networks “owned, operated by, or affiliated with local governments, non-profits, and co-operatives?providers with less pressure to turn profits and with a commitment to serving entire communities.”
Municipal broadband and other options that decouple Internet service from profits and losses do not serve consumers in a cost-effective way. Municipal providers rely heavily on subsidies (including cross-subsidies from electric co-ops) to continue operations, creating an uneven playing field. The presence of a municipal provider also means less incentive for private companies to enter or expand in the market. On the other hand, benefits from municipal broadband are minimal and it represents a risky investment for taxpayers that should only be considered a last resort.
Read the full explainer here.
TOTM It’s a telecom tale as old as time: industry gets a prime slice of radio spectrum and falls in love with it, only to take . . .
It’s a telecom tale as old as time: industry gets a prime slice of radio spectrum and falls in love with it, only to take it for granted. Then, faced with the reapportionment of that spectrum, it proceeds to fight tooth and nail (and law firm) to maintain the status quo.
Read the full piece here.
ICLE White Paper The instinct to promote broadband network buildout is understandable, but precisely how that infrastructure funding is deployed will determine whether such proposals succeed or fail.
The 117th Congress is considering whether to devote significant federal resources toward promoting broadband access in underserved communities. Legislative proposals to do so include President Joe Biden’s draft American Jobs Plan—a $2.3 trillion budget-reconciliation package that sets aside $100 billion for broadband infrastructure. They also include the Accessible, Affordable Internet for All Act, which would create a $79.5 billion federal program.
The instinct to promote network buildout is understandable, particularly in the wake of the COVID-19 pandemic and the various socioeconomic disparities it highlighted. But precisely how that infrastructure funding is deployed will determine whether such proposals succeed or fail.
In fact, the U.S. broadband market is already healthy, and in most cases, competitive outcomes are close to optimal. Charges that broadband markets are dominated by monopolies or oligopolies and that they are therefore stagnant, over-priced, and of low quality do not comport with the empirical and economic realities. To take but one example, even with the overall rise of prices across the economy, and in the face of surging demand during the COVID-19 pandemic, U.S. broadband prices fell.
Concentration is a poor predictor of competitiveness, and broadband markets with even a small number of competitors can be—and are—quite healthy. Indeed, the multi-year, multi-billion-dollar investment plans broadband firms execute—amid constant pressure from alternative modes of Internet access like 5G, fixed wireless, and satellite—tell the story of a highly competitive, dynamic market.
To be sure, there are a few areas where there has been no meaningful wireline broadband buildout: Approximately 4.4 percent of the U.S. population does not have access to at least 25/3 Mbps fixed service. Even then, however, many of those areas are served by wireless Internet service providers (WISPs), cellular broadband, and/or satellite service.
But while the digital divide—both rural and urban—may be real, that fact alone does not justify wholesale intervention into broadband markets. Instead, the actual scope of the problem should be assessed, and policies tailored to remedy specific needs. The policies required to reach that stubborn 4.4 percent tail of broadband rollout are likely to be very different than those that facilitated the buildout of the first 95.6 percent.
Policies designed to close the digital divide should have two broad features: they should reach consumers where they are, and they should not disrupt the otherwise healthy broadband market. Reaching consumers where they are means targeting subsidies directly to consumers to make it more viable for existing providers to build out into new areas. Such policies should be technology-neutral and designed to stimulate demand to jumpstart markets that have otherwise proven too costly for any provider to enter. Avoiding disruption of healthy markets entails refraining from interventions that artificially introduce new competitors, skew investment planning by broadband providers, or dictate how and where providers should build networks.
There is much that can be done to encourage better and timelier broadband rollout, but not all solutions are equally effective. As we detail below, policymakers must choose carefully among competing options to realize the best possible result.
This paper aims to address common misconceptions associated with broadband competition that, in turn, undercut practical solutions for connecting the unconnected. It first details some of those misconceptions and contrasts them with the realities of current broadband markets. It then provides an overview of how to properly understand healthy competition in local broadband markets. It then provides a critique of commonly advanced proposals that are based on fundamental misunderstandings of how broadband markets work. And finally, it offers an approach to policy that incorporates a variety of solutions for connecting the unconnected.
