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the Supreme Court appears ready to prevent regulatory agencies from acting when a statutory mandate is ambiguous and outdated.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.

The Wall Street Journal Editorial Board's Faulty Memory

             You would think the Editorial Board of the Wall Street Journal would remember what it wrote about network neutrality. In its April 24th diatribe against network neutrality regulation,

https://www.wsj.com/articles/fcc-net-neutrality-jessica-rosenworcel-biden-administration-internet-b427c825?mod=opinion_feat1_editorials_pos1; the Board appears has forgotten how it spread the gospel that classifying Internet access as telecommunications service, subject to streamlined regulation, would stifle investment, innovation, and employment in the wireless industry. No 5G, no billion-dollar acquisitions, and nothing but stagnation in an industry otherwise considered quite dynamic and robust.

             The Editorial Board joined a large cast of characters, including former FCC Chairman Ajit Pai, and gobs of “coin-operated” sponsored researchers, in ignoring a basic tenant in high tech finance: Research and development, as well as capital expenditures in next generation service, trump any regulatory initiative, no matter how misguided.

             The Editorial Board also lost track of where U.S. wireless carriers operate along a technology curve in any given year.  High investment occurs when competitive necessity requires carriers to install next generation equipment, followed by far less investment once the new plant becomes operational.

             Wireless carriers cannot afford to punish overzealous regulators with skimpy investment at the onset of next generation service, nor do they overinvest simply because a more lenient and favorable regulatory environment exists, soon after a high point in new technology deployment.

             The Editorial Board also seems to have forgotten the initiatives by much loved fellow conservatives to require content neutrality by liberal and biased Internet Service Providers.  Some of the Journal’s best buddies urged Congress to mandate common carriage regulation of the Internet.

Can You Hear Me Now?

            Yet again, a significant wireless network outage has caught users unaware.  See https://www.nytimes.com/2024/02/22/business/att-outage.html; https://www.cnn.com/2024/02/22/tech/att-cell-service-outage/index.html. There’s an inverse relationship between one’s growing reliance on wireless networks and their reduced reliability compared to less elegant wireline technologies the carriers want to abandon.

            Our near exclusive reliance on wireless cellphone service increases the risk of both carrier responsible outages and a subscriber self-induced service disruptions.  These outcomes are an inconvenient truth: centrally managed, software driven networks regularly fail.  When they do so, emergency 911 service also fails.  On the consumer side, cellphone batteries typically need daily recharging.  If the electrical grid has an outage, cellphone batteries cannot get recharged.  Even standalone battery charging units also need recharging as they lose power over time.

            Once upon a time, telephone companies of the world championed “toll grade” sound quality, redundant, “self-healing” networks, and high quality of service.  They generated their own power with 99.9999+ percent reliability.  On the other hand, they did have financial incentives to “gold plate” networks, because doing so supported higher rates, more revenues, and larger profit margins.  Now, the incentives work the other way. Scrimping on maintenance enhances profits and market concentration makes it possible to avoid any major subscriber churn to another carrier perceived as offering more reliable service. 

            Today, some inconvenienced AT&T Wireless subscribers may get ticked off, but they have no recourse at the FCC, the court of public opinion, and the marketplace.  The FCC has no perceived upside in imposing quality of service minimum standards, outage reporting, refunds for service disruptions, truth in billing disclosures, etc. Such consumer protections would make the wireless carriers howl about overreach given how robustly competitive and self-regulating the wireless market operates.  The court of public opinion already loathes the wireless carriers, but having a oligopoly of three national carriers means they do not suffer when outages occur, providing poor customer care, and engaging in “consciously parallel” conduct such as collusion and price fixing.

            Does anyone truly believe a market share of 95% shared by three carriers forces sleepless afternoons competing and innovating?  That “free” video streaming service you get with a wireless subscription and the not free “on us” carrier handset has less value when you cannot use them.

            Carriers to customers: “Get a grip and deal with it. We will restore service as soon as we can.”

 

           

A Brief Primer on Anti-satellite Warfare Tactics

A Brief Primer on Anti-satellite Warfare Tactics

Satellites make it possible for governments to provide essential services, such as national defense, navigation, and weather forecasting.  Private ventures use satellites to offer highly desired services that include video program distribution, telecommunications, and Internet access. The Russian launch of a satellite, with nuclear power and the likely ability to disable satellites, underscores how satellites are quite vulnerable to both natural and manmade ruin. See https://www.nytimes.com/2024/02/14/us/politics/intelligence-russia-nuclear.html.

