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Regulatory Comments Introduction On behalf of the International Center for Law & Economics (ICLE), we thank the Commission for the opportunity to comment on this Notice of . . .
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.
Presentations & Interviews 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 . . .
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.
Popular Media The Federal Aviation Administration (FAA) has released a list of 50 airports that it contends will need “buffer zones” for 5G cellular spectrum, the latest in a . . .
The Federal Aviation Administration (FAA) has released a list of 50 airports that it contends will need “buffer zones” for 5G cellular spectrum, the latest in a months-long and escalating public fight between the agency and the Federal Communications Commission (FCC). Rather than a mere regulatory turf battle, the differences this internecine spectacle illustrates in how these two agencies think about risk and understand the purposes of regulation reflect basic divisions that run throughout our politics.
Read the full piece here.
TOTM Capping months of inter-chamber legislative wrangling, President Joe Biden on Nov. 15 signed the $1 trillion Infrastructure Investment and Jobs Act (also known as the bipartisan infrastructure . . .
Capping months of inter-chamber legislative wrangling, President Joe Biden on Nov. 15 signed the $1 trillion Infrastructure Investment and Jobs Act (also known as the bipartisan infrastructure framework, or BIF), which sets aside $65 billion of federal funding for broadband projects. While there is much to praise about the package’s focus on broadband deployment and adoption, whether that money will be well-spent depends substantially on how the law is implemented and whether the National Telecommunications and Information Administration (NTIA) adopts adequate safeguards to avoid waste, fraud, and abuse.
Presentations & Interviews ICLE Director of Law & Economics Programs Gus Hurwitz appeared on RFD-TV to discuss the lack of high speed internet access in some rural areas. The . . .
ICLE Director of Law & Economics Programs Gus Hurwitz appeared on RFD-TV to discuss the lack of high speed internet access in some rural areas. The full clip is embedded below.
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.
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.
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.
Read the full explainer here.
Popular Media With a compromise infrastructure bill now on the table in the Senate, it is more than just merely possible that Congress will invest $65 billion . . .
With a compromise infrastructure bill now on the table in the Senate, it is more than just merely possible that Congress will invest $65 billion in broadband over the next eight years. Despite the size of this potential investment, on an annualized basis it is smaller than the existing Federal Communications Commission Universal Service program. The pending infrastructure bill would invest $8.125 billion per year in an effort to close the digital divide, while the FCC’s Universal Service program has spent just under $8.3 billion per year for each of the past three years.
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.
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.
