Yet Again the Editorial Board of The Wall Street Distorts Wireless Market Reality

          The Saturday Oct. 5^th 2024 edition of the Wall Street Journal falsely claims that wireless telecommunications rates in the U.S. have remained flat despite ravenous inflation: “Even as inflation has surged, wireless prices have remained flat since 2018.” https://www.wsj.com/opinion/dish-directv-fcc-charlie-ergen-jessica-rosenworcel-c50c31b4.

          Just because the Mandarins at the Wall Street Journal offer a definitive statement about something does not make it true.  With characteristic snark and righteous indignation, the Journal polemicists want to convince readers that the reduction from 4 to 3 facilities-based wireless carriers in the U.S. achieved great things for consumers and the overall competitive and innovative health of the industry.  Two prominent researchers claim that TMobile’s acquisition of Sprint singularly enhanced consumer welfare with no apparent downside.  See https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4736059.

          How do consumers allegedly benefit from further concentration of an already oligopolistic market?  It takes creative, selective, and flawed interpretations of statistical facts to pull that rabbit out of a hat.

          To show flat rates, one would have to ignore the widely used carrier tactic of sneaking in new billing line items, or increasing existing ones.  Researchers also would have to ignore clear evidence of actual rate increases by asserting that the average minutes of use and data consumption increased thereby offsetting higher out of pocket payments by subscribers. Additionally, researchers would have to ignore ample evidence that subscribers are being involuntarily migrated to higher costing rate plans.

          Here’s a credible, non-partisan assessment of wireless pricing compiled by the Bureau of Labor Statistics, available at: https://data.bls.gov/pdq/SurveyOutputServlet.  Look for 2018-present PPI Industry Data;

Series Id:	PCU517312517312
Series Title:	PPI industry data for Wireless telecommunications carriers, not seasonally adjusted
Industry:	Wireless telecommunications carriers
Product:	Wireless telecommunications carriers
Base Date:	199906

Does the line appear horizontal to you?

          There are plenty of credible reports that U.S. subscribers are paying more for wireless service and their monthly rates exceed what most subscribers pay throughout the world. See https://www.billshark.com/blogs/u-s-mobile-plans-expensive; https://www.tangoe.com/blog/prepare-for-higher-mobile-phone-bills-this-summer-att-others-are-raising-rates/; https://www.usatoday.com/story/money/2024/05/23/t-mobile-price-hike/73818353007/;https://www.cnet.com/tech/mobile/verizon-price-increase-why-your-phone-bill-might-be-higher-in-march/;https://www.zdnet.com/home-and-office/networking/t-mobile-is-raising-prices-on-several-cellular-plans-heres-how-much-and-when/.

          Consider this scenario.  Let’s assume a Law Vegas hotel dinner buffet is priced at $75.00 per person.  Such a deal, given the diversity of opulent menu options.  Too good to be true, because the rate increased to $100.00.  Consumers of Las Vegas hotel buffets would interpret the new $100 price as a 33.3% rate increase.  The hotel and their sponsored researchers would cast about for ways to explain that the “value proposition” of the buffet “experience” actually increased.  They determine that the average guest increased consumption of buffet items from 2 pounds to 3 pounds, despite the imposition of a 90-minute time limit!

          Here’s the mathematical proof. At the $75 price point the per pound rate of consumption amounted to $37.50 (75 divided by 2).  Despite the $25 rate increase, a 3 pound rate of consumption reduces the per pound rate to $33.33 (100 divided by 3). Apparently, the buffet deal got better, because the attributed measure of consumer welfare increased, despite the price hike.

          Such a deal.

          If wireless consumers increase their network consumption sufficiently, the Wall Street Journal Editorial Board and others can see this as proof positive that the market is robust, competitive, innovative, increasing investment, hiring more employees, and making every subscriber fat and happy.

         

 

 

 

 

 

 

 

         

The Inconvenient Truth About Wireless Network Resiliency

          Rarely does a week go by without a news report of a wireless network outage.  Just now, the lack of wireless access in Western North Carolina adds insults to the injuries from massive rainfall generated by Hurricane Helene, despite being 400 miles from initial landfall and diminished in classification to a tropical depression. See, e.g, https://www.citizen-times.com/story/news/2024/09/29/cell-power-outage-north-carolina-helene-att-verizon-tmobile/75441408007/.

          We reluctantly expect that it will take days or weeks for electric power restoration to millions of subscribers after an earthquake, wildfire, or other natural disaster.  Ironically, the vulnerability of wireless networks exceeds that of the electric power grid, even as most wireless subscribers appear surprised and angry that their handsets do not work.  It may take weeks before complete wireless service is restored, even in the city of Asheville, N.C.  Until then, access will remain spotty, with islands of connectivity, based on which individual tower sites regain electric access.

          “Can you hear me now” has a new meaning in the storm ravaged south.  The weak link is the vulnerability of tower sites to power cuts, coupled with a quite limited span of time during which on site backup power generation can support “emergency service.”  Just as wireless subscribers cannot charge their handsets when the power grid fails, carriers equip tower sites with a limited amount of diesel fuel to power on-site electric generators.

          Outside of urban and suburban locales, cell towers typically are located on high ground and tall towers in remote places.  Wireless carriers often had to secure a dedicated wire link to the power grid.  If that link gets cut, there is no backup for access.  Even if the link itself did not fail, the interconnection with the electrical grid might offer nothing due to outages in that network.

          Every time I experience a wireless outage, I recall how my wireline connection rarely failed.  The telephone network was self-powered, originating at facilities impervious to many harms.  Much of the wireline telephone network travels underground in urban and suburban locales offering greater reliability.  Additionally, that network has built in resiliency and redundant routing.

          I do not long for a return to tethered phone service.  But I offer this reminder that with technological innovations there are tradeoffs that reduce the much touted enhanced value proposition.

The Frequently Attempted, But Rarely Successful Identification of Causation

           First, thanks to anyone who sees a daunting title like this one and nevertheless reads on. I want to discuss whether and how researchers can correctly isolate variables and determine how impactful they are on consumers, competition, and the marketplace.