Read the full white paper here.
* NOTE: Section 1.b was updated July 13, 2021, to reflect feedback regarding the paper’s interpretation of certain relevant economic studies.
TL;DR Claims that the U.S. broadband market is insufficiently competitive have prompted public policy proposals to stimulate market entry, including through subsidies to government-run broadband service.
Claims that the U.S. broadband market is insufficiently competitive have prompted public policy proposals to stimulate market entry, including through subsidies to government-run broadband service. The White House has incorporated similar proposals into its American Jobs Plan, while Congress also is considering increased subsidies for broadband as part of its infrastructure package.
Competition in the broadband market is stronger than critics claim. Economists have long recognized that a market’s level of competition is not solely determined by the number of competitors. Seeking to increase the number of firms beyond what that market can profitably bear will lower societal welfare. A better way to encourage broadband buildout would be to remove regulatory barriers to entry.
TOTM The European Commission recently issued a formal Statement of Objections (SO) in which it charges Apple with antitrust breach. In a nutshell, the commission argues that Apple . . .
The European Commission recently issued a formal Statement of Objections (SO) in which it charges Apple with antitrust breach. In a nutshell, the commission argues that Apple prevents app developers—in this case, Spotify—from using alternative in-app purchase systems (IAPs) other than Apple’s own, or steering them towards other, cheaper payment methods on another site. This, the commission says, results in higher prices for consumers in the audio streaming and ebook/audiobook markets.
Presentations & Interviews ICLE Director of Innovation Policy Kristian Stout joined a digital panel organized by WifiForward and the Wi-Fi Alliance on the state of the Wi-Fi 6E . . .
ICLE Director of Innovation Policy Kristian Stout joined a digital panel organized by WifiForward and the Wi-Fi Alliance on the state of the Wi-Fi 6E market. The full video is embedded below.
TL;DR The COVID-19 pandemic has highlighted the resilience of U.S. broadband infrastructure, the extent to which we rely on that infrastructure, and the geographies and communities where broadband build-out lags behind.
The COVID-19 pandemic has highlighted the resilience of U.S. broadband infrastructure, the extent to which we rely on that infrastructure, and the geographies and communities where broadband build-out lags behind. As the extent and impact of the digital divide has been made clearer, there is renewed interest in the best ways to expand broadband access to better serve all Americans.
Policymakers should eschew calls to address the digital divide simply by throwing vast sums of money at the problem. Moreover, they should take account of the dynamic nature of broadband markets and avoid highly prescriptive mandates. They should, instead, pursue a principled approach designed to encourage entry in new regions, while avoiding poorly managed subsidies and harmful price controls that would discourage investment and innovation by incumbent internet service providers (ISPs).
As Congress and the White House prepare to debate infrastructure proposals that include potentially more than $100 billion in spending on broadband, the International Center for Law & Economics (ICLE) proposes the following principles to guide legislative deliberations to expand broadband access.
Amicus Brief ICLE supports the appeal filed by ACA Connects et al. seeking review of the district court’s denial of a preliminary injunction. As detailed herein, the district court failed to consider economic and empirical realities that militate in favor of finding irreparable harm to the Appellants’ members. Moreover, the same economic and empirical realities tip the balance of equities in favor of the Appellants, and establish that the public interest is in granting a preliminary injunction against enforcement of the California Internet Consumer Protection and Net Neutrality Act of 2018.
In 2018, the FCC issued its Restoring Internet Freedom Order, 33 FCC Rcd. 311 (2018) [“2018 Order”], which returned broadband Internet access service (“broadband”) to a classification as a Title I information service. The FCC determined that a “light touch” regulatory regime was necessary to promote investment in broadband. Id. ¶¶ 1-2. While removing the “no-blocking” and “no-throttling” rules previously imposed under the 2015 Open Internet Order, Protecting and Promoting the Open Internet, Report and Order on Remand, Declaratory Ruling, and Order, 30 FCC Rcd. 5601 (2015) [“2015 Order”], the FCC also removed the “general conduct” standard—an open-ended regulatory catch-all that would permit the FCC to examine any conduct of broadband providers that it deemed potentially threatening to Internet openness. Cf. 2018 Order ¶¶ 239-245. Yet, notably, the FCC elected to keep a version of the 2015 Order’s transparency rule in place, which requires broadband providers to disclose any blocking, throttling, paid prioritization, or similar conduct. Id.
