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ICLE Issue Brief President Joe Biden has made broadband build-out part of his Build Back Better plan, arguing that it constitutes essential infrastructure, much like electricity and water. . . .
President Joe Biden has made broadband build-out part of his Build Back Better plan, arguing that it constitutes essential infrastructure, much like electricity and water. The plan calls for $100 billion in subsidies for “future-proof” broadband—that is, connection modes that are expected to meet, or can be readily upgraded to meet, future connectivity needs—with a particular focus on municipal broadband and other nonprofit Internet service providers (ISPs). Congress also has taken up the question of broadband subsidies as part of its ongoing debate over infrastructure spending. But while it is important to get subsidies right, the most expedient public-policy change to ensure greater deployment and adoption of broadband would be to reform policies that needlessly impede the construction and efficient operation of broadband services.
Broadband connectivity continues to be a top priority for the Federal Communications Commission (FCC) and for state and local governments. But to build out wireline broadband, ISPs need access to poles, many of which are owned by electric cooperatives, utilities, and municipal governments. Unfortunately, these entities can charge exorbitant prices to access the necessary inputs. Moreover, the cost to replace, repair, and improve these poles is frequently offloaded onto ISPs and other attachers. These practices drive up the cost to deploy broadband, leading to slower deployment and higher prices for consumers.
The more expensive deployment becomes, the more difficult it is for providers to realize sustainable profits on those investments. This dynamic invariably leads to more selective use of scarce resources, to the detriment of costlier, less-profitable rural deployment. The challenge confronting policymakers and industry alike is how best to equitably and cost-effectively allocate the expenses associated with pole attachments.
The FCC has authority under Section 224 of the Communications Act to review the rates charged for pole attachments to ensure that they are “just and reasonable.” Pursuant to that authority, the FCC recently found that “utilities throughout the country have disparate and inconsistent practices with regard to cost responsibility for pole replacements.” The FCC also declared it unreasonable for utilities to “impose the entire cost of a pole replacement on a requesting attacher when the attacher is not the sole cause of the pole replacement.”
In order to facilitate greater broadband deployment, the FCC should consider rulemaking governing how to allocate pole-replacement costs more equitably. States should also reform how the costs of upgrades are distributed when municipal governments and electric cooperatives own the poles.
Read the full issue brief here.
TOTM President Joe Biden named his post-COVID-19 agenda “Build Back Better,” but his proposals to prioritize support for government-run broadband service “with less pressure to turn . . .
President Joe Biden named his post-COVID-19 agenda “Build Back Better,” but his proposals to prioritize support for government-run broadband service “with less pressure to turn profits” and to “reduce Internet prices for all Americans” will slow broadband deployment and leave taxpayers with an enormous bill.
Read the full piece here.
TL;DR As part of its ongoing debate over infrastructure spending, Congress should consider how to best encourage broadband deployment.
As part of its ongoing debate over infrastructure spending, Congress should consider how to best encourage broadband deployment. Lawmakers have been considering ways to fund deployment, particularly through subsidies to users or providers.
As important as it is to get subsidies right, the lowest-hanging fruit to facilitate deployment and adoption of broadband is to reform policies that needlessly impede the construction and efficient operation of broadband services. Chief among those are rules governing pole attachments and eligible telecommunications carrier (ETC) requirements.
Read the full explainer here.
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.
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 In his recent concurrence in Biden v. Knight, Justice Clarence Thomas sketched a roadmap for how to regulate social-media platforms. The animating factor for Thomas, . . .
In his recent concurrence in Biden v. Knight, Justice Clarence Thomas sketched a roadmap for how to regulate social-media platforms. The animating factor for Thomas, much like for other conservatives, appears to be a sense that Big Tech has exhibited anti-conservative bias in its moderation decisions, most prominently by excluding former President Donald Trump from Twitter and Facebook. The opinion has predictably been greeted warmly by conservative champions of social-media regulation, who believe it shows how states and the federal government can proceed on this front.
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.
TOTM In what has become regularly scheduled programming on Capitol Hill, Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey, and Google CEO Sundar Pichai will be . . .
In what has become regularly scheduled programming on Capitol Hill, Facebook CEO Mark Zuckerberg, Twitter CEO Jack Dorsey, and Google CEO Sundar Pichai will be subject to yet another round of congressional grilling—this time, about the platforms’ content-moderation policies—during a March 25 joint hearing of two subcommittees of the House Energy and Commerce Committee.