           For example, former FCC Chairman Ajit Pai and others claimed in that imposing network neutrality obligations on Internet access providers created a substantial, unassailable adverse effect on carrier investment in infrastructure:

           “So what happened after the Commission adopted Title II? Sure enough, infrastructure investment declined. Among our nation’s 12 largest Internet service providers, domestic broadband capital expenditures decreased by 5.6% percent, or $3.6 billion, between 2014 and 2016, the first two years of the Title II era. This decline is extremely unusual. It is the first time that such investment has declined outside of a recession in the Internet era.” Remarks of FCC Chairman Ajit Pai at the Newseum, “The Future Of Internet Freedom” (Washington, D.C, April 26, 2017); https://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0426/DOC-344590A1.pdf.

           After relentless repetition of this assertion, it became gospel truth and expanded to become a given that a single major regulatory initiative, by itself, can trigger multi-billion dollar reductions in carrier capital expenditures.

           Never mind that this isolation of a single causal (so-called dependent) variable simplifies a quite complex issue about the many factors directly impacting a carrier’s decision to invest in plant, that may take years to recover, if at all.  Politicians and sponsored researchers like to remove complexity and identify a single cause for all types of ills, particularly ones that possibly constrain profitability of important benefactors, requiring them to work harder. 

           Regulators were presented with “proof” that their work had harmed consumers and the public interest.  Publications, like the Wall Street Journal, showcase the research followed by a strongly worded editorial castigating the FCC for its poor work product.

           Currently, another variable isolation process is underway, this time to prove that mergers and acquisitions enhance consumer welfare and promote competition.  Dr. Tom Hazlett, Hugh H. Macaulay Endowed Professor of Economics, Clemson University, and Dr. Robert Crandall, Senior Fellow, Technology Policy Institute, have written a comprehensive paper concluding that TMobile’s $26 billion acquisition of Sprint in 2020 did not trigger a cascade of anticompetitive outcomes, but in fact achieved great things. See https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4736059 [hereinafter cited as Hazlett and Crandall 2024 Paper].

          The paper supports the premise that reducing the number of U.S. facilities-based wireless carriers from 4 to 3 did not result in a variety of terrible outcomes, predicted by the Justice Department, many state Attorneys General, and yours truly.

          In another blog entry, I may attempt to identify questionable assertions made in the paper which I suspect will get much promotion given the stature of the authors, the persuasive nature of the paper, and the ongoing campaign to shut down any initiative at the Federal Trade Commission and elsewhere to become more aggressive antitrust law enforcers.

          Right now, I would like to identify a curious and probably unanticipated result of the paper: two eminent researchers have provided ample evidence that U.S. wireless carriers always have made the necessary investments in plant to stay competitive, regardless of whether one or more regulatory initiatives might make cost recovery more difficult:

“Increases in total bandwidth and network investment accelerated in the post-merger period. These measured trends – each requiring costly actions by the competing mobile service carriers -- are the reverse of what would occur in the “cozy oligopoly” scenario predicted by opponents of the transaction.” Hazlett and Crandall 2024 Paper at p. 26.

           Simply put, wireless carriers capex invest decision are driven largely by technology cycles, whether a carrier has to invest in next generation network plant and bid billions of dollars for more spectrum to accommodate growing bandwidth demand, or not.  Wireless carrier capex has grown even after the election of President Biden and the resulting Democratic majority of FCC Commissioners starting in January 2021.

           Wireless carriers made extraordinarily high capital investments during the upcycle rollout of 5G technology, despite Covid 19 reductions in revenues and stock values, and temporary declines in average revenue per user. If Chairman Pai was correct, wouldn’t it follow that the carriers would have conserved capital during times when marketplace conditions were pointing to delayed or possibly nonrecoverable capital investment?

           Can we at least agree that there are many factors that determine marketplace outcomes? It appears quite unlikely that one event, no matter how profound, can singularly alter market-driven behavior.

Increasingly Unmeasurable Consumer Welfare When Governments Market Meddle

          Currently, both U.S. presidential candidates tout the benefits of having government intervene in commercial markets.  Former President Trump wants to impose tariffs, up to 20%, on foreign goods deemed below cost, so-called predatory pricing and dumping.  Vice President Harris wants price caps on food to foreclose gouging.

           I am skeptical whenever governments try to manage aspects of a market economy even with noble intentions, such as remedying so-called market failures.  Markets rarely fail.  Consumers and elected officials do not like certain market outcomes and unanticipated manipulations. Consumer/voter sentiment considers a market outcome wrong, unfair, or distorted and candidates for elective office better pay attention and “fight” to make thing right.

           Former President Trump wants to level the competitive playing field in a variety of markets, such as steel, solar panels, clothing, and electric vehicles, by imposing a surcharge he asserts will have to be paid by exporting companies that have achieved a lower cost of doing business advance thanks to government subsidies, cheaper labor, and other distortions. Vice President Harris wants to punish greedy corporations that have achieved high profit margins, no longer justified by higher costs and lower demand occurring during the Covid pandemic.

           Curiously, there is little analysis of what constitutes a government-imposed market intervention that can actually remedy a prior intervention (by another government) that has distorted the marketplace and created new winners and losers.  Price dumping companies acquire market share abroad, based on a price discount made possible by a government benefactor. Losers include U.S. companies without access to a government subsidy and their employees who might lose a well-paying job, and opportunity to realize the American Dream.

           Markets get distorted and lots of stakeholders have both legitimate and opportunistic reasons to complain and “vote their pocketbook.” Anyone unemployed, or no longer able to operate a profitable business, can blame imports and the arrival of illegal aliens willing to work for less pay. Anyone looking at the rising cost of food might believe corporations are gouging, despite the economic gospel that above cost pricing encouraging market entry and enhanced competition.

