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Even before taking office, incoming members of the Trump Administration and some Republican members of Congress criticized various regulatory requirements in the  $42.5 billion BEAD program as being unnecessarily burdensome and contributing to a perceived slow rollout of BEAD funding. The Commerce Department and Congress have now begun efforts to streamline and reform the BEAD program. The changes raise a number of questions, and if implemented as expected, will significantly impact and may delay the program.

Commerce Department Reviewing BEAD Program Rules

Last week, newly appointed Commerce Secretary Howard Lutnick announced that he has directed NTIA to launch a “rigorous review” of the BEAD program. According to Secretary Lutnick, NTIA “is ripping out the Biden Administration’s pointless requirements” and “revamping the BEAD program to take a tech-neutral approach,” which is clearly intended to eliminate the current funding preference for end-to-end fiber optic projects and pave the way for much more of the BEAD funding going to low-earth orbit (LEO) satellite or unlicensed fixed wireless broadband. NTIA is expected to release details of such rule changes in the coming days.

House Introduces “SPEED for BEAD Act”

Also last week, Congressman Richard Hudson (R-NC), Chairman of the House Communications and Technology Subcommittee, introduced legislation to revise and expedite the deployment of the BEAD program to get “shovels into the ground as soon as possible.”[1] H.R. 1870, The Streamlining Program Efficiency and Expanding Deployment (“SPEED”) for BEAD Act would eliminate certain BEAD requirements that are viewed by the bill’s supporters as being politically driven, overly bureaucratic, and not tied to the underlying goals of deploying broadband infrastructure.

  1. Certain BEAD Requirements Removed

Among other things, the SPEED for BEAD Act would prohibit NTIA and eligible entities (e.g., states) from conditioning or scoring BEAD subrecipient awards based on:

  • Prevailing wage laws;
  • Labor agreements;
  • Local hiring;
  • Climate change;
  • Regulation of network management practices, including data caps;
  • Open access; and
  • Diversity, equity, and inclusion.
  1. Amend Definition of Reliable Broadband Service

Under the BEAD statute, funding will be made available for projects serving “unserved locations” and “underserved locations”[2] lacking access to “reliable broadband service.” The legislation would amend and broaden the definition of “reliable broadband service” to include “any broadband service that meets the applicable performance criteria without regard to the type of technology by which service is provided.” This would reverse the current NTIA requirements, which exclude locations “served exclusively by satellite, services using entirely unlicensed spectrum, or a technology not specified by the Commission for purposes of the Broadband DATA Maps.”[3] This will enable LEO and unlicensed fixed wireless providers to participate more broadly in the BEAD program as providers of “reliable broadband service,” if they meet certain performance requirements to be set by NTIA. It may also exclude from BEAD eligibility locations already served by such services.

  1. Prohibition on Rate Regulation

The legislation would prohibit the imposition of rate regulation of broadband services provided over BEAD-funded network facilities. This includes prohibiting NTIA or any state or territory from regulating, setting, capping, or otherwise mandating the rates charged for broadband service by BEAD subrecipients, or the use of rates as part of an application scoring process. The Act does not remove the low-cost service option requirement from the BEAD statute, but instead prohibits eligibility entities from imposing specific low-cost service requirements.

  1. Ability to Remove High Cost Locations From a Project Area

The legislation would provide a mechanism for subrecipients to remove locations from a project area that the subrecipient “determines would unreasonably increase costs or is otherwise necessary to remove.” The provision raises several questions as to how and when such determinations can be made by the subrecipient. States and territories would apparently award a separate subgrant to address such removed locations, presumably creating additional opportunities for BEAD-funded LEO service.

  1. Elimination of LOC Requirement

The legislation would also eliminate the requirement for a BEAD subrecipient to provide a letter of credit (“LOC”) if the provider has commercially deployed a similar network using similar technologies and is either: (a) seeking funding that is less than 25% of the provider’s annual gross revenues; or (b) seeking to serve a number of locations that is less than 25% of the provider’s total number of existing service locations. These revisions would tend to benefit larger service providers, and would likely be of less benefit to new entrants or smaller providers, for whom LOC requirements often present a greater challenge.

Questions Raised by Impact of Reform Effort     

While some stakeholders have already embraced a streamlining of the BEAD program rules, it must be noted that the proposed reforms are coming at a time when funding is about to be disbursed. NTIA has already approved Initial Proposal for all states and territories, and most of them have either already selected subrecipients, or are in the later stages of doing so. While the reform efforts at Commerce and in Congress are aimed at getting “shovels in the ground” as soon as possible, the reform initiatives – and resulting policy and legal questions – may well impose additional delay.

Introducing sweeping changes to BEAD at this stage raises thorny questions on whether some of the new rules can and should be applied mid-way through the award selection process, and after the application windows have closed. It should also be noted that despite concerns that the existing rules would result in low participation, many states are reporting strong bidder participation. Applicants around the country spent millions of dollars developing business plans, forging partnerships, locking down inventory, mapping out participation strategies, and developing detailed applications, all in reliance on the existing rules. Many other entities elected not to participate in BEAD based on the existing rules. Will they have any recourse to participate based on the new rules?

Finally, the broadband ecosystem is in a constant state of flux, with new privately funded networks coming online all of the time. Many state broadband offices, at the direction of NTIA, have been hesitant to revise their BEAD maps to remove locations after the “challenge” period. If there are now going to be additional delays in BEAD awards, what will be the impact on the existing maps? Will NTIA allow states to revise eligible locations to account for new deployments based on new updated data reported in the next Broadband Data Collection?