The Russian launch increases the risk that satellites can be disabled, immediately evaporating billions of dollars in value, while also adding to space debris that can collide with satellites, rendering them worthless.  Having a nuclear power source, extends the available time in space and probably the maneuverability of the satellite.  This capability arguably violates a treaty-level Russian commitment to keep space nuclear-free. Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies, Article IV (1967); https://www.unoosa.org/oosa/en/ourwork/spacelaw/treaties/outerspacetreaty.html.

However, the U.N. document lacks any enforcement option and Russia surely will characterize its technology as a source of operational power and propulsion, not weaponry.  

Set out below, I explain how the sun and manmade anti-satellite techniques can annihilate satellites.  Despite global consensus to promote peaceful uses of outer space for the benefit of everyone, the stakes have increased that space will become “weaponized” of as a new theater of warfare See Rob Frieden, Dangers From Regulatory Vacuums in Outer, Inner, and Near Space (Nov. 2023); https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4628699; https://www.reachingcriticalwill.org/resources/fact-sheets/critical-issues/5448-outer-space; https://armscontrolcenter.org/fact-sheet-space-weapons/.

Natural Risks

Satellites are launched into various locations above earth where solar radiation can rise to a level that disrupts circuitry and orbital stability.  The earth’s gravitational force, pulls satellites downward.  Satellites need on-board propulsion to offset gravity, but such “station keeping” capability is limited by available fuel and power.  Because satellites cannot be repaired or refueled in orbit, components, like batteries, eventually fail.  Satellites in outer space, from about 60 to 22,300 miles above earth, typically have a useable life of 10 years.  Low earth orbiting satellites, closer in proximity to earth and smaller in size, have much shorter life expectancies.

Human Risks

While satellite technology has vastly improved, roughly one in three launches fail to insert space objects into proper orbit.  Leaky rocket boosters, design defects, weather conditions at launch, and other factors can render a massive investment of time, money, and effort worthless.  Even if a satellite reaches the proper location, components may fail prematurely resulting in diminished performance and early end of life.

The risk of costly calamities in space has risen at an alarming rate, because national governments understand the importance of space orbiting resources, for surveillance, communications, earth observation, and navigation.  China, India, Russia, and the United States have developed so-called anti-satellite technologies designed to disrupt or eradicate operational satellites. See https://aerospace.org/sites/default/files/2020-10/Gleason-Hays_SpaceWeapons_20201006_0.pdf. The techniques include earth-based and orbiting resources that can directly impact a nearby target or do so from a distance. Currently available options include missiles and other projectiles, as well as using radio, lasers, and software to disrupt the satellite’s ability to receive instructions and perform as designed.

Nations can render satellites worthless in ways that limit the damage solely to the satellite, by nudging it out of a stable orbit father outward into deep space, or downward toward earth at a trajectory resulting in complete vaporization.  Failing to execute either of these two strategies can result in the creation of thousands of intact space debris that can later collide with other satellites.

Space Treaty Obsolescence and Ineffectiveness

Just as the private and public opportunities increase using space to benefit everyone, a chronic lag in government oversight, consumer safeguards, and essential operational guardrails, has the potential to frustrate and possibly thwart progress and stability. The five Space Treaties, administered by the United Nations, see https://www.unoosa.org/oosa/index.html; has not foreclosed the growing risk of catastrophic space vehicle collisions, the proliferation of space debris that increase the odds for additional collisions, and the incentive and ability of some to weaponize space.

Unless the nations of the world quickly revise the treaties to clarify what is meant by peaceful uses of outer space, some space faring governments will exploit ambiguity with potentially disastrous consequences.

Lies, Damn Lies, and Selective Statistics About Our Great Wireless Marketplace Thanks to the TMobile Acquisition of Sprint

             In the February 13^th edition of the Wall Street Journal, Professor Thomas W. Hazlett offers a breathless endorsement of market concentration with the TMobile acquisition of Sprint his go to example.  See https://www.wsj.com/articles/t-mobile-proves-that-mergers-can-benefit-consumers-8fab2890.  Apparently, mergers and acquisitions benefit consumers, because they enhance competition and generate all sorts of positive outcomes that could not possibly have occurred, but for the reduction in the number of industry players.

            Professor Hazlett has cherry picked statistics to create the false impression that mergers are the primary trigger for all events enhancing consumer welfare.  Conveniently, he ignores the benefits accruing from technological innovation, maturing markets, and the likelihood that just about all of his evidence would have occurred even if TMobile had not acquired Sprint.