           It looks like there are lots of fallacies, false assumptions, and wishful thinking in play.  I have devoted a career trying to find the truth in telecommunications markets.  What enormous, distorted reality I have seen. I especially loath the gospel truth that all mergers and acquisitions “enhance competition and consumer welfare,” No one seems obligated by courts and the court of public opinion to explain how the marketplace improves.

           The Chicago School advocates point to lower prices, but often one cannot determine actual cost of doing business.  For example, how can one determine the actual cost of providing wireless broadband, when carriers bundle, “at no additional charge” streaming video.  For an industry with very high initial sunk costs, the cost of providing an additional unit of service approaches zero. Accordingly, consumers have no clue whether an attentional text message is properly priced at 5 cents by a reseller, but bundled in with unlimited voice and data.

           If an economic assertion is touted long enough and loud enough by credible speakers, then it becomes true no matter how illogical and bogus.

           For example, what happens when a market consolidation does not trigger market entry and the assumed increase in competition? In telecommunications there are extremely high barriers to market entry in light of the high sunk investment costs and regulatory decisions that often create a scarcity in a mission critical component such as radio spectrum.

           The Chicago School doctrine that mergers can enhance consumer welfare is based on the premise that a concentrated market will not result in higher prices.  But what is the correct price in a concentrated market?  Vice President Harris has generated much pushback, if not contempt, for her foolish economic thinking. Why have Chicago School mandarins avoided similar disdain when new market entry does not occur, prices exceed any measure of ongoing inflation, and there is ample proof that competitive markets in other countries offer consumers a clearly better value proposition?

           Right now, voters are told that tariffs will not raise product costs, governments can identify and sanction price gouging, and mergers are a wonderful event for consumers.

           Do these gospel truths make sense to you?

 

         

The Role of Chronic Radio Interoperability Impediments in the Butler, PA Assassination Attempt

  There are many inconvenient truths about radio spectrum sharing and transceiver interoperability that require full ventilation and resolution. Spectrum users want exclusive access and—news flash—they do not like to share!   

          Campaign events, like the Trump Bulter, PA rally, require short notice, forced cooperation between and among federal, state, and local law enforcement officers, as well as a variety of other government agencies. The radios used by onsite Secret Service and law enforcement officers operate on different channels requiring ad hoc adjustments to achieve interoperability.  Software can satisfy this mission critical requirement, but there must be an unconditional commitment to program all radios to operate on all frequencies available for use at any upcoming event.  

          While government agencies have exclusive access to more than half of all usable radio frequencies, bandwidth becomes scarce, because of the insistence on exclusivity.  Until quite recently, federal government agencies launched single user satellites, even though they could save billions of dollars and access more capacity by negotiating a public private partnership.  Innovations in spectrum sharing make it possible to share satellites and frequencies without interference.  

          But no one likes to share. It’s human nature, not technology triggering the interoperability impasse that almost killed Donald Trump.  

          Short notice, one-time events, like a campaign rally, all but guarantee that on site personnel will have transceivers that transmit and receive different frequencies.  The exclusive bandwidth allocation requires the use of devices that can be reprogrammed to use a common set of channels.  This means on-site personnel may need to use a temporary device about which they may lack full understanding on its operation. Of course, there has to be funding available for temporary deployment of these expensive, “frequency agile” handsets.  

          Spectrum interoperability is not rocket science.  Throughout the world, cellphone handsets operate on different frequencies, using incompatible operating formats.  Commercial necessity and consumer friendly regulations have achieved interoperability, including the ability of subscribers to keep their existing telephone number when changing service providers. Wireless subscribers can “roam” throughout the world using the same handset they use at home.  

          Interoperability requires ongoing commitment to pay attention to spectrum incompatibility issues.  It appears that Secret Service officials got too comfortable with their tried-and-true procedures that may not have given spectrum problems a priority.  Additionally, we should not ignore the possibility that turf concerns, envy, and resentment might surface when the feds “parachute in” and take charge.  

          Interoperability requires conscientious cooperation, despite the inclination to push back.

Maverick Capitulation: Why TMobile and Southwest Airlines Abandoned Their Core Values

     Once upon a time, TMobile prided itself as the “uncarrier” wireless company.  After acquiring Sprint, it quickly abandoned a strong commitment to innovate and enhance its value proposition.  See https://telefrieden.blogspot.com/2018/06/life-in-antitrust-wonderland-suspension.html; https://telefrieden.blogspot.com/2019/11/more-overstatements-about-lovefest.html.

          TMobile quickly realized that it did not have to spend sleepless afternoons competing with AT&T and Verizon.  The market had become so concentrated that TMobile could increase their profit margin through what antitrust experts call conscious parallelism: a go along, get along, strategy that comes close to collusion. Now, little differentiates the three national carriers aside from what “free” video streaming they offer high margin subscribers.

        Southwest Airlines, perhaps reluctantly, has followed the T Mobile strategy.  For many ears, the airline differentiated itself from the other large, legacy carriers, by offering lower fares, open seating without additional charge, and free carriage of two bags.  Eventually Southwest realized it did not have to offer the lowest rates for every route.  Recently, it announced the cancellation of open seating, disingenuously characterizing the decision as a revenue neutral response to consumer demand. See https://www.cnn.com/2024/07/26/business/southwest-boarding-history/index.html.

       Does anyone really believe Southwest will not monetize seat access just like the other carriers?  Southwest realized that it could eliminate this perk and convert seat access into a new profit center, just like the other airlines.  Why not make a bundle on decoupling air carriage from where a passenger sits.

         It is not rocket science to detect an obvious outcome: when markets concentrate, through mergers, acquisitions, barriers to market entry, and lax antitrust enforcement, the surviving businesses have little incentive to reduce rates and enhance the customer experience.  

          Because consumers have limited choices in airlines and wireless carriers, we cannot vote with our pocketbooks and take our business elsewhere when we suffer from bad—vary bad—customer care. 

          TMobile is not the fearless, iconoclastic uncarrier anymore and neither is Southwest. 