While targeted reforms aimed at enabling BEAD to better meet its underlying goal of providing all Americans with robust broadband connectivity make sense, care must be taken to ensure that such reforms do not themselves cause undue delays or undermine state processes that are working reasonably well.

[1] Chairman Hudson’s Opening Statement at Subcommittee on Communications and Technology Hearing on Rural Broadband

[2] Defined respectively as, a location lacking access to “reliable broadband service” of 25/3Mbps, with latency of less than 100ms, and a location lacking access to reliable broadband service of 100/20 Mbps, with latency of less than 100ms.

[3] NTIA BEAD Notice of Funding Opportunity

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In March 2022, we published a blog post explaining that broadband grants are apparently subject to federal income taxation. Three years later, and with $42.5 billion in BEAD grants on the verge of disbursement, nothing has changed.

As discussed in 2022, the taxability of broadband grants seems to be an unplanned quirk of the 2017 Tax Cuts and Jobs Act. Prior to that, broadband grants were generally exempt from taxation based on a favorable IRS interpretation of Section 118 of the tax code. But the Tax Cuts and Jobs Act amended Section 118 to the effect that “contributions to capital” (including grants) made from governmental or civic groups to a corporation are taxable as gross income.

Recent recipients of state and federal broadband grants are already struggling with this. Crucially, the tax bill applies to grants used to cover front-end costs relating to construction of a broadband network, with taxes likely due on the grant before revenues ramp up. If a company receives $50 million in grant funds in 2024 to construct a rural broadband network, the company would need to pay $10 million in taxes on the grant (give or take) in 2025. The very substantial tax bill would come due while the network developer is still building up operations, and may in fact threaten the operational feasibility of the entire project.

Bipartisan legislation has been repeatedly introduced over the past several years to address this issue, to no avail. But on February 24, a bipartisan group of Senators announced the re-introduction of the Broadband Grant Tax Treatment Act, with such varied supporters as Sen. Tim Kaine (D-VA) and Sen. Tommy Tuberville (R-AL). (Notably, the Act would apply to amounts received in taxable years ending after March 11, 2021.)

Broadband providers have reason to be optimistic that the Broadband Grant Tax Treatment Act will finally be enacted this session. But until that occurs, it would be prudent to set aside funds to cover the tax bill associated with broadband grants.

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On January 16, 2025, the FCC closed out Jessica Rosenworcel’s term as Chairwoman by releasing a Notice of Proposed Rulemaking (“NPRM”) seeking to expand the use of the 896-901/935-940 MHz (“900 MHz”) band for broadband use. The NPRM builds on the Commission’s 2019 rulemaking, which created a 3/3 MHz broadband allocation at 897.5-900.5/936.5-939.5 MHz and established a process for clearing narrowband incumbents from the band.

The NPRM was released in response to a Petition for Rulemaking filed by ten entities, including Anterix, Inc., which holds the majority of 900 MHz band spectrum in the U.S., and the FCC is now proposing to expand the ability to license broadband not just in the 3/3 MHz segment, but across the entire 5/5 MHz of the 900 MHz band. Eligibility to obtain a 5/5 MHz broadband license would be similar to the eligibility required to obtain a broadband license in the 3/3 MHz segment. Applicants would need to hold more than 50% of the total amount of licensed 900 MHz band spectrum in the county, hold or be eligible to hold the 3/3 MHz broadband license, and clear or protect from interference all covered incumbents from the narrowband segment (896–897.5/935–936.5 MHz and 900.5–901/939.5–940 MHz).

Unlike in the 3/3 MHz broadband segment, the FCC proposes that incumbent relocations from the narrowband segment would be accomplished through a voluntary negotiation process. In the 3/3 MHz segment, the FCC allows a broadband applicant to trigger mandatory negotiations once relocation agreements are reached or interference protection is demonstrated to 90% of covered incumbents (“complex systems” are exempted). The FCC does not propose to establish a narrowband segment mandatory relocation process for applicants seeking a 5/5 MHz license. This is noteworthy because Anterix, as the “presumptive broadband licensee,” has already relocated a number of incumbents from the broadband segment of the band to the narrowband segment, and many incumbents are now concerned about being forced from the spectrum they just relocated to (or are in the process of relocating to). However, the FCC does ask whether it should consider some process to deal with holdouts and also asks whether to modify the complex system exemption.

Also of note, the Commission asks whether to lift or modify the ongoing narrowband licensing freeze for the 900 MHz band. Currently, no applications for new or expanded 900 MHz narrowband operations will be accepted unless the applications pertain to broadband license-related incumbent relocations. The FCC notes that in many areas of the country, there still are no broadband licensees. On the other hand, in other areas with broadband licensees, have relocations concluded such that narrowband licensing can resume? Should the freeze be lifted only with respect to current license holders? Or should any applicant be able to obtain a new license in the 900 MHz band?

Comments and Reply Comments will be due 60 and 90 days, respectively, from the date of the NPRM’s publication in the Federal Register, which has not yet occurred.

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Earlier this month, in the waning days of Jessica Rosenworcel’s tenure as Chair of the Democrat-led FCC, the FCC released a Declaratory Ruling concluding that Section 105 of the Communications Assistance for Law Enforcement Act (CALEA) requires telecommunications carriers to secure their networks from unlawful access and interception of communications. Effectively, the FCC determined that CALEA can serve as a hook for additional rules addressing emergent cybersecurity issues.

