The FCC’s Net Neutrality Decision and Stock Prices

More than a year after a court invalidated its “net neutrality” rules on broadband Internet service providers (ISPs), the Federal Communications Commission (FCC) decided to extend public-utility (Title II) regulation on broadband services. This paper uses traditional event analysis of the movements in the values of major communications and media companies’ equities at key moments in the FCC’s path to this decision to estimate the financial market’s assessment of the likely effects of regulation on ISPs, traditional media companies, and new digital media companies. The results are surprising: the markets penalized only three large cable companies to any extent, and even these effects appear to have been short-lived. The media companies, arguably the intended beneficiaries of the regulations, were unaffected.     

The Digital Divide and Other Economic Considerations for Network Neutrality

In its 2016 Broadband Report, the Federal Communications Commission (FCC) recognizes that a rural/urban digital divide remains prevalent—especially with respect to broadband adoption. It also highlights several policies that the FCC has undertaken purportedly to reduce the divide, including the 2015 Open Internet Order (OIO)—in which the stated intent is to enforce “network neutrality.” However, long before the OIO, studies have raised concerns that network neutrality policies will discourage investment by internet service providers (ISPs) in broadband infrastructure, to the detriment of broadband accessibility, and may increase average consumer costs—both of which would only further exacerbate the digital divide. In this paper, we provide a holistic analysis of the effects of net neutrality on the digital divide; in doing so, we draw from recent economic research on this issue. Our goal is to present a range of economic considerations that should be taken into account when evaluating the overall impact of the OIO, with particular attention to its impact on the digital divide.     

Economics at the FCC, 2017–2018: Internet Freedom,International Broadband Pricing Comparisons,and a New Office of Economics and Analytics

The Federal Communications Commission’s (FCC’s) current strategic plan lists four priority goals: closing the digital divide; promoting innovation; protecting consumers and public safety; and reforming the FCC’s processes. Economists at the FCC contribute toward the realization of each of these goals, through analysis of the nature and significance of the underlying problems that regulations are intended to solve, as well as assessments of alternative solutions. Three major FCC initiatives demonstrate the role that economic analysis played in Commission decisions in 2017–2018: the Restoring Internet Freedom Order; the new hedonic pricing model that was used in the International Broadband Data Report; and the order that reorganized Commission economists into the Office of Economics and Analytics.     

Estimating willingness-to-pay for broadband attributes among low-income consumers: Results from two FCC lifeline pilot projects

Recent studies have confirmed that broadband adoption (as opposed to simply having access to broadband infrastructure) is positively linked with economic growth. In light of this, federal policy efforts have switched from focusing mainly on the provision of infrastructure to more explicit adoption-oriented efforts. One of those efforts was the Federal Communications Commission’s (FCC’s) Low-income Broadband Lifeline Pilot Projects, which ran from 2013 to 2014. The program worked with 14 private telecommunications firms to subsidize household broadband adoption for low-income households by providing discounted monthly and equipment costs. Low-income households are an important component of the broadband adoption puzzle: between 2003 and 2013, the adoption gap between low-income and high-income households actually increased by 5% points. This paper focuses on two specific FCC Broadband Lifeline Pilot projects that allowed consumers to make choices among different options, such as data allowance, speed, and wireless vs. wired connections. Conditional logit models are used to develop estimates of consumer’s willingness-to-pay for specific broadband attributes. The results indicate that low-income consumers have a preference for smartphone connections (versus aircards) – and that this effect is even more pronounced for those households earning less than $20,000; that low-income consumers have a preference for wired connections (versus wireless); and that there is evidence that low-income consumers are willing to pay for an extra GB of data each month – but not for the speed of their connection.     

The Year in Economics at the FCC: A National Plan for Broadband

The past year in economics at the Federal Communications Commission (FCC) has focused on encouraging the adoption and deployment of high capacity Internet access and the associated networks, commonly termed “broadband.” Our article sketches important economic themes in the FCC’s National Broadband Plan to show how the application of basic principles of regulatory economics takes account of rapid technological change. We discuss natural monopoly regulation, externalities and cross-subsidies, network effects and interconnection, the allocation of scarce inputs, protecting and fostering competitive markets, and consumer protection and transparency as they apply to the development of broadband.     