 

              

The We Don’t Want to Pay for Universal Telecommunications Access Litigants Finally Hit Paydirt

           For several years now, a well-funded litigation group has sought a federal appellate court decision deeming unconstitutional congressional legislation directing the FCC to establish a subsidy mechanism to achieve affordable and ubiquitous access to telecommunications and broadband.  In three appellate court districts, the litigants filed the same claims and lost. 

         Even a panel in the nation’s most conservative district, failed to buy the argument that the decades long FCC-created subsidy mechanism constituted a tax, made worse by the Commission’s delegation of administrative duties to a private company.

        The litigants finally hit paydirt in an enbanc appeal to the Fifth Circuit Court of Appeals that ruled in their favor on a 9-7 vote.  See https://www.law360.com/articles/1861779/attachments/0. The litigants finally have a conflict in appellate court rulings that eventually will result in a Supreme Court appeal and the opportunity for the conservative majority there to issue yet another order framed as rightsizing the administrative state.

        The litigants ostensibly expressed concerns about constitutional rights, economic freedom, what constitutes a tax, how specific a congressional delegation of authority has to be, and the extent to which the FCC could lawfully delegate administration of the universal service program to a company.  These arguments are creative rationales to support a basic mission: to find a way for a court to eliminate an increasingly expensive subsidy burden flowing from telecommunications carriers to qualifying subscribers based on their income. Reduced to its basic premise the litigation is funded by stakeholders who do not want to pay anything to support affordable Internet for everyone, including all those Republican voters in rural America.

           Apparently jettisoning a successful, albeit expensive, subsidy program should be shut down as a unfair, and apparently unnecessary gravy train for undeserving beneficiaries, many of which happen to live in rural Red States!

           Ever since the onset of telephone service telephone companies, the FCC, and even Congress have supported a universal service mission.  For decades, no one objected to the basic premise that society benefits when as many people as possible have access to affordable telecommunications.  In light of how right-wing conservatives currently rail against universal service, historically sparsely populated Red, Republican states receive the largest share of universal service funding.  Now that universal surface funding has substantially increased to support broadband access, the right-wing rails against so-called Obama Phones and unconstitutional taxation.

           The 5^th Circuit En Banc decision reeks of partisan, doctrinal overreach.  The majority, emboldened by recent Supreme Court decisions to eliminate reliance on regulatory agency expertise, blows up a subsidy mechanism that has significantly achieved progress, and funneled billions of dollars into the coffers of telephone companies.

           The ultimate irony from this misguided mission will be a massive increase in employment at the FCC that no longer can off load administrative duties to a separate company.  Telephone companies quite likely will regret losing a generous subsidy and I expect them to lobby for a resurrection of the program, with even more explicit, unambiguous language now required by the Supreme Court.

 

 

An Epidemic of Overreach at the Supreme Court, FCC and Beyond

           Recent precedent overturning decisions by the Supreme Court prompted thoughts about the human proclivity to overreach when assuming—correctly or not—the opportunity and divine duty to act. I am certain the conversative majority at the Court thinks they should exploit their numbers to the max, having toiled in the vineyards for so many years as a minority voice of reason.

           It seems almost a foregone conclusion that an unfortunate and harmful sequence of increasingly unwise and ill-conceived actions start when an individual or group perceives an opportunity to overplay an advantage that might be a long time coming.

           In quick succession, the Supreme Court conservative wing has checked off a longstanding wish list. Surely there is strength in numbers and reinforcing validation. Having achieved longstanding goals, the Court conservatives now expand their list of attainable ambitions in an ever more aggressive and risky selection of outcomes previously considered both unattainable and unlawful.

           The possibility exists that overreach may reach an endpoint and pushback. Overconfidence morphs into hubris, inflexibility, results-driven decision making, sanctimoniousness, and arrogance.  Having reversed Roe v. Wade, why not press onward and outlaw the decades-long use of medications that terminate early pregnancies. Why stop there? How about outlawing contraception? Might there be a way to execute the religious view that in vitro pregnancies, supported by federally approved fertility enhancing medications, can be judicially deemed unlawful? While they are at it, might the end point be a complete prohibition on any sort of pregnancy termination?

           I hope pushback eventually reaches a critical mass, when overreach, of any sort and political basis, has become unpopular, unlawful, and based on assumptions and personal views rather than facts. 

           Let’s consider overreach at the FCC by Democratic and Republican majorities.  A Democratic majority FCC can engage in mission creep, sometimes the product of Chevon Doctrine deference to agency expertise.  A Republican majority might interpret a statute as authorizing its result-driven determination that current market conditions justify deregulation and industry self-regulation.

           A humble judiciary, not motivated by doctrine, politics, and personal bias, might not second guess the FCC’s interpretation of an ambiguous law. Often this makes sense, because a hands-on, close understanding of technology and market change trumps insistence on narrow, historical extrapolation.  For example, a reviewing court should uphold an FCC expansion of its regulatory wingspan to include fiber optic cable, even though the Communications Act of 1934 specifies jurisdiction only for “wire and radio.”  See https://telefrieden.blogspot.com/2024/06/who-needs-humility-when-you-have-6-3.html.

           Democratic overreach might delay or reject deregulation based on a determination that self-regulation will harm consumers, promote market concentration, and stifle market entry by small ventures with a promising new business plan. Republicans might search for regulations they consider job killing, innovation stifling, and a threat to national security.

           I cannot understand how FCC Commissioners, of either party, can come up with a rationale for more or less regulation based on mere conjecture, not science, statistics, and facts.

           Republicans and their sponsored researchers spoke with absolute certainty that network neutrality regulation reduces infrastructure spending by wireless carriers.  These Commissioners ignored whether the carriers had to invest in next generation plant, or having previously done so, they could reduce capital expenditures for a while. If network neutrality had such a stifling effect on plant investment, what evidence shows a significant increase in capex now that network neutrality rules have evaporated?