The Commission also adopted a Notice of Proposed Rulemaking (NPRM) that would apply cybersecurity and supply chain risk management obligations to a broader set of providers.

Commissioners Carr and Simington dissented from the Declaratory Ruling and NPRM. While Chairman Carr frequently references cybersecurity threats, particularly those stemming from state-sponsored actors in the People’s Republic of China (PRC), it is unclear whether the new GOP-led FCC will allow the Declaratory Ruling and NPRM to stand or will pursue another course of action.

Background.  Enacted in 1994, CALEA requires telecommunications carriers and manufacturers of telecommunications equipment to ensure that law enforcement agencies have necessary surveillance capabilities of telecommunications equipment, facilities, and services. Notably, under the “substantial replacement” provision of CALEA, the FCC has interpreted the term “telecommunications carrier” for purposes of CALEA to include facilities-based broadband Internet access service (BIAS) and interconnected VoIP providers. [1]

Declaratory Ruling.  Previously, the FCC found that Section 105 of CALEA requires telecommunications carriers to avoid the risk that suppliers of untrusted equipment will illegally intercept or surveil a carrier’s switching premises without its knowledge.[2] In the Declaratory Ruling, the Commission imposed an affirmative duty on “telecommunications carriers” (again, including BIAS and iVoIP providers) to secure their networks, and clarified that telecommunications carriers’ responsibilities under CALEA extend to their equipment as well as network management practices.

The FCC concluded that carriers are obligated to prevent interception of communications or access to call-identifying information by any means other than pursuant to a lawful authorization with the affirmative intervention of an officer of the carrier acting in accordance with FCC rules. In adopting the Declaratory Ruling, the Commission puts carriers on notice that all incidents of unauthorized interception of communications and access to call-identifying information amount to a violation of the carrier’s obligations under CALEA.

Within this context, the FCC concluded that Congress has authorized the Commission to adopt rules requiring telecommunications carriers to take steps to secure their networks.

Notice of Proposed Rulemaking.  In its NPRM, the FCC proposes to apply cybersecurity requirements to a broad set of service providers, including facilities-based fixed and mobile BIAS providers, cable systems, wireline video systems, wireline communications providers, satellite communications providers, commercial mobile radio providers, covered 911 and 988 service providers, and international section 214 authorization holders, among others (Covered Providers).

The Commission proposes that Covered Providers would be obligated to create and implement cybersecurity and supply chain risk management plans. The plans would identify the cyber risks the carrier faces, as well as how the carrier plans to mitigate such risks. Covered Providers would also need to describe their organization’s resources and processes to ensure confidentiality, integrity, and availability of its systems and services. The plans would require annual certification and be submitted in the Network Outage Reporting System (NORS).

[1] Telecommunications carrier includes:

A person or entity engaged in the transmission or switching of wire or electronic communications as a common carrier for hire; A person or entity engaged in providing commercial mobile service . . . ; A person or entity that the Commission has found is engaged in providing wire or electronic communication switching or transmission service such that the service is a replacement for a substantial portion of the local telephone exchange service and that it is in the public interest to deem such a person or entity to be a telecommunications carrier for purposes of CALEA.

47 CFR § 1.20002(e).

[2] Protecting Against National Security Threats to the Communications Supply Chain Through FCC Programs; Huawei Designation; ZTE Designation, WC Docket No. 18-89; PS Docket Nos. 19-351 and 19-352, Report and Order, Further Notice of Proposed Rulemaking, and Order, 34 FCC Rcd 11423, 11436-37, para. 35 (2019).

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On October 18, 2024, the FCC adopted an Eighth Report and Order in its 4.9 GHz band proceeding. The new rules will permit a yet-to-be-selected Band Manager to be eligible for a nationwide license in the band, overlaying the licenses of incumbent public safety licensees. The Band Manager will be authorized to enter sharing agreements with the First Responder Network Authority (FirstNet), which can integrate unused 4.9 GHz band spectrum into its nationwide public safety broadband network (NPSBN). Additionally, the Band Manager’s primary responsibilities will include providing frequency coordination for incumbent public safety operators and integrating new technologies.

The FCC hopes the Eighth Report and Order will cap a decade-plus-long effort to promote greater use of the 4.9 GHz band, which the FCC views as underutilized in certain areas of the U.S. However, the proposed rules were strongly opposed by several groups. Critical infrastructure entities considered themselves as natural sharing partners with public safety incumbents and sought co-primary access to the band. Verizon and T-Mobile viewed integration of the band into the NPSBN as a de facto grant of free spectrum to AT&T, which has a contract with FirstNet for NPSBN management. Given the amount of spectrum at issue, up to 50 MHz in some areas, there are various predictions that the issue will eventually be appealed to the court system. We will see what the future holds.

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Over the summer, the FCC adopted the first nationwide Next Generation 911 (“NG911”) transition rules to define the responsibilities and set deadlines for originating service providers (“OSPs”) to implement NG911 capabilities and deliver 911 calls to NG911 systems. The final rules were published in the Federal Register on September 24, 2024.