Economics at the FCC, 2016–2017: Auction Designs for Spectrum Repurposing and Universal Service Subsidies

The Federal Communications Commission is responsible for federal regulation in the telecommunications and electronic media sectors, and for management of the nation’s non-federal radio frequency spectrum. During the past year, Commission economists contributed to the agency’s ongoing efforts to use market-based mechanisms—such as auctions—to allocate spectrum and distribute universal service subsidies efficiently. This includes repurposing broadcast television spectrum for more efficient use by wireless service providers through the recently concluded Broadcast Incentive Auction and structuring auction mechanisms to promote efficient allocation of universal service subsidies for the increased build-out of mobile wireless and fixed broadband service in unserved and underserved areas.     

The Post-Internet Order Broadband Sector: Lessons from the Pre-Open Internet Order Experience

A significant component of the contentious debate over the Federal Communications Commission’s (FCC) 2015 Open Internet Order (OI 2015) has been its effects on future broadband investment and the development of Internet content and other applications. Although such debate can advance understanding of the potential consequences of the OI 2015, much of it, albeit informed by economics, is of necessity speculative. It may be useful to see how experience up to OI 2015 might be informative. That experience is notably thin, with the FCC’s citing two to four instances in ten years that would have violated OI 2015. After explaining why the OI 2015 order and its predecessor may be largely non-binding, we look at the four examples for lessons in what kinds of behavior OI 2015 might prevent. This experience suggests that non-economic concerns should have been more explicit in OI 2015.     

Economics at the FCC, 2011–2012: Spectrum Incentive Auctions, Universal Service and Intercarrier Compensation Reform, and Mergers

The past year in economics at the Federal Communications Commission covered a broad range of topics in telecommunications policy. This paper highlights the economic issues that are addressed in the following key areas: spectrum management, universal service and intercarrier compensation reform, and merger review. In spectrum management, the FCC received congressional authority to implement an ??incentive auction?? to repurpose television broadcasting spectrum into flexible-use licenses that will be suitable for mobile wireless service providers. We discuss some important issues in designing the auction. We next address some aspects of the FCC??s comprehensive reforms of intercarrier compensation, which mainly involves call termination rates, and of universal service. Finally, we discuss the economic analysis of two major mergers: AT&T-T-Mobile, which the FCC staff recommended should be referred to an administrative hearing, and Level 3/Global Crossing, which was cleared with no conditions.     

Reforming the lifeline program: Regulatory federalism in action?

This paper considers whether common national standards for determining participants' eligibility and designating service providers in the Lifeline program are preferable to a decentralized system where state utility commissions have greater influence over these program parameters. Two recent decisions of the Federal Communications Commission (FCC), a 2016 Order and its reversal in March 2017, on the designation of Eligible Telecommunications Carriers to provide broadband Lifeline service, centered on this question. Statistical analysis of program data demonstrates that state-by-state variations in enrollment may be attributed to state-level policy actions, after controlling for alternative demographic and economic explanations. This paper concludes that national standards may reduce state-by-state variations in program participation rates.     

An Oligopoly Model for Analyzing and Evaluating (Re)-Assignments of Spectrum Licenses

The Communications Act requires the Federal Communications Commission to assess whether proposed spectrum license transactions serve the public interest, convenience, and necessity. We review the FCC’s implementation of this component of the Act. We provide a tractable economic model of competition among wireless service providers in which spectrum licenses are a cost-reducing input. This model allows us to evaluate the effects of (re-)assigning spectrum licenses on economic outcomes and to define operational measures of “warehousing” licenses. Calibrating the model, we find little evidence of warehousing and that the approved Verizon-T-Mobile-SpectrumCo transaction increased social surplus.     

Economics at the FCC, 2013–2014

We present a sample of recent FCC matters of economic interest. These include nonstructural remedies in a number of wireless telecommunications transactions, econometric attempts to identify which schools are likely to have access to fiber broadband, and the implementation of “rural broadband experiments” to improve the effectiveness of subsidy programs to promote universal service. We close with some observations regarding the prominence of vertical concerns in FCC policy assessments.     

Efficiency in broadband service provision: A spatial analysis

With the 2008 Federal Communications Commission (FCC) order amending both the definition of broadband and its data collection practices, the problems associated with data integrity and ZIP code aggregations in the United States will soon be forgotten. However, between 1999 and 2007, FCC Form 477 data remain the only viable, nationwide database of broadband provision in the United States. While broadband data from 1999–2004 and 2005–2007 are not directly comparable due to a modification in collection procedure, there is an absence of objective empirical analysis for the latter time period. Interestingly, although the FCC made the 2005–2007 data publically available on the Internet, password protected files largely prevented analysts from accessing, manipulating and analyzing these data. The purpose of this paper is three-fold. First, the process utilized for liberating these data from their protected format and integrating them into a geographic information system (GIS) is outlined. Second, the spatial distribution of broadband provision in the United States for 2005–2007 is explored. A mathematical programming approach is also utilized for comparing the relative efficiencies of ZIP code areas in acquiring broadband service given their demand-side socio-economic and demographic determinants. Finally, implications for public policy, particularly those associated with developing local and regional benchmarks for broadband provision, competition and access, are addressed.     