             Do not be fooled into suspending disbelief and ignoring common sense.  Companies merge, because senior management believes industrial consolidation will enhance shareholder value, generate bonuses, and make it less essential to work sleepless afternoons, reduce operating margins, and enhance the value proposition of the goods and service offered.

            Here’s a reality check: consider whether and how TMobile continues to serve as the wireless marketplace maverick keen on innovating and distinguishing itself from the clueless market leaders AT&T and Verizon.  The judge approving the $26.5 billion acquisition of Sprint shared Professor Hazlett’s enthusiasm that a bolstered TMobile would have even greater capabilities and incentives to acquire market share and trounce the bigger incumbents:

 

[I]t is highly unlikely that New TMobile executives, upon the company being reinforced  nearer in size and resources to AT&T and Verizon, would do a commercial about-face and instead pursue anticompetitive strategies. State of New York et al v. Deutsche Telekom AG et al, No. 1:2019cv05434 - Document 409 at 160-61 (S.D.N.Y. 2020). available at: https://cases.justia.com/federal/district-courts/new-york/nysdce/1:2019cv05434/517350/409/0.pdf?ts=1581513636 … [T]estimony and documentary evidence revealed . . . a company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition. Id. at 161

             Do you consider TMobile as operating with the competitive zeal anticipated by an approving court and attributed by Professor Hazlett?  Put another way, post-merger, what has TMobile offered to distinguish itself as the better of three options?

             TMobile has relaxed its maverick, competitive muscles making it possible for all three gigantic carriers to raise rates, well above the general inflation level.  TMobile matches, and in some instances, exceeds comparable options from AT&T and Verizon. https://www.lightreading.com/5g/t-mobile-s-premium-pricing-passes-at-t-verizon; https://ktla.com/news/money-smart/t-mobile-planning-to-move-customers-on-older-phone-plans-to-newer-ones/; https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. The three carriers have nearly identical rates and differentiate primarily on what “free” video streaming service they bundle and how clever they can confuse consumers into assuming “on us” means a free handset.

             There’s an inconvenient fact that U.S. wireless subscribers pay some of the highest rates globally. See, e.g., https://communitytechnetwork.org/blog/why-is-the-internet-more-expensive-in-the-usa-than-in-other-countries/; https://kushnickbruce.medium.com/at-ts-wireless-profits-are-outrageous-at-t-s-5g-wireless-prepaid-prices-are-obscene-compared-dc15c57926f; https://themarkup.org/2020/09/03/cost-speed-of-mobile-data-by-country; https://www.quora.com/Why-are-phone-plans-in-the-US-so-expensive-compared-to-other-countries-not-hate/.

             Statistics do show a long-term reduction in cost based on increasing minutes of use and data consumption, i.e., the per voice minute or per megabyte of data price has dropped precipitously.  As markets evolve and carriers accrue greater economies of scale, prices should decline.  However, the rate of decline in the U.S. pales in comparison to that occurring just about everywhere else.  

             Recently, all three U.S. wireless carriers have raised, not further reduced rates.  See, e.g., https://www.cnn.com/2023/03/06/tech/verizon-plan-price-increase/index.html. TMobile triggered major pushback when it sought to eliminate service tiers and force an “upgrade” to something significantly more expensive. https://www.fiercewireless.com/wireless/t-mobile-will-migrate-customers-higher-cost-plans.

             I can find nothing about the T-Mobile acquisition of Sprint proving how mergers can benefit consumers.

 

The Quickening Pace of Landline Retirement

Sooner rather than later, landline telephone service will completely transition to wireless and Internet-based calling, commonly referred to as Voice Over the Internet Protocol ("VoIP").  While the FCC, for over a decade, has precluded a “flash cut” service termination, I expect the timeline for copper wire service retirements to shorten. Last year, the FCC removed a federal statutory obligation for landline, copper service where “Plain Old Telephone Service” alternative service exists. See https://docs.fcc.gov/public/attachments/FCC-19-72A1_Rcd.pdf.     Recently, AT&T sought removal of its status as “Carrier of Last Resort” legally obligated to provide wireline phone service in California  See https://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M502/K977/502977267.PDF; and https://www.rcrcnet.org/cpuc-announces-public-hearings-att%E2%80%99s-request-discontinue-landline-service.