Triggering the Transition.  The FCC adopted a two-phased NG911 transition scheme in which a valid request from a 911 Authority starts the transition process for each phase. A 911 Authority is considered to have submitted a valid Phase 1 request if it certifies that it has all the necessary infrastructure installed and operational to receive 911 traffic in an IP-based Session Initiation Protocol (“SIP”) format. A valid request to initiate Phase 2 requires the 911 Authority to certify that its reception of 911 traffic in SIP format complies with NG911 commonly accepted standards and that it can transmit such traffic to the Public Safety Answering Points (“PSAPs”) connected to it. In Phase 2, a 911 Authority must also certify that its Emergency Services IP Network (“ESInet”) is connected to a functioning Next Generation 911 Core Services (“NGCS”) network that can access a Location Validation Function (“LVF”) and interface with the Location Information Server (“LIS”) or its functional equivalent. As part of the transition, the 911 Authority must designate the NG911 Delivery Point locations to which the 911 Authority wants the OSPs to deliver 911 traffic. A valid request does not require all PSAPs connected to the ESInet to be NG911-ready.

Phase 1.  After receiving a valid Phase 1 request, OSPs are required to (i) deliver 911 traffic bound for PSAPs in the IP-based SIP format requested, (ii) obtain and deliver 911 traffic to enable the ESInet and other NG911 network facilities to transmit 911 traffic to the PSAP, (iii) deliver 911 traffic to in-state NG911 Delivery Points designated by the 911 Authority, and (iv) complete connectivity testing to confirm that the 911 Authority receives 911 traffic in the format requested.

Phase 2.  The completion of Phase 1 is a prerequisite to initiate the Phase 2 transition. Phase 2 requires OSPs to deliver 911 traffic to designated delivery points in an IP-based SIP format in accordance with NG911 commonly accepted standards, including embedding location information in the call signaling using Presence Information Data Format – Location Object (“PIDF-LO”), or its functional equivalent. OSPs must also be able to use a LIS or its functional equivalent to verify customer location information and records or acquire services that can be used to do so.

Federal Register Publication.  The Final Rule establishes that, “[f]or all OSPs, the initial compliance date will be extended based on the effective date of the rules—i.e., no OSP must comply with a 911 Authority Phase 1 request sooner than one year after the effective date of these rules, regardless of the timing of the 911 Authority’s request.” The effective date of the rules is November 25, 2024; however, the FCC is not requiring compliance with the rules establishing what constitutes a valid request from a 911 Authority and the rules establishing how the NG911 requirements may be modified by mutual agreement of the 911 Authority and OSPs until a separate compliance date for those provisions has been established.

Cost Allocation.  The FCC adopted default rules that require OSPs to bear the financial responsibility for transmitting and delivering 911 traffic to NG911 Delivery Points, including costs associated with completing any needed 911 traffic translation to IP-based format and the costs of delivering associated routing and location information. The default rules do not preclude alternative arrangements between 911 Authorities and OSPs at the state or local level.

Impact of Loper.  Earlier this year, the Supreme Court in a 6-3 vote overturned the landmark decision in Chevron v. Natural Resources Defense Council. The case overturning this precedent is captioned Loper Bright Enterprises v. Raimondo. The deference a federal agency, like the FCC, received when a Court was reviewing a challenge to an agency’s rules took a major hit on the heels of the Loper decision. This decision could sharply limit the authority of federal agencies to implement rules that are not clearly set forth by an Act of Congress. In this instance, the FCC relied on a patchwork of statutory authority to argue that the agency had authority to adopt these rules. It will be interesting to see whether a court has a chance to weigh in on these rules and, if so, whether the rules can survive an appellate challenge.

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Last month, the FCC issued a Notice of Proposed Rulemaking (“NPRM”) that could revise the agency’s Citizens Broadband Radio Service (“CBRS”) rules in the 3.5 GHz band. The objective of the proposed changes is to better protect incumbent federal users and improve the rules for both Priority Access License (“PAL”) holders and General Authorized Access (“GAA”) users. Initial Comments are due October 7th and Reply Comments must be filed by November 5th.

Background.  The Commission created a three-tiered sharing framework in the 3.5 GHz band in 2015. Priority access to – and sharing within – the band is managed by Spectrum Access System (“SAS”) administrators, which are automated frequency coordinators that coordinate operations between and among the three different tiers of users in the 3.5 GHz band. To assist in coordination, Environmental Sensing Capability (“ESC”) operators detect information about federal frequency use in and adjacent to the 3.5 GHz band and report that information to the SAS.

The highest tier of the CBRS 3.5 GHz band consists of incumbent federal and non-federal users, which receive protection from all other users. The second tier is comprised of the PAL holders, which purchased this spectrum at auction from the FCC (which we covered in this blog about five years ago!). The third tier represents users who are “licensed by rule” and must accept interference from other CBRS users, including other GAA users.

The FCC’s proposed changes to the CBRS framework include the following:

Federal Protection and Coordination.  The FCC seeks comment on whether it should expand the use of a coordination portal to protect federal operations, modify its ESC procedures to address potential effects on competition and the marketplace, and/or permit CBRS operations in offshore areas.

Citizens Broadband Radio Service Devices (“CBSD”) Information.  PAL holders and GAA users are required to register all CBSDs with a SAS administrator prior to operation. Commission rules require CBSDs to provide received signal strength and other measured parameters to the SAS administrators upon request, and disclosure of this information to the public is restricted. The FCC seeks comment on whether to update the breadth and scope of CBSD information provided to SASs, as well as the availability of CBSD information.