In retaining the transparency rule, the FCC noted that the FTC and state attorneys general are in a position to prevent anticompetitive consumer harm through the enforcement of consumer protection and antitrust laws. See 2018 Order ¶ 142. Thus, the overarching goal of the 2018 Order was to ensure business conduct which could be beneficial to consumers was not foreclosed by regulatory fiat, as would have been the case under the 2015 Order, while empowering the FCC, FTC, and state attorneys general to identify and address discrete consumer harms.
The Mozilla court noted that the FCC could invoke conflict preemption principles in order to prevent inconsistent state laws from interfering with the 2018 Order. Mozilla Corp. v. FCC, 940 F.3d 1, 85 (D.C. Cir. 2019) (per curiam). Without such preemption, a patchwork of inconsistent state laws would confuse compliance efforts and drive up broadband deployment costs. Cf. Id. Relying as it does on a common carriage approach to regulating the Internet, and fragmenting the regulation of broadband providers between the federal and state levels, SB-822 is at odds with the purpose of the 2018 Order.
The district court found the balance of the equities and the public interest both weighed in favor of California in enforcing SB-822, stating the law “provides crucial protections for California’s economy, democracy, and society as a whole,” Transcript of Proceedings, American Cable Ass’n v. Becerra, No. 2:18 cv-02684 (E.D. Cal. Feb. 23, 2021) (ER-7–78) [“Tr.”], and that a preliminary injunction would “negatively impact the State of California more than [it would benefit] the ISP companies.” Id. at 69. In denying the motion for a preliminary injunction, the court also found the Appellants failed to show a likelihood of success on the merits. Id. at 67.
The district court wrongly concluded the balance of equities tips in favor of Defendant-Appellee, the state of California, and incorrectly assumed that the Appellants’ members would not suffer irreparable harm. The economics underlying broadband deployment, combined with competition and consumer protection law, provide adequate protection to consumers and firms in the marketplace without enforcement of SB-822. And, because of the sovereign immunity provided to California under the Eleventh Amendment, the potential damages suffered by the Appellants’ members are unable to be remedied. On the other hand, the enforcement of this law will significantly harm the Appellants’ members as well as the public by allowing states to create a patchwork of inconsistent laws and bans on consumer welfare-enhancing conduct like zero-rating.
The district court made crucial errors in its analysis when balancing the equities.
First, when evaluating the likelihood of ISPs acting in ways that would reduce Internet openness, it failed to consider the economic incentives that militate against this outcome.
ISPs operate as multi-sided markets—their ability to draw consumers and edge providers on both sides of their platforms depends on behavior that comports with consumer expectations. Both broadband consumers and edge providers demand openness, and there is no reason to expect ISPs to systematically subvert those desires and risk losing revenue and suffering reputational harm. Contrary to the district court’s characterization, the good behavior of ISPs is not attributable to scrutiny during the pendency of the current litigation: rather, it is a rational response to consumer demand and part of a course of conduct that has existed for decades.
Second, the district court discounted the legal backdrop that both would hold ISPs to their promises, as well as prevent them from committing competitive harms.
All of the major ISPs have made public promises to refrain from blocking, throttling, or engaging in paid prioritization. See infra Part I (A) at 17. Further, the FCC’s 2018 Order creates a transparency regime that would prevent ISPs from covertly engaging in the practices SB-822 seeks to prevent. The FTC’s Section 5 authority to prevent “unfair or deceptive acts or practices” empowers that agency to pursue ISPs that make such promises and break them while state attorneys general can also bring enforcement actions under state consumer protection laws. 2018 Order ¶¶ 140-41.