I terminated landline service with reservations that had kept my household wired for years. I miss the “toll quality” sound, ability to send faxes with ease, and having a standalone answering machine that readily shows inbound voicemails.  I can see how so-called Digital Immigrants might not want to ascend the learning curve on setting up wireless voicemail and programming smartphones to provide notification of calls to a virtual mailbox for messages.

The big problem, particularly for specific households like the elderly, and homes with fax machines, burglar alarms, health monitoring, is the added risks and burdens that consumers must bear.  Landlines use power provided by the telephone company, while wireless and VoIP require home-based power. Cellphones need daily recharging, or the use of portable battery packs.  VoIP calling requires modems and special terminals that may run out of backup battery power after a few hours.

The recent floods in California, Superstorm Sandy, hurricanes, tornados, earth quakes, volcanic eruptions etc. trigger days long power outages. Wireline phone service rarely fails

A few statistics worth noting about 30% of all U.S. households still have landline service, but most also have a wireless option. 75% of households with Seniors and people with certain medical conditions still rely on landline service.  Fewer than 5% of Digital Natives, i.e., people less than 25 years of age, have landline service.

I anticipate a faster pace of landline service closure requests to state Public Utility Commissions like that from AT&T in California.  Because landline service involves local and intrastate service, state PUCs (not the FCC) have jurisdiction.

I expect consumer friendly state regulators, to hold public hearings and to impose tough requirements before agreeing to service terminations.  I anticipate a reduction to single digit national market penetration within the next few years.  The top 100 urban markets should see service closure in the next 2-3 years. The Today Show for Feb. 8, 2024 has a piece that includes my forecast; see https://www.today.com/video/phone-companies-phase-out-landlines-in-homes-203846213929?search=landline%20telephone%20service%20terminations.

Antitrust Judicial Review That Gets It Right

             Just when one reasonably could assume that no federal appellate court could possibly do the right thing in a merger review, pigs fly!  Judge William G. Young of the District Court in Massachusetts did not buy the conventional wisdom that all mergers “promote competition.” He rejected the proposed JetBlue’s $3.8 billion acquisition of Spirit Airlines. https://www.nytimes.com/2024/01/16/business/jetblue-spirit-airlines-ruling-merger.html; https://www.law360.com/articles/1786317/attachments/0.

             Millions of dollars in sponsored research and litigation expert witnesses have persuaded jurists and their law clerks that even though a merger reduces the number flights and airlines operating on the same city pairs, consumer welfare somehow increases. The conventional rationale explains that the combined carrier will have greater resources and no less incentives to compete aggressively with larger incumbents.

             How could it ever make sense that a profit maximizing business venture would prefer to devote sleepless afternoons reducing consumers’ out of pocket costs and enhancing their value proposition?  Why would any merged venture take the harder glide path of aggressive pricing and innovation rather than “go along and get along” by matching the dominant carriers’ rates?    

            I remember the unshakable confidence expressed by Judge Victor Marrero of the Southern District of New York, that $37 billion merger between T-Mobile and Sprint would benefit consumers by promoting more competition in the wireless marketplace. See https://casetext.com/case/united-states-v-deutsche-telekom-ag.  

             It did not happen!  

            Since acquiring Sprint TMobile evidences nothing of its former iconoclastic nature.  It has become a happy camper more than willing to engage in “consciously parallel” conduct, quite willing to follow the lead of AT&T and Verizon on price, performance, handset deals, freebie streaming subscriptions, etc.  

            The combination of Sprint and TMobile tower sites has improved TMobile’s reliability, especially in rural locales. But what evidence can anyone show that TMobile now is a deep cost cutter and conscientious innovator?  

            The Big Three now compete on what “free” video streaming service they offer and how much they can deceive consumers about “free” access to the latest and greatest smartphone.  AT&T advertisements first touted free Iphone 15s “on us” https://about.att.com/story/2023/iphone-15.html.  Soon thereafter both TMobile and Verizon quickly used the same “on us” deception.  https://www.t-mobile.com/news/devices/get-iphone-15-pro-on-us-and-be-upgrade-ready-every-year-only-at-t-mobile; https://www.verizon.com/smartphones/apple-iphone-15-pro/.  

            You call this maverick innovation?  The three national carriers deliberately use the same slogan to imply that consumers can get a free handset on them. This is evidence of robust competition?  

            The con job usually works, but maybe someday more consumers will understand that a marketplace with Alaska Airlines, JetBlue, Hawaiian Airlines, and Spirit Airlines works better than if two evaporate.  

            It does not take a rocket scientist to conclude that consumers suffer when four national wireless carriers dissolved into three.