SAS Connectivity and/or Outages.  CBSDs are required to maintain SAS connectivity so the SAS is updated of any change in status and so that the CBSD can comply with SAS instructions within seconds of a triggering event. The FCC seeks comment on specific circumstances that may warrant less restrictive application of the SAS connectivity requirements.

Other Issues.  The FCC seeks comment on the efficacy of the current professional installation regime and whether any rule changes are needed to ensure that CBSDs are installed and maintained correctly. The NPRM also requests comment on whether the Commission can take steps to facilitate additional use of the 3.5 GHz band for low power indoor operations, including private networks. Finally, the Commission seeks comment on whether there are new rules, or clarifications of current rules, that could foster coexistence and preempt disputes among GAA users in a manner that will also advance GAA spectrum use and continued deployment of the CBRS.

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The Supreme Court in a 6-3 vote overturned the landmark decision in Chevron v. Natural Resources Defense Council, sharply limiting the authority of federal administrative agencies, including the FCC.[1] After the decision in Loper Bright Enterprises v. Raimondo,[2] it will be easier to challenge and overturn agency decisions, and federal agencies will be more hesitant to adopt new regulations absent clear Congressional direction. At the same time, the need for clear Congressional direction means that new legislation will need to spell out the agency’s role in greater detail.

While the Loper Bright decision involved a statute governing fisheries,[3] the decision will have far-reaching and significant effects across scores of federal agencies, impacting core policy matters on everything from banking to healthcare to energy and the environment, and of particular relevance to this analysis, telecommunications.

The overturning of the Chevron doctrine promises to impact ongoing telecommunications and broadband policy debates, including the regulatory classification of broadband Internet services and the scope of the FCC’s Title II authority. It may also reopen prior regulatory debates on everything from spectrum allocation matters to pole attachment and rights-of-way management decisions.

I. OVERVIEW OF THE DECISION

A. What is Chevron Deference?

The Chevron doctrine of judicial deference to agency interpretation arose forty years ago in a case examining whether an Environmental Protection Agency (EPA) regulation was consistent with the provisions of the Clean Air Act. (Interestingly, the EPA Administrator at the time was none other than Justice Gorsuch’s mother.) To answer the question, the Chevron court adopted a two-step approach for reviewing agency actions, essentially requiring courts to defer to the agency’s interpretation if the underlying statute is ambiguous or silent as to the activity in question.

Chevron deference was in large part based on the presumed expertise and institutional knowledge of the agency. Since its adoption, Chevron deference has allowed agencies, including the FCC, to address changing and evolving technologies and policies that may not have been anticipated at the time of the statute’s enactment.

B. The Loper Bright Decision

The Loper Bright decision represents a long-standing and concerted effort, particularly among conservatives, to overturn or reign in the deference afforded to administrative agencies under Chevron. In reversing Chevron, the Loper Bright Court concluded that 1) Chevron deference is inconsistent with the requirements of the Administrative Procedures Act (“APA”), and 2) Chevron deference violates the U.S. Constitution.

First, the Court noted that, under the APA, the role of “the reviewing court” – not the agency whose action it reviews – is to “decide all relevant questions of law” and “interpret … statutory provisions.”[4] The Court further found that the APA “requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the statute.”[5] The Court, therefore, concluded that Chevron deference is fundamentally inconsistent with the APA and must be overturned.

Second, the Court held that Chevron deference runs counter to the Article III of the U.S. Constitution, which assigns to the federal judiciary the responsibility and power to adjudicate “Cases” and “Controversies.” The Court reasoned that this Constitutional requirement necessarily requires that courts, and not independent agencies, determine the meaning of laws.

In reaching these conclusions, the Court specifically rejected the presumption that agency interpretations should be given deference because of the subject matter expertise of the agencies.  The Court held that Chevron’s presumption is “misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.”[6]

The Court also criticized the fact that Chevron deference required courts to accept and uphold a reasonable agency interpretation of a statute even if that interpretation was not the most reasonable interpretation. As Justice Gorsuch noted in his concurring opinion, this can result in a game of regulatory ping pong, with successive administrations adopting contradictory interpretations of the same law being upheld under Chevron. To illustrate his point, Justice Gorsuch focused on the FCC’s multiple conflicting interpretations of the regulatory classification of broadband Internet service under the federal Communications Act over the past twenty years:

Under Chevron, executive officials can replace one “reasonable” interpretation with another at any time, all without any change in the law itself. The result: Affected individuals “can never be sure of their legal rights and duties.” How bad is the problem? Take just one example. Brand X concerned a law regulating broadband internet services. There, the Court upheld an agency rule adopted by the administration of President George W. Bush because it was premised on a “reasonable” interpretation of the statute. Later, President Barack Obama’s administration rescinded the rule and replaced it with another. Later still, during President Donald J. Trump’s administration, officials replaced that rule with a different one, all before President Joseph R. Biden, Jr.’s administration declared its intention to reverse course for yet a fourth time. See, Safeguarding and Securing the Open Internet, 88 Fed. Reg. 76048 (2023); Brand X, 545 U. S., at 981–982. Each time, the government claimed its new rule was just as “reasonable” as the last. Rather than promoting reliance by fixing the meaning of the law, Chevron deference engenders constant uncertainty and convulsive change even when the statute at issue itself remains unchanged.[7]