           Democrats and their sponsored researchers also speak with absolute certainty about the benefits of network neutrality rules. I think they overreached with some unnecessary safeguards that could harm broadband subscribers rather than protect them from unlawful carrier behavior.  I consider some types of so-called paid prioritization potentially desirable and beneficial to some consumers without constituting unlawful discrimination. 

           Might some video streaming subscribers want “better than best efforts” routing of mission critical bits?  How about access to video content at the highest bit rate a carrier can deliver instead of an industrywide (collusive?) decision to throttle wireless video streams to “CD quality”? If carriers can lawfully package service tiers on bitrate and data volume, why would any FCC administration permit deliberate service degradation?

          Bottom line: overreach occurs everywhere often with readily identifiable harms.

Who Needs Humility When you have a 6-3 Advantage?

           Yet again, the Supreme Court conservative majority overreaches in a decision that probably harms their benefactors who think disqualifying regulatory agency expertise will save them billions.  In Loper Bright Enterprises Et Al. V. Raimondo, https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf the Court majority reversed a 1984 precedent (Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984); https://supreme.justia.com/cases/federal/us/467/837/) that requires judicial deference to reasonable expert regulatory agency interpretation of ambiguous statutes.

           Judges surely have the jurisprudential skills to know when a law is ambiguous and when a regulatory agency acts arbitrarily, ignores evidence, exceeds statutory authority, misreads laws, etc.  But these same judges surely have no basis to substitute their inexpert assessment of technology and science.  From now on, courts can second guess just about anything a regulatory agency does that lacks a specific statutory mandate.

           The corporate underwriters of litigation usually accrue triple digit returns on their investments in lawyers and lobbyists who peck away at costly regulatory compliance duties.  Not in this case. The winning litigants think they have persuaded the Court to “rightsize” the deep, regulatory state.  In reality, they have funded a new legal foundation empowering non-expert judges to shut down even reasonable statutory interpretation by regulatory agencies who regularly have to confront and resolve new cases, controversies, conflicts, public interest challenges, etc.

           Fast evolving technologies and market conditions usually result in regulatory lag that might benefit some corporations from incurring higher costs once the rules change.  But a lag, and now a prohibition, can just a easily cost corporations billions in terms of uncertainty, higher risk, more conflicts and disputes, etc.

           I cannot understand how corporate litigation managers think that foreclosing regulatory agency assessment and response to changed circumstances will save them money.  And yes, this litigation is all about money even as it is framed as belated and proper realignment of the relative powers in the three branches of government.

           Let’s consider what the Federal Communications Commission will not be able to do unless and until Congress amends or enacts new legislation to specify what must be done to regulate a new technology, resolve an emerging case or controversy, right a wrong not previously defined, etc.

           The Communications Act of 1934, https://transition.fcc.gov/Reports/1934new.pdf  specifies the FCC’s clear statutory authority. For example, Congress explicitly mandated FCC regulatory oversight of “wire and radio”: “For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges . . ..” 47 U.S.C. §151; https://www.law.cornell.edu/uscode/text/47/151.

           It appears that the new Loper Bright Enterprises standard would permit a judge to question whether and how the FCC can regulate anything that does not fit within the meaning of wire and radio when Congress used these terms in 1934.  Bear in mind that Congress often does not define all of the terms it uses in a law, nor does it get around to updating a law to reflect changed circumstances. 

           Apparently, both the FCC and reviewing courts must interpret and apply the meaning of wire as originally used in the organic law creating the FCC, unless and until Congress provides a new definition.

           Does a 2024 judicial interpretation of wire limit its meaning to a copper medium for conducting signals used in communications? If so, do subsequent media used for signal transmission, but not comprised of metal, fit within the definition of wire?  What about fiber optic lines?  They transmit signals, of a sort, but no one considers them a type of wire. They are made of glass, not metal!

           Fiber optic lines might fit within the definition of cable, but is a cable a reasonable functional equivalent of wire?  If so, why didn’t Congress specify both wire and cable? Better yet, why didn’t Congress update the Communications Act of 1934 to recognize FCC jurisdiction over fiber optic lines as a new functional equivalent to metal wires?

           In other words, how can an expert regulatory agency comply with its statutory mandates, if it cannot expand or compress its oversight based on newly occurring circumstance?  Just now, I am researching the growing risk of collisions of satellites and space stations with space debris.  The possibility exists for the Loper Bright Enterprises standard to invalidate any FCC effort to establish space debris mitigation requirements by regulated satellite operators. There certainly is nothing in the Communications Act that specifies satellite carrier affirmative duties to mitigate space debris.

           The FCC probably no longer can fine a carrier for noncompliance of mitigation requirements as it recently did when Dish Network failed to remove from orbit a direct broadcast satellite reaching end of life.  DISH Operating L.L.C., Order, DA 23-888 (Oct. 2, 2023); https://docs.fcc.gov/public/attachments/DA-23-888A1.docx.

           Bottom line: Even a serious-minded Congress, emphasizing law over theatrics, cannot “future proof” a law to respond to all changed circumstances.  The Supreme Court conservative majority now expects Congress to correct all ambiguities and deficiencies in existing laws. 

           Good luck with that America.

Emerging Private Lawsuits for Damages from Falling Space Debris

   Emerging Private Lawsuits for Damages from Falling Space Debris

            When authorizing the dumping of spent nickel-hydrogen batteries from the International Space (https://images.nasa.gov/details/iss064e041512) NASA’s managers expected all of the 5800 pounds to vaporize in a few years, after picking up speed and encountering atmospheric friction before landfall (https://www.npr.org/2024/06/23/nx-s1-5016923/space-debris-nasa-florida-home-lawsuit). Surprisingly, 1.6 pounds of the space debris survived the 260 mile high speed fall, back to earth.  The metal object damaged the roof of a private residence in Naples, Florida (https://www.clickorlando.com/news/local/2024/06/23/florida-family-sues-nasa-after-piece-of-space-station-crashed-through-homes-roof/).  Having no likely recourse to recover repair costs from a standard insurance policy, the homeowners lawyered up to file a claim in federal court (https://www.cshlaw.com/news/mica-nguyen-worthy-submits-first-of-its-kind-claim-to-nasa-seeking-recovery-from-damages-sustained-from-space-debris/).