Spatial data constraints: Implications for measuring broadband

The accurate determination of where broadband telecommunication services are available in the United States continues to be a significant challenge. Existing data regarding broadband provision, such as that provided by the Federal Communication Commission (FCC) simply designate ZIP codes with at least one high-speed Internet subscriber. As ZIP code areas vary greatly in size and shape, the lack of geographic specificity as to exactly where broadband is available, particularly within ZIP code areas, confounds communications policymaking. Further, there are a number of additional geographic nuances concerning broadband availability that also inhibit empirical examination and policy generation, including the spatial limitations of digital subscriber line services. The purpose of this paper is to briefly review the issues concerning broadband measurement in the United States and provide an empirical analysis of several spatial data constraints that must be accounted for when interpreting and constructing public telecommunications policy.     

Where have all the boundaries gone?

Interstate communications in the USA are regulated by the Federal Communications Commission (FCC). The guidelines within which the FCC must operate are set by the Communications Act of 1934, which primarily reflects the technology and industry norms of the late 1920s. There have been dramatic improvements since the second world war in the electronic technology which supports telecommunications. The past decade has brought changes in the price and performance of electronic components, eg Large Scale Integration (LSI), so great as to be a shift in kind and not merely one of degree. The impact of these advances in technology upon the FCC has been to make some of the fundamental distinctions upon which the FCC has based its actions meaningless (eg communications/computers, telephone/telegraph, multi-point/point-to-point, and monopoly/competition). Communications common carriage can no longer adequately be distinguished from many other forms of telecommunications or from non-communications activities in any substantive technical or economic sense. While it may be possible to develop criteria upon which valid distinctions can be based, these will have to be new ones — the traditional criteria have been eroded by technology.     

Economics at the Federal Communications Commission: 2006–2007

This article focuses on media ownership and spectrum auction design. These two issues have not only been particularly important at the Federal Communications Commission (FCC) over the last year, but also are being informed by economic analysis either completed at the FCC or commissioned by the FCC.     

A new measure of US residential broadband availability

The only comprehensive published indicator of residential broadband availability in the US is number of providers in each ZIP code, as reported by the Federal Communications Commission (FCC). This measure has been widely used in academic and policy research to assess availability and to identify under-served areas, but it is acknowledged to be flawed and is often misinterpreted.     

Economic Analysis at the Federal Communications Commission

This article reviews a number of the major economic issues confronting the Federal Communications Commission (FCC) over the past year and discusses new analytic techniques that FCC economists applied to some of those issues. The article also identifies several areas in which further academic research would be valuable to this agency.Martin Perry is serving as FCC Chief Economist on leave from Rutgers University, New Brunswick NJ. Jonathan Levy is the FCC Deputy Chief Economist and, like Evan Kwerel and Chuck Needy, works in the FCCs Office of Strategic Planning and Policy Analysis. Mark Uretsky works in the FCCs International Bureau and Tracy Waldon in the FCCs Media Bureau. All authors are economists except for John Williams, an engineer consultant who advises the FCC on spectrum issues.     

Increasing the Efficiency of Spectrum Allocation

Over the past 80 years, the Federal Communications Commission has been responsible for the allocation of non-governmental use of the radio frequency spectrum. Over that time, here have been significant changes in spectrum use that have been driven by changes in demand and technology. The technical, regulatory, and business obstacles in past reallocations shed light on some of the FCC’s implementation decisions for its upcoming two-sided auction.     

Trying to Promote Network Entry: From the Chain Broadcasting Rules to the Channel Occupancy Rule and Beyond

This article traces the efforts by the U.S. Federal Communications Commission to promote the entry of new networks, starting from its regulation of radio networks under the Chain Broadcasting Rules, through its regulation of broadcast television networks under its Financial Interest and Syndication Rules and its Prime Time Access Rule, and finally to its regulation of cable television networks under its Channel Occupancy and Leased Access Rules and its National Ownership Cap. The article’s principal conclusion is that these efforts by the FCC were largely ineffectual and that only the removal of regulatory barriers to new network entry could, and indeed did, achieve the Commission’s goal.