C. Standard of Review in the Wake of Loper Bright

Rather than defer to agency determinations, the courts will now instead exercise their own independent judgment in determining the meaning of statutory provisions. The Court in Loper Bright, however, stated that in exercising such judgment, “courts may – as they have from the start – seek aid from the interpretations of those responsible for implementing particular statutes.”[8] The Court indicated that “such interpretations constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance.”[9] Thus, the key difference is that while courts may, and often should, look to agency expertise for guidance, the courts may not defer to agency interpretations.[10]

D. Impact on Prior Agency Decisions

The Court stated that it was not reversing previously decided cases that relied on Chevron deference, stating that “the holdings of those cases that specific agency actions are lawful – including the Clean Air Act holding of Chevron itself – are still subject to statutory stare decisis despite our change in interpretive methodology.”[11]

The Dissenting Opinion, however, notes that the majority’s ruling does not address the fact that many agency rulings and interpretations were never challenged and may therefore be vulnerable to challenge. The possibility of such challenges to existing agency rulings has increased further with a decision by the Supreme Court just a few days after the Loper Bright decision was announced. In Corner Post, Inc. v. Board Of Governors of the Federal Reserve System, the Court held that legal challenges to federal regulations can be brought outside the normal six-year statute of limitations if someone is not adversely affected by an agency rule until after the six-year window of time to file suit.

II. POTENTIAL IMPACT ON TELECOMMUNICATIONS AND BROADBAND POLICY

The Supreme Court’s abandonment of Chevron deference could have a significant impact on a variety of telecommunications and broadband rules and policies. The decision will likely result in a flurry of challenges to FCC and NTIA rulings and polices that may not be clearly supported by statutory language.

A. Open Internet Order

Among the most notable FCC rulings that will be impacted by the Loper Bright decision is the FCC’s 2024 Open Internet Order. As discussed above, the FCC’s back and forth reclassification of broadband Internet access service under the federal Communications Act, as a Title I unregulated “information service” or a Title II regulated “telecommunications service,” was specifically referenced in the Concurring Opinion of Justice Gorsuch to illustrate the inconsistent policy that can result from deference to agency rulings.

Several Internet service provider groups are currently challenging the FCC’s Open Internet Order in the U.S Court of Appeals for the Sixth Circuit. The removal of Chevron deference and Justice Gorsuch’s Concurrence have given the petitioners an additional basis to overturn the FCC’s Order, which the court will likely do if it does not agree with the FCC’s interpretation that broadband Internet access service is a “telecommunications service” subject to Title II regulatory authority. In fact, immediately following the Loper Bright decision, the Sixth Circuit directed parties to file supplemental briefing material addressing the effect of the decision on the court’s analysis of a motion to stay the Open Internet Order.

B. Other Likely Challenges

Among the other key telecom and broadband policy areas that we would expect to see challenges, or an expanded basis for challenge, are the following:

  • The FCC Digital Discrimination Order, which has been appealed to the U.S. Court of Appeals for Eighth Circuit.[12]
  • Challenges to the scope of the FCC’s administration of the federal Universal Service program under the so-called non-delegation doctrine,[13] as well as the FCC’s appointment of the Universal Service Administrative Company to manage the federal Universal Service Fund. There have been multiple challenges in various federal courts, some of which are still ongoing.
  • NTIA’s adoption of a low-cost service option requirement for Broadband Equity, Access and Deployment (“BEAD”) funding.

C. Prior FCC Determinations

The Loper Bright decision, when combined with the aforementioned Corner Post decision, could enable litigants to reopen FCC decisions in areas where the law is thought to have been settled. A putative petitioner might argue that the agency’s prior decision was never challenged (and therefore not granted Chevron deference), or the specific matter did not harm the petitioner so during the initial six-year statute of limitations. A petitioner could challenge prior FCC decisions involving spectrum regulations, pole attachments, and myriad other issues if the issue was never previously challenged, or if the petitioner is impacted only after the regulation was upheld.

D. An Updated Telecommunications Act? 

We expect that uncertainty surrounding the FCC’s authority to undertake crucial policy initiatives will lead to increased calls for major new telecommunications/broadband legislation.   Universal service contribution reform, for example, is viewed as a priority across the political spectrum, yet the FCC’s authority to do so is now in question. In the absence of clear legislative direction on that and other issues – including net neutrality, digital equity, consumer privacy, and the question of whether the FCC may exert regulatory authority over broadband Internet access as a general matter – the future of telecommunications policy will be clouded by uncertainty.

[1] Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837.

[2] Loper Bright Enterprises Et Al. v. Raimondo, Secretary Of Commerce, 603 U. S. ____ (2024)(“Opinion of the Court”) https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf. The Loper case was adopted with a companion case Relentless, Inc., et al. v. Department of Commerce, et al.

[3] The Magnuson-Stevens Fishery Conservation and Management Act. See 90 Stat. 331 (codified as amended at 16 U. S. C. §1801 et seq.).

[4] Opinion of the Court, at 21.

[5] Id., at 1.

[6] Id., at 5.

[7] Concurring Opinion of Justice Gorsuch, at 23.

[8] Opinion of the Court, at 16 citing Skidmore v. Swift & Co., 323 U. S. 134, at 140 (1944).

[9] Id., at 16.

[10] The Court further clarified that the ruling does not impact instances where Congress specifically conferred authority to an agency to interpret statutory terms, noting that some statutes “expressly delegate to an agency the authority to give meaning to a particular statutory term.” In such instances, the court’s role is to determine whether the agency has engaged in “reasoned decision making” within the boundaries of the authority delegated under the statute.