             To its credit, NASA acknowledged having owned and jettisoned the material, thereby removing one of the litigation defense strategies it could have used to deny any financial responsibility (https://blogs.nasa.gov/spacestation/2024/04/15/nasa-completes-analysis-of-recovered-space-object/).  However, NASA will have plenty of other legal defenses if it opts not to pay a small sum to make the problem go away.

             Space debris, usually weighing far more than a few pounds, often arrives partially intact. Because about 71% of earth is salt water, (https://education.nationalgeographic.org/resource/ocean/), the odds favor “no harm, no foul.” In November, 2022, a 23-ton Chinese used rocket launch stage fell harmlessly into the Pacific Ocean (See China Lucks Out Again as Out-of-Control Rocket Booster Falls in the Pacific; https://www.nytimes.com/2022/11/04/science/china-rocket-debris.html).

             The sharp increase in space launches, particularly ones installing satellites in low earth orbit, 200-1200 miles above, sharply increases the odds for future collisions and space debris landfalls.  While global space treaties establish a right of recovery for damages caused in space, no enforcement mechanism exists.  Additionally, the treaties do not recognize private parties both in terms of having responsibility for causing harm and having a right to seek damages when harmed by a space object.  NASA also might argue the space treaties have no applicability for domestic disputes when both parties reside in the same country.

             Even as it removes the evidentiary question of who and what caused the damage, NASA may assert that a private, U.S. citizen has no legal basis (standing) to recover the cost of the roof repair.  Sovereign immunity insulates government agencies from lawsuits.  NASA might even claim that natural (e.g., meteorites) and man-made, space debris regularly fall to earth and private property owners have to bear the risk—a sort of force majeure.  Bad things happen through no fault of either party.

             Although I doubt it, this first of its kind private litigation may establish the basis for private recovery by a U.S. citizen for harm occurring domestically.  Congress may enact legislation requiring insurance by private ventures and specify a conditional private right of legal action against federal government agencies, such as NASA.  On the other hand, states with growing space commerce, such as space tourism, may explicitly exempt or cap liability, as recently done in Florida (https://www.mcgill.ca/iasl/article/florida-moves-limit-spaceflight-liability).

             I think NASA management will try to prevent this case from establishing a precedent.  It can do this by offering compensation outside the court room in exchange for non-disclosure.

 

           

 

                     

Left Wing “Gotcha Journalism” Is Not OK Either

             A documentary filmmaker and self-described “advocacy journalist,” posing as a Catholic conservative, secretly recorded the private thoughts of Supreme Court Chief Justice Roberts and Associate Justice Alito, as well as the wife of Judge Alito at a private reception. See https://www.nytimes.com/2024/06/10/us/politics/supreme-court-alito.html.

             The off the record comments are quite striking: Judge Alito truly does not believe in the Constitutional, Originalist, and Jeffersonian principle that Church and State must be separate.  He appears to favor jurisprudence based on Christian values replacing the rule of law. His wife seemed ready to take on anyone who rejects her flag waving and beliefs. See https://www.nytimes.com/2024/06/10/us/politics/alito-pride-flag.html.

             I do not believe such privacy invasions constitute any sort of public service and ethical journalism.  It does not matter if a right-wing agent provocateur captures unguarded opinions of a prolife advocate, or a left wing fake journalist encourages senior public figures to speak candidly.

             Off the record, whether by explicit instructions, or fundamental fairness, means there can be no record or disclosure. No if, ands, or buts.

             On the other hand, it’s fair game to report what a public figure drops his guard and expresses heart felt, off the wall opinions.  Supreme Court nominee Brett Kavanaugh’s claimed that the allegations of sexual misconduct against him were being carried out as part of vast left-wing conspiracy:

 “This whole two-week effort has been a calculated and orchestrated political hit,” he said, “fueled with apparent pent-up anger about President Trump and the 2016 election, fear that has been unfairly stoked about my judicial record, revenge on behalf of the Clintons and millions of dollars in money from outside left-wing opposition groups.” https://www.nytimes.com/2018/09/28/us/politics/kavanaugh-testimony-supreme-court.html 

            Currently, anonymous donors to right wing Political Action Committees, have funded nonstop, snarky advertisements attacking resident Biden as dishonest or demented. That speech narrowly fits within First Amendment protection. When The Wall Street Journal, Fox, and Sinclair add their considerable voice to the dementia claim, I wonder if vast right-wing conspiracy has highjacked the First Amendment.

Even the News Side of The Wall Street Journal Embraces Partisanship

The Wall Street Journal claims to have bright line separation between its partisan editorial side and its straight shooting news operation.  Don't buy it!

In a biased hit job, the Journal wants every voter to believe its conclusion that President Biden's mental acuity has declined significantly.  See Journal Hit Job Sinclair and Fox have repackaged the fake news account into a fake broadcast news account of its own. See, e.g.,  Hit Piece Repackaged

I have relied on the Journal to provide fair and unbiased journalism separate from its partisan editorials.  The Biden piece does not pass muster on fairness, because the reporters failed to include comments from Democrat interviewees that dispute the basic premise of the piece. See, e.g., So Much for Unbiased Reporting

Apparently, it's quite okay for robust, newly remarried, 93 year old Rupert Murdoch to stay involved in Fox management, but a younger Joe Biden is quite demented and unqualified to do anything coherent. So concludes a quite powerful assemblage of media outlets purporting to be fair and balanced.

I’m Not Buying the Plausible Deniability Gambit of AT&T Wireless

             AT&T Wireless has appealed the FCC’s $57 million fine for monetizing up to the minute subscriber location data that the company had no legal right to release, absent “opt in authorization from subscribers https://www.law360.com/articles/1835513/attachments/0.  The company’s primary defense relies on the deliberate strategy of ignoring the actual uses of the data by third parties of the two location information aggregators with which it sold the data.

