The US Court of Appeals for the DC Circuit overturned the Federal Communications Commission's attempt to take broadband subsidies away from tribal residents. The Ajit Pai-led FCC voted 3-2 in Nov 2017 to make it much harder for tribal residents to obtain a $25-per-month Lifeline subsidy that reduces the cost of Internet or phone service. The change didn't take effect because in Aug 2018, the court stayed the FCC decision pending appeal. The court followed that up on Feb 1 with a ruling that reversed the FCC decision and remanded the matter back to the commission for a new rule-making proceeding. 

The Pai FCC's 2017 decision would have limited the $25 subsidy to "facilities-based" carriers—those that build their own networks—making it impossible for tribal residents to use the $25 subsidy to buy telecommunication service from resellers. The move would have dramatically limited tribal residents' options for purchasing subsidized service, but the FCC claimed it was necessary in order to encourage carriers to build their own networks. The same FCC decision also would have eliminated the $25 subsidy in urban areas, reserving it only for tribal lands in rural areas. The court's decision Feb 1, in response to an appeal filed by tribal organizations and small wireless carriers, overturned both of these limitations. A three-judge panel said the FCC failed to consider that facilities-based providers have been leaving the Lifeline program and provided no evidence that banning resellers would spur new broadband deployment. The FCC also failed to properly consider how eliminating the subsidy in urban areas would affect consumers, judges determined. In addition, the FCC "failed to provide an adequate opportunity for comment on the proposed limitations," judges wrote. The FCC could appeal the ruling.

The Federal Communications Commission, under Chairman Ajit Pai, recently limited the number of providers that can offer Lifeline service in tribal areas (though that decision was struck down in court on Feb 1). And, in Nov 2017, the agency proposed a series of changes to the program that, together, would severely hobble the program and take Lifeline service away from millions of people. “Our statistics suggest the program has shrunk 30 percent under Chairman Pai’s watch,” said John Heitmann, a partner at Kelley Drye & Warren LLP who has represented Lifeline-participating companies. Heitmann elaborated on the 30-percent drop in the program over the past two years, attributing it to, “in large part, regulatory uncertainty created during Chairman Pai’s administration. [Pai] started by eliminating Lifeline Broadband Provider (LBP) designations within weeks of walking in the door,” Heitmann added, referring to Chairman Pai’s decision, at the very beginning of his administration in 2017, to revoke nine broadband companies’ official designations, which had allowed them to participate in the program. “That sent a signal to the marketplace that we have problems…The companies have been having difficulty attracting investment to grow in the Lifeline space.” What were the FCC’s specific 2017 proposals? They included a ban on standalone broadband from the program, strict limitations on subscribers’ lifetime use and the program’s budget, and a ban on wireless resellers, which make up around 70 percent of Lifeline-supported connections. The FCC’s proposal, on the whole, represents a wholesale attack on the Lifeline program. 

Former Federal Communications Commission Chairmen Tom Wheeler and Michael Powell will be among the high-profile witnesses at the Feb 7 House Communications Subcommittee hearing on network neutrality. Others testifying include:

• Jessica González, deputy director and senior counsel, Free Press & Free Press Action Fund
• Denelle Dixon, COO, Mozilla
• Ruth Livier, actress, writer, and UCLA doctoral student.

On Feb 1, Petitioners (including Public Knowledge) finally got to make their case in court that the Federal Communications Commission’s reckless abdication of responsibility over broadband was illegal. To highlight some of them:

• The Petitioners argued that the FCC violated the Administrative Procedure Act (APA) by failing to explain how and whether antitrust law and Federal Trade Commission enforcement could actually take the place of FCC rules. 
• The FCC adopted a transparency rule, and much of its policy justification hinges on transparency being sufficient to allow the market, and antitrust and general consumer protection law, to work. But it failed to properly ground this rule in statutory authority during the rulemaking process, and the statute it did rely on was subsequently repealed. The FCC was also unable to answer some fairly basic questions about how its rule worked and its likely efficacy. Given that the transparency rule is invalid, the entire order must be vacated.
• The FCC also argued that DNS and caching -- which it has conceded are the only relevant "information processing" components of broadband -- do not fall within the “telecommunications management exception.” But this relies on inaccurate characterizations of the FCC's own precedent, and misleading citations of decisions from the Modification of the Final Judgment (MFJ) court of Judge Harold Greene.
• Local government intervenors noted that the FCC failed to even consider strong public safety arguments put forward by some local governments. Not only was it required to respond to substantive comments in the record, it has a statutory responsibility to promote and protect public safety as well. This argument got quite a bit of traction on the bench and is particularly relevant given that Verizon throttled data services used by firefighters combating 2018’s California wildfires.
• State government intervenors argued that if the FCC claims to have no authority to regulate broadband, it likewise lacks the authority to preempt states from doing so. 

On balance, I come away from the argument fairly confident of a victory for Petitioners, though as to how sweeping of a victory, and on what precise grounds, it is as difficult as ever to say.

Verizon and AT&T have waffled on their timelines and business strategies for fixed 5G vs. mobile 5G. In 2018, Verizon pushed hard to be the “first” operator to launch 5G and it was going to do so by offering a fixed wireless service. The company fulfilled that goal with its prestandardized fixed 5G service, called 5G Home, that it launched in four markets in Oct 2018. However, it appears Verizon will be moving more quickly to a mobile 5G offering, while the expansion of its fixed 5G Home service may be delayed to later in 2019. 

Back in mid-2018 AT&T CFO John Stephens said that AT&T didn’t think it was cost efficient to deploy fixed 5G wireless service to residences because it would take too much fiber and too many small cells to backhaul the traffic. Now, AT&T appears to be bullish on fixed wireless as a broadband replacement service. In late Jan, CEO Randall Stephenson predicted that fixed 5G wireless will have enough broadband capacity for consumers to access streaming video services similar to what cable broadband offers today. However, he did reiterate that the company will pursue standards-based mobile 5G first. 

In the world of competition law, Louis Brandeis applauded “the introduction of two governmental devices designed to protect the rights and opportunities of the individual.” One was, of course, antitrust. The second was the creation of “[c]ommissions to regulate public utilities.” Brandeis always preferred competition to regulated monopoly, but he recognized that there were times when sectoral regulation was needed, as, for example with local gas, water, and telephone monopolies. He viewed such instances as “exceptional” but obviously important. For example, Brandeis understood price-setting as a tool to be used only in the context of specific industries where such government involvement was necessary. Brandeis believed there to be a “radical difference between attempts to fix rates for transportation and similar public services and fixing prices for industrial services.” Brandeis also recognized the importance of sectoral regulation where regulated entities were not monopolies. He supported “effective regulation of railroads as well as of other public-service corporations, whether they be monopolies or competitive concerns,” but he vehemently argued that such sectoral regulation should work to preserve and create competition, not, as in the Theodore Roosevelt view that he opposed in 1912, simply to acquiesce in the existence of non-competitive markets.

[Jonathan Sallet is a Benton Senior Fellow]

The Federal Communications Commission has voted to create a Fraud Division within its Enforcement Bureau. This action codifies and reiterates the importance of ongoing work by FCC enforcement staff to combat misuse of taxpayer funds. The new Fraud Division will be dedicated to investigating and prosecuting fraud in the Universal Service Fund (USF). This team will work closely with the FCC’s Office of Inspector General, the US Department of Justice, and other law enforcement agencies to prosecute unlawful conduct. The Fraud Division will be established following review and approval by the Office of Management and Budget and the House and Senate Appropriations Committees, as well as publication of the Order in the Federal Register.