[11] Id., at 34. “Stare decisis” is a legal doctrine governing judicial adherence to the precedent set by prior rulings.

[12] Implementing the Infrastructure Investment and Jobs Act: Prevention and Elimination of Digital Discrimination, Report and Order and Further Notice of Proposed Rulemaking, GN Docket No. 22-69, FCC 23-100 (rel. Nov. 20, 2023).

[13] The “non-delegation doctrine” is the principle under the Constitution’s separation of powers that holds that legislative bodies cannot delegate their legislative powers to executive agencies or private entities.

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In 2019, the U.S. Department of Justice and the states of Kansas, Nebraska, Ohio, Oklahoma, and South Dakota brought a civil antitrust suit opposing the merger of T-Mobile and Sprint. According to the lawsuit, consolidating nationwide carriers from four to three would reduce competition to an unacceptable degree, ultimately harming consumers. To resolve the complaint, and in an effort to encourage competition, T-Mobile agreed to divest certain assets, including approximately 13.5 MHz of nationwide wireless spectrum in the 817-824/862-869 MHz band (“800 MHz Spectrum”). DISH Network stepped up and agreed to a purchase price of $3.59 billion.

The parties were originally due to close the deal by June 30, 2023, however, DISH needed additional time and negotiated an extension until April 1, 2024. Speculation was that DISH’s merger with Echostar and other improving economic conditions would place it on better footing to close the deal. This proved not to be the case, as DISH did not exercise its purchase right on April 1, 2024.

But the DOJ settlement had a Plan B. It provided that if DISH did not purchase the 800 MHz spectrum, T-Mobile would be required to hold an auction for the spectrum by October 1, 2024. Consistent with that requirement, on T-Mobile’s April 25, 2024, Q1 earnings call, Mike Sievert, T-Mobile’s president and CEO, stated the auction “has begun.”

Interestingly, T-Mobile’s settlement with the DOJ and the states provides that T-Mobile “will not be required to divest the 800 MHz Spectrum Licenses at a price that is lower than the price the [DISH] originally agreed to pay for such licenses” – effectively setting a reserve price of $3.59 billion. The agreement also states that T-Mobile will not be required to sell to “any other national facilities-based mobile wireless network operator, without the prior written approval of the United States.” So, AT&T and Verizon are out of the auction, as well as any other party that can’t raise $3.59+ billion for 800 MHz spectrum. That likely leaves a fairly small pool of potential participants and, if the auction fails, T-Mobile gets to keep the spectrum.

DISH thinks that gives T-Mobile a motive to not play fair. On the April 25, 2024, earnings call, Mr. Sievert stated that if the auction fails, T-Mobile gets “found spectrum and capacity.” Mr. Sievert spoke in glowing terms of the 800 MHz spectrum calling it “great spectrum” and stating there are “lots of interesting things [T-Mobile] can do with it, especially with emerging technologies.” DISH thinks this is evidence that T-Mobile is hoping the auction fails because it actually wants the spectrum for itself.

In a filing with the FCC earlier this month, DISH asserts T-Mobile refuses to share “even preliminary information about the auction” with DISH. This includes relevant rules and procedures by which DISH might choose to participate. DISH claims the intent is clear…  T-Mobile wants to undermine its own auction to keep the spectrum for itself. On the other hand, T-Mobile states it has received “nonbinding indications of interest” in the auction and that there is “reason to believe that [it] will meet the reserve” successfully auctioning off the spectrum. It just doesn’t believe DISH has the right to participate in the auction.

October is rapidly approaching, and it will be interesting to see where this 800 MHz spectrum, a significant asset to be sure, ultimately lands.

On May 7, 2024, the FCC released a Declaratory Ruling reclassifying “broadband Internet access service” (“BIAS”) as a “telecommunications service” subject to the jurisdiction of the FCC under Title II of the Communications Act. It was accompanied by an Order removing BIAS from most Title II regulations, and a Report and Order applying a set of Open Internet rules to BIAS providers. (For clarity, the remainder of this blog will refer to the proceeding as the “Order.”)[1]

We summarized key provisions impacting ISPs in an initial blog post on this topic earlier this month. In June, we will provide our best guesses as to what the future holds with respect to net neutrality, the upcoming election, and potential Congressional action. This post examines what some consider to be the centerpiece of the Order: the Open Internet Rules.

A Brief Net Neutrality History Lesson

In its 2015 “Open Internet Order,” the FCC adopted “bright line” net neutrality rules applicable to BIAS:  no blocking lawful content, no throttling lawful content, and no paid prioritization. The ink was barely dry on the new rules when, in January 2016, the newly GOP-led agency released the “Restoring Internet Freedom Order,” which largely converted the net neutrality rules from prohibited conduct to actions that were legal but which must be disclosed to customers. . .

To say net neutrality was a hotly-contested issue in 2015-16 is an understatement. The issue caused a 3,000% spike in the FCC’s web traffic and the agency received about 22 million comments. In August 2018, the FCC’s Inspector General concluded that the bulk of this was caused by a segment on John Oliver’s TV show.

While restoring net neutrality was identified early on as a priority for the Biden Administration, it was not until the fall of 2023, with the confirmation of Anna Gomez, that the Administration was able to secure a Democratic majority at the Commission. Following Commissioner Gomez’s confirmation, the Democrat-let FCC moved immediately to re-implement net neutrality rules.