             If even a few of the 300+ million wireless subscribers in the U.S. (see https://www.ctia.org/the-wireless-industry/infographics-library; https://datareportal.com/reports/digital-2024-united-states-of-america) fully understand how extensive their location data has been exploited, the court of public opinion would lash out vigorously against the wireless carriers.  This probably will not happen, because no one, other than the carriers and their information broker customers, will know the total revenues accrued and the extensiveness of the data exploitation.   

            Consider the efficacy of non-disclosure agreements, the lack of full evidence gathering by the FCC and reviewing courts, and attorney client privileges that block disclosure of how extensive the data selling was. AT&T is banking on the premise that because no one will ever know the breadth and value of the location data, no one can refute the company’s assertion that the FCC has overreacted to one minor incident that the company resolved years ago. AT&T wants us to believe that only one bad actor existed, the one identified by reporters of New York Times.  See  https://www.nytimes.com/interactive/2019/12/19/opinion/location-tracking-cell-phone.html.  

            Arguably (in its most expansive context), we should accept AT&T’s premise that everybody else, including the massive number of third-party data location brokers and users, absolutely complied with any and all non-disclosure and anonymization requirements.  

            AT&T deliberately structured its disclosure of subscriber locations in a manner that insulated the company from knowing how the data was used by customers of the “Location-Based Services” the company provided two location information aggregators: LocationSmart and Zumigo.  See https://docs.fcc.gov/public/attachments/FCC-24-40A1.pdf. In legal terms, AT&T had direct, “privity of contract” with only two commercial ventures.  AT&T had every reason to insulate itself from knowing what its direct contractors did with the data, how much money they made, and how many location disclosure deals the two ventures cut with third parties.  

            No one should buy AT&T’s plausible deniability rationale that it’s possible that the thousands of the information aggregator clients did nothing wrong.

About That Universal Service “Tax”

            Universal service opponents like to claim in real courts, and the court of public opinion, that the surcharge imposed by carriers represents an unlawful tax.

             Consumers’ Research, the advocacy group seeking to have universal service funding deemed unconstitutional, wants several courts to endorse its view that the “revenues raised for the Universal Service Fund pursuant to 47 U.S.C. § 254 are taxes and therefore Congress’s standardless delegation to the FCC of authority to raise and spend nearly unlimited taxes violates Article I, section 8 of the U.S. Constitution.” https://storage.courtlistener.com/recap/gov.uscourts.ca5.215996/gov.uscourts.ca5.215996.1.1.pdf?ref=broadbandbreakfast.com at p. 4.

             When asked whether universal service funding constitutes a tax, former FCC Commissioner Harold Furchtgott-Roth stated:  “I think the way it’s structured now it’s unambiguously a tax. It’s -- the people who pay in — and the statute’s very clear.” https://fedsoc.org/events/consumers-research-v-fcc-and-the-legality-of-the-universal-service-fund-contribution-regime.

             Several advocacy groups preach the gospel that Congress has no legal authority to create a universal service funding mechanism and in turn the FCC has no basis to establish policies and rules, nor can it delegate administrative responsibilities to the Universal Service Administrative Co.

             If, somehow, they never learned the distinction between a tax and a legislatively mandated charge, that carriers pass through in its entirety to subscribers, consider what a wireless reseller discloses in its terms of service:

             Surcharges

When imposed, unless prohibited by applicable law or agreement, you agree to pay all surcharges (“Surcharges”), which may include, but are not limited to: Federal Universal Service; various regulatory charges; Kroger Wireless administrative charges; gross receipts charges and certain other taxes imposed upon Kroger Wireless; or charges for the costs that we incur and pass along to you. Surcharges are not taxes, and we are not required to assess them by law. They are charges we choose to collect from you, are part of our rates, and are kept by us in whole or in part. The number and type of Surcharges will be provided and may vary depending upon the location of the transaction or the primary account address of the payment method or Device and can change over time. We determine the rate for these charges, and these amounts are subject to change as are the components used to calculate these amounts. https://www.krogerwireless.com/support/terms-and-conditions

             When creating contracts and tariffs, wireless service providers must play it straight.  Elsewhere it’s caveat emptor.

 

Thought Exercise on CPNI

             I recognize that many of my posts are technical, complex, and “inside baseball.”  However, the matter of wireless carrier disclosure of location information is really, really, important, and rather easy to understand.  

             For public safety, national security, emergency response, and a host of other issues, location data can save lives.  On the other hand, commercial exploitation of location data can kill people. 

             It does not take too much speculation to come up with scenarios where disclosure for compensation by commercial ventures can trigger catastrophe.  For every bail bond professional tracking of a client who failed to show up in court, there are scenarios where location information makes it far easier for stalking and worse.

             Here’s a thought exercise.  Can you come up with any scenario where a landline or wireless telephone company will reveal to you the name and address of a subscriber?  There are commercial ventures that can disclose home and business addresses associated with a telephone number.  But no telecommunications carrier has ever agreed to disclose either a fixed or mobile location of a subscriber upon a one off, anonymous request. Directory Assistance provided a telephone number if you identified a name and address.  The carriers even monetized unlisted numbers for subscribers who did not disclosure of such relatively benign information.

             What could entitle the wireless carriers to disclose such location data on a commercial, contractual basis?

             Is anyone else livid that their location data was commercialized and monetized for years?  Is anyone disgusted by assertions that the FCC has no legal basis to act?

How Much Did the U.S. Wireless Carriers “Earn” From “Location Information Aggregators”?

             The FCC lawfully fined U.S. facilities-based wireless carriers nearly $200 million for selling highly intrusive location data about subscribers without their “opt-in” consent.  See https://www.fcc.gov/document/fcc-fines-largest-wireless-carriers-sharing-location-data.

             In Section 222 of the Communications Act, Congress comprehensively specified how the carriers bore an affirmative duty of care not to disclose clearly defined Customer Proprietary Information (“CPNI”).  See https://www.law.cornell.edu/uscode/text/47/222. The Act explicitly required the FCC, and no other agency, to protect telecommunications consumers.