In addition to the consumer protection enforcement noted above, antitrust law provides a well-developed set of legal rules that would prevent ISP’s from engaging in anticompetitive conduct. This would include preventing ISPs from entering into anticompetitive agreements with each other, or with edge providers, that harm competition, as well as prevent anticompetitive unilateral conduct.
In summary, the district court failed to properly balance the equities and, in so doing, sanctioned net harm to the public interest. Both the underlying economic incentives and existing laws ensure ISPs will continue to provide broadband service that meets consumer expectations. By contrast, SB-822, in going further than even the 2015 Order, actually permits a great deal of harm against the public interest by presumptively banning practices, like zero-rating, that increase consumer welfare without harming competition.
Regulatory Comments Dear Secretary Buttigieg, Secretary Raimondo, and Director Deese: The International Center for Law & Economics, New America’s Open Technology Institute, Public Knowledge and the R . . .
Dear Secretary Buttigieg, Secretary Raimondo, and Director Deese:
The International Center for Law & Economics, New America’s Open Technology Institute, Public Knowledge and the R Street Institute represent organizations that take contrary positions on many policy issues. But we all agree that the Federal Communications Commission’s bipartisan compromise decision to open the 5.9 GHz band to both automotive and broadband technologies achieved the right balance. We therefore write to respond to a March 11, 2021 letter from the Intelligent Transportation Society of America (ITS America) and the American Association of State Highway and Transportation Officials (AASHTO).[1] This letter argues that you should intervene in an attempt to overrule the considered decision of an independent regulatory agency, without revealing key facts about the band. The truth is that the automotive industry was granted access to this band more than twenty years ago and has still failed to produce any real-world safety benefits—and that the FCC’s well-supported and bipartisan decision will both support crash-avoidance advances and expand broadband at a time when Americans need it more than ever. We urge you not to undermine the FCC’s important decision as ITS America and AASHTO ask you to do.
On November 18, 2020, the Federal Communications Commission (FCC) adopted a unanimous and bipartisan 5.9 GHz Order designating (1) 45 megahertz of the 5.9 GHz band for indoor Wi Fi and other unlicensed broadband technologies and (2) 30 megahertz for automotive safety technologies.[2] Our organizations believe that the FCC’s compromise approach was right for strengthening the Wi-Fi connections Americans rely on and for supporting the innovation in automotive technologies needed to finally address the failure of the FCC’s previous ITS policy.
The FCC’s 5.9 GHz Order recognized the enormous contributions Wi-Fi makes to Americans’ everyday lives and to the Nation’s economy. Demand for Wi-Fi has been increasing rapidly for years, and recent research published by the Wi-Fi Alliance has found that Wi-Fi creates nearly $1 trillion in economic value annually in the United States today.[3] The COVID-19 pandemic has only magnified the importance of Wi-Fi to Americans working, attending school, completing homework assignments, attending telehealth visits, connecting with family and friends, and more via their broadband internet connections. Even before the FCC adopted its final order in November, it granted special temporary access to the lower 45 megahertz of the 5.9 GHz band to 100 wireless internet service providers, who used it to immediately expand capacity for customers in dozens of rural areas across the country using existing devices.
Because of Wi-Fi’s enormous success, however, the spectrum bands commonly used today are overburdened. As Americans continue to rely increasingly on Wi-Fi to connect more and more devices to the internet, the FCC must seize opportunities to make more spectrum available.
The FCC began to study the 5.9 GHz band for Wi-Fi and other unlicensed applications in 2013. In 2019, in a notice of proposed rulemaking, the Commission correctly recognized that even though the FCC had set aside the full 5.9 GHz band over twenty years ago in 1999 for a particular automotive safety technology called Dedicated Short Range Communications (or DSRC), that technology had “not lived up to its promise, … leaving valuable mid-band spectrum largely fallow.”[4] Today, there is no use of the band at all in the vast majority of the country, and there is not even one automobile model currently built with DSRC. In recognition of this failure, the FCC proposed to split the band so that unlicensed technologies like Wi-Fi could operate in the lower 45 megahertz of the band, and a new automotive communications technology called C- V2X could operate in the top 30 megahertz of the band. It noted that the 5.9 GHz band is adjacent to the most widely used Wi-Fi band in the United States and that adding those 45 megahertz would enable the use of wider Wi-Fi channels needed to make more efficient use of the spectrum and to support next-generation broadband applications.