Bright Line Rules

In the 2024 Order, the FCC reinstated several bright-line rules that:

  1. Prohibit BIAS providers from blocking lawful content, applications, services, or non-harmful devices (“No Blocking”);
  2. Prohibit BIAS providers from impairing or degrading lawful Internet traffic on the basis of content, application, service, or use of non-harmful device (“No Throttling”); and,
  3. Prohibit paid or affiliated prioritization practices (“No Paid Prioritization”).

The Order also implemented a “general conduct standard” prohibiting unreasonable interference or disadvantage in general, and adopted enhancements to transparency rules that had been narrowed by the FCC’s Restoring Internet Freedom Order” in 2017.

No Blocking

In the Order, the FCC determined that “the freedom to send and receive lawful content and to use and provide applications and services without fear of blocking continues to be essential to the Internet’s openness,” and expressed concern that BIAS providers may, in certain instances, be incentivized to block edge providers’ content. The no-blocking rule applies to transmissions of lawful content only. BIAS providers may refuse to transmit unlawful material, such as child pornography or copyright-infringing materials. The rule also entitles end users to connect, access, and use any lawful device of their choice, provided that the device does not harm the network. The no-blocking rule prohibits network practices that block a specific application or service, or any particular class of applications or services, unless it is found to be reasonable network management. Finally, this rule prohibits BIAS providers from charging edge providers a fee to avoid having edge providers’ content, services, or applications blocked from end-user customers.

No Throttling

The term “throttling” refers to conduct that is not outright blocking, but that inhibits the delivery of particular content, applications, or services, or particular classes of content, applications, or services. Under the Open Internet rules, BIAS providers are prohibited from impairing or degrading lawful Internet traffic on the basis of content, application, service, or use of non-harmful device. The no-throttling rule bans conduct that is not outright blocking, but that the FCC believes would inhibit the delivery of particular content, applications, or services, or particular classes of content, applications, or services. The rule also prohibits conduct that impairs or degrades lawful traffic to a non-harmful device or class of devices. The rule addresses instances in which a BIAS provider targets particular content, applications, services, or non-harmful devices and does not address slowing down or speeding up an end user’s connection to the Internet based on a choice clearly made by the end user. For example, a BIAS provider may offer a data plan in which a subscriber receives a set amount of data at one speed tier and any remaining data at a lower tier.

No Paid Prioritization

Finally, the FCC reinstated the prohibition on paid or affiliated prioritization practices, subject to a narrow waiver process. The term “paid prioritization” refers to the management of a broadband provider’s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity. As with throttling, the FCC found that BIAS providers have both an incentive and the ability to engage in paid prioritization. However, the FCC may waive the ban on paid prioritization if a petitioner demonstrates that the paid prioritization practice would provide some significant public interest benefit and would not harm the open nature of the Internet. A successful waiver request would require the petitioner to provide evidence that the practice furthers competition, innovation, consumer demand, or investment, and does not harm the open nature of the Internet. This could be done by providing evidence that the practice: (i) does not materially degrade or threaten to materially degrade the BIAS of the general public; (ii) does not hinder consumer choice; (iii) does not impair competition, innovation, consumer demands, or investment; and (iv) does not impede any forms of expression, types of service, or points of view. This is an extremely high bar and waivers will not be routinely granted.

General Conduct Standard

In addition to the bright-line rules above, the FCC also reinstated a “no-unreasonable interference/disadvantage standard.” This standard allows the FCC to prohibit practices that unreasonably interfere with the ability of consumers or edge providers to select, access, and use BIAS to reach one another. This standard will operate on a case-by-case basis, applying a non-exhaustive list of factors, and is designed to evaluate other current or future BIAS provider policies or practices—not covered by the bright-line rules—and prohibit those that harm the open Internet. The FCC provided guidance to BIAS providers regarding the application of the standard and adopted a non-exhaustive list of factors that the agency will consider in its analysis. These factors include: (i) whether a practice allows end-user control and enables consumer choice; (ii) whether a practice has anticompetitive effects in the market for applications, services, content, or devices; (iii) whether a practice affects consumers’ ability to select, access, or use lawful broadband services, applications, or content; (iv) the effect a practice has on innovation, investment, or broadband deployment; (v) whether a practice threatens free expression; (vi) whether a practice is application agnostic; and (vii) whether a practice conforms to best practices and technical standards adopted by open, broadly representative, and independent Internet engineering, governance initiatives, or standards-setting organizations.

Transparency Rule

The FCC also adopted enhancements to existing transparency rules that require BIAS providers to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings. BIAS providers must maintain the accuracy of these disclosures. When there is a material change in a provider’s disclosure of commercial terms, network practices, or performance characteristics, the provider has a duty to update the disclosure in a manner that is “timely and prominently disclosed in plain language accessible to current and prospective end users and edge providers, the Commission, and third parties who wish to monitor network management practices for potential violations of open Internet principles.”

*       *       *

These rules have been adopted, rescinded, and readopted in the past decade. And they could be rescinded yet again depending on the outcome of the 2024 Presidential election. Our next post will explore different election scenarios, likely court challenges, and prospects for Congressional action to predict what may be next.

[1] In the Matter of Safeguarding and Securing the Open Internet, WC Docket Nos. 23-320, 17-108, Declaratory Ruling, Order, Report and Order, and Order on Reconsideration, FCC 24-52, rel. May 7, 2024 (“Order”).