             The language in this section is quite unambiguous.  Congress surely answered the “major question” whether and how the FCC has jurisdiction to protect telecommunications service subscribers from the unconsented commercial exploitation of data about their immediate location.

             There is no basis for the carriers, or certain dissenting FCC Commissioners, to state that the Federal Trade Commission has exclusive jurisdiction over any and all consumer privacy issues.  See https://docs.fcc.gov/public/attachments/FCC-24-40A3.docx.  Wireless carriers need subscriber location information to route calls to consumers and to provide access to their networks.  Privacy surely can be invaded by unlawful disclosure, but the reason wireless carriers generate and process this information is a fundamental technological element in how they provide service to subscribers.

             There is no doubt that all the facilities-based carriers “monetized” this information, but we will never know how many millions they received, because the carriers would scream bloody murder that such information is “business confidential” and “proprietary.” I’ll bet the carriers received far more than the $200 million they have to forfeit.

             If you follow the logic for exonerating the wireless carriers, it is okay for the carriers to provide nearly instantaneous location information for compensation, because such disclosure does not constitute anything proprietary within the meaning of Section 222 of the Communications Act. The exonerators dug themselves an even deeper jurisprudential hole when they claim the FTC has exclusive jurisdiction to decide whether and how to sanction CPNI disclosures.

             Once upon a time both Democratic and Republican FCC Commissioners acted in a nonpartisan, unanimous manner to protect consumers. So did Congress when it enacted Section 222 and amended it on several occasions.

             Now we have apologists for truly egregious behavior by carriers who surely knew they were creating a lucrative, but illegal, new profit center.  It does not help that they mended their ways a few years ago.

Does the FCC Have a Safe Harbor to Deregulate Despite the 1994 MCI Case Precedent?

             The prior blog entry suggested that the Supreme Court would have to use a semantic sleight of hand to approve FCC deregulatory initiatives while vacating new or resurrected regulatory rules and requirements.  See https://telefrieden.blogspot.com/2024/04/does-supreme-court-conservative.html. On further review, I think there just might be a way to pull this blocked on one side, open on the other gambit.

             Despite all the speculation about pending foreclosure of regulatory agency discretion, there is a provision in the Telecommunications Act of 1996 that the Court might deem sufficiently clear to withstand the major question and ambiguity roadblocks: 47 U.S. Code § 160 - Competition in provision of telecommunications service.  See https://www.law.cornell.edu/uscode/text/47/160.

             This Section establishes three evaluative criteria for the FCC to use when considering a deregulatory proposal for Title II, telecommunications service providers:

 (1)       enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory;

(2)       enforcement of such regulation or provision is not necessary for the protection of consumers; and

(3)       forbearance from applying such provision or regulation is consistent with the public interest. 47 U.S.C. §160(a)(1)-(3).

             There’s a lot of wiggle room in the criteria for a pro marketplace-oriented FCC to abandon common carrier rules and regulations.  Despite all the conservative majority’s antipathy toward regulatory agency activism, Section 160 just might provide enough clarity to green light major deregulatory initiative.  

             No questions asked.

Does the Supreme Court Conservative Majority Want to Prevent Regulatory Agencies from Responding to Technological Innovation and Changed Circumstances?

             Despite ample and longstanding case precedent, the Supreme Court appears ready to prevent regulatory agencies from acting when a statutory mandate is ambiguous and outdated. 

The Court appears ready to prevent regulatory agencies from “changing its mind” about the proper scope of regulation, either to increase, or decrease oversight.

            The Court’s conservative super majority wants to reverse its Chevron Doctrine that conditionally supports judicial deference to the expertise resident in agencies such as the Federal Communications Commission.  See https://www.law.cornell.edu/wex/chevron_deference.  Additionally, the Court wants to deem off limits any issue that constitutes something so important that Congress must legislate. See West Virginia v. EPA, 142 S. Ct. 2587 (2022); https://law.stanford.edu/publications/testing-the-major-questions-doctrine/.

             This means that if Congress does not enact timely clarifications and updates to a law, regulatory agencies cannot “fill in the blanks.” If the FCC and other agencies cannot act, doesn’t this mean that they cannot establish new rules and regulations, but also they cannot deregulate, despite changed circumstances?

             Does it also foreclose actions by both Democratic and Republican majorities to alter a regulatory regime by changing what Communications Act Title applies? Having done so previously, the FCC recently restored the application of Title II telecommunications service, common carrier to Internet access. https://www.fcc.gov/document/promoting-fast-open-and-fair-internet, ¶153-186.

             I hope this Court will not attempt a textual analysis of original statutory intent to establish the basis only for regulatory agency abandonment (but not new, or renewed application) of a statutory mandate, absent congressional authorization.

             If the Court wants to endorse unilateral, unauthorized deregulation, then it will have to reverse another longstanding case precedent that prevented the FCC from removing telecommunications common carrier tariffing requirements in light of marketplace dynamics favoring more facilities-based competition and less regulation.  See MCI Telecommunications Corp. v. American Telephone & Telegraph Co., 512 U.S. 218 (1994); https://supreme.justia.com/cases/federal/us/512/218/.

             In a decision written by Justice Scalia, a far more principled Supreme Court in 1994 did not allow a Democratic majority FCC to “jump the gun” with a deregulatory initiative that contradicted a clear statutory mandate: “It is effectively the introduction of a whole new regime of regulation (or of free-market competition), which may well be a better regime but is not the one that Congress established.” 512 U.S. at 234.

             The Court properly decided that Congress had to act and it did so in a timely manner. Sadly, the current gridlocked congress has little likelihood of enacting essential statutory revisions. 

             Unless the Court comes up with a clever and undisciplined roadmap for unilateral deregulatory initiatives, while prohibiting new rules and regulations, agencies like the FCC will become powerless to make deregulatory, regulatory, or re-regulatory actions.

             Now that would be job killing, investment thwarting, and innovation stifling.