Particularly with the emergence of C-V2X, preferred by many in the automotive industry, the Commission believed that a compromise giving both Wi-Fi and C-V2X the ability to operate would finally make efficient and valuable use of the 5.9 GHz band. The Commission received extensive comments over many years from Wi-Fi advocates and automotive interests, and met repeatedly with interested parties. It also considered multiple rounds of input from the National Telecommunications and Information Administration and the U.S. Department of Transportation on behalf of private automotive companies and states, even though this band is not available for Department of Transportation federal use. In 2020, after many years of consideration, the Commission finally released the 5.9 GHz Order adopting the compromise proposal. Commissioners from both sides of the political aisle voted unanimously in favor of the 5.9 GHz Order, following years of bipartisan effort.
Despite this open and fair proceeding by an independent regulatory agency acting within its area of expertise, ITS America and AASHTO now ask you to work to overturn the FCC’s unanimous judgment. They argue, just as they have before the FCC again and again, that automotive communications technologies are poised to revolutionize automotive safety, if only the FCC would get out of the way and leave them the full 75 megahertz of the 5.9 GHz band instead of the top 30 megahertz. ITS America and its members made the same promises over twenty years ago about DSRC’s just-around-the-corner ability to improve vehicle safety when they successfully convinced the FCC to grant them the unusual and ill-fated subsidy of free, exclusive spectrum. They had two decades and billions of dollars in taxpayer-subsidized grants and investments, but failed to deploy DSRC widely in commercial vehicles. As a result, the only current DSRC uses of the band are sparse pilot projects for applications that need far less than the full 75 megahertz—not the ubiquitous deployments along roadways and in vehicles that would be necessary for DSRC to deliver on its promises. The FCC was right to recognize that there is a more efficient way to make use of the 5.9 GHz band for the benefit of Americans, while still leaving more than enough spectrum for the automotive industry to provide the safety applications they promised decades ago.
The FCC gave ITS America and AASHTO a full and fair hearing. These organizations were vocal participants in the FCC’s 5.9 GHz rulemaking process. They filed comments as far back as 2013 and presented their views in meetings with the FCC’s expert engineers many times over the course of the rulemaking. After years of careful consideration, the FCC concluded that there is room enough in the 5.9 GHz band for the future of Wi-Fi and for C-V2X, the future of automotive communications according to many industry stakeholders.
For ITS America and AASHTO now to ask the Administration to intervene with Congress in an effort to overrule the technical analysis and unanimous decision of an independent regulator, after 20 years of illusory promises, is nothing short of breathtaking. The country cannot afford for the Administration or Congress to fall prey to another generation of smoke and mirrors. We urge you to decline their invitation to undermine the FCC’s independence and its careful technical judgment.
Sincerely,
International Center for Law & Economics
New America’s Open Technology Institute
Public Knowledge
R Street Institute
[1] Letter from Shailen Bhatt, President & CEO, ITS America, and Jim Tymon, Executive Director, AASHTO, to the Honorable Pete Buttigieg, Secretary, U.S. Department of Transportation, the Honorable Gina Raimondo, Secretary, U.S. Department of Commerce, and Mr. Brian Deese, Director, National Economic Council (Mar. 11, 2021), available at https://itsa.org/wp-content/uploads/2021/03/ITSA-AASHTO-V2X-Letter-March-11.pdf.
[2] See Use of the 5.850-5.925 GHz Band, First Report and Order, Further Notice of Proposed Rulemaking, and Order of Proposed Modification, 35 FCC Rcd. 13440 (2020) (5.9 GHz Order).
[3] See https://www.wi-fi.org/news-events/newsroom/wi-fi-global-economic-value-to-reach-5-trillion-in-2025.
[4] Use of the 5.850-5.925 GHz Band, Notice of Proposed Rulemaking, 34 FCC Rcd. 12603, ¶ 18 (2019).
