Lawrence Spiwak

[Commentary] Rather than give the Department of Justice — and, assuming jurisdictional issues are resolved, perhaps even the Federal Communications Commission— an opportunity to look dispassionately at the facts of AT&T’s acquisition of Time Warner, law and economics of the transaction, some consumer groups are going for the political jugular. But then again, who can blame them?

As FCC Chairman Tom Wheeler has actively encouraged such conduct by steadfastly choosing to ignore substance and view every major policy initiative from network neutrality to set-top boxes to municipal broadband through a political lens, this playbook appears to be quite successful. Still, ignorant sophistry is no excuse for ill-formed policymaking. Let's just hope that the new administration — regardless of party — rejects the politicized approach to telecom policy favored by the Obama Administration and returns to first principles: an honest, rigorous and dispassionate review of the transaction.

[Spiwak is the president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies]

[Commentary] Ever since the passage of the Telecommunications Act of 1996, deployment of advanced telecommunications infrastructure has been a national priority. In fact, Section 706 of the Telecommunications Act of 1996 specifically directs the Federal Communications Commission (FCC) and each state commission with regulatory jurisdiction over telecommunications services to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." However, broadband deployment is not as easy a task as it seems — network construction is enormously expensive and there are a variety of practical factors, like various government permissions, a provider must address. One of these factors is the little-known, but highly important, issue of how broadband providers may attach their wires to utility poles, which are mostly owned by private companies. To provide guidance, Congress set forth a detailed framework to govern this process in Section 224 of the Communications Act.

Like it or not, broadband is a difficult and, more to the point, an expensive business, so identifying and removing policy-relevant barriers to entry remains a constant challenge. Nonetheless, there are detailed laws which govern our conduct which must be respected, not just for economic reasons, but to protect our health and safety. Having municipalities pass ordinances which are nakedly intended to circumvent those laws and abridge private property rights in the name of promoting "competition" achieves none of these goals.

[Spiwak is the president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies.]

[Commentary] In 2015, the Federal Communications Commission, at the urging of the White House, voted along party lines to preempt portions of Tennessee and North Carolina laws designed to delineate the terms and conditions under which municipalities may construct and deploy broadband Internet networks in order to offer advanced communications services to the general public. Notwithstanding clear Supreme Court precedent holding that this type of preemption is unconstitutional, the FCC nonetheless plowed ahead with its efforts to have the federal government dictate to a state how it governs its municipal subdivisions. For this reason, many leading telecom lawyers predicted that the FCC's order was dead on arrival. Seeing the hopelessness of the FCC's case, even the Department of Justice refused to back the agency on appeal — a very rare refrain. As expected, earlier in August, the Sixth Circuit Court of Appeals in the case of Tennessee v. FCC trounced the FCC's constitutional end-run, finding that "nowhere in [the Communications Act's] general charge to 'promote competition in the telecommunications market' is a directive to do so by pre-empting a state’s allocation of powers between itself and its subdivision." According to the court, this is "fundamental constitutional policy."

By pursuing this nakedly political agenda, FCC Chairman Tom Wheeler has wasted significant federal and state resources litigating his patently unconstitutional power grab. Nevertheless, Chairman Wheeler is far from contrite. If anything, Chairman Wheeler is doubling down on his political hubris. In response to the Sixth Circuit's ruling in Tennessee, Chairman Wheeler retorted that the case perpetuated "anti-competitive broadband statutes" and thus "thwarted" the "efforts of communities wanting better broadband ... by the political power of those who, by protecting their monopoly, have failed to deliver acceptable service at an acceptable price." Moreover, Chairman Wheeler boasted that he would be "happy to testify on behalf of consumer choice" should other "states seek to limit the right of people to act for better broadband." If Chairman Wheeler wants to have a policy debate about municipal broadband, then let's have it.

[Spiwak is the president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies.]

[Commentary] Since Federal Communications Commission Chairman Tom Wheeler took over, we have seen one assault after another on American's procedural due process rights. In addition to the well-documented improprieties with the White House during the Open Internet debate, Chairman Wheeler, among other transgressions, has attempted to force nonprofits to reveal their donors in strict violation of Supreme Court precedent, hired advocates who had filed in significant FCC dockets as an interested party to come into the commission to supervise those very dockets, and attempted to hold a FCC "town hall" in which he had invited an outside party to participate and comment on a yet-to-be-released item during the "sunshine" period. Chairman Wheeler is now at it again, this time in the context of the FCC's attempt to impose stringent price regulation for "business data services" (BDS). Let's look at this shameful timeline.

[Spiwak is the president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies.]

[Commentary] However one feels about municipal broadband as a matter of public policy, as a matter of law the Federal Communications Commission has no authority to preempt state laws limiting municipal entry into the broadband marketplace under Section 706 which sanctions regulation to ensure competitiveness.

Indeed, when the Supreme Court first looked at the issue of preemption in municipal broadband in Nixon v. Missouri Municipal League, the Supreme Court went out of its way to note that “it is well to put aside” the public policy arguments favoring municipal broadband to support any “generous conception of preemption.”

Why? Because the issue of preemption is one of statutory interpretation and, as such, “the issue does not turn on the merits of municipal telecommunications services.”

[Spiwak is president of the Phoenix Center for Advanced Legal & Economic Public Policy Studies]

As the Federal Communications Commission begins to formalize rules for the upcoming voluntary incentive auctions for broadcast spectrum, questions regarding participation limits on the largest domestic wireless carriers remain open.

Proponents of bidder restrictions on AT&T and Verizon appeal to a “revenue- enhancement hypothesis,” under which the participation by the more successful carriers will allegedly discourage bidding by smaller firms and thus reduce total auction revenues.

In this bulletin, we analyze data from a recent large-scale spectrum auction to shed light on the validity of the revenue-enhancement hypothesis, and our findings are significant. Among other things, we find no evidence that AT&T and Verizon reduced the number of bidders for licenses. Moreover, we find no evidence to support the claim that lower auction revenues resulted from large firm participation.

As participants, the two increased overall auction revenues, both by winning licenses and by helping to reveal the valuations of other bidders. AT&T’s efforts (win or not) added a 21% premium to final auction prices above and beyond the revenue effects of the typical bidder.

AT&T alone accounted for nearly half of all auction proceeds, even though its winning bids were only about 10% of the total. Verizon’s impact was consistent with that of the average bidder. Accordingly, our findings contradict almost every key aspect of the revenue- enhancement hypothesis -- not only did AT&T’s and Verizon’s participation not deter smaller firms from entering the auction, but their participation substantially raised total auction proceeds. Empirical evidence supporting bidder exclusions or restrictions in the forthcoming voluntary incentive spectrum auctions therefore remains weak.