There’s been exciting progress in US drone policy in the past few months. First, the FAA in April announced surprising new guidance in its Aeronautics Information Manual, re: drone airspace access. As I noted in an article for the State Aviation Journal, the new Manual notes:

There can be certain local restrictions to airspace. While the FAA is designated by federal law to be the regulator of the NAS [national airspace system], some state and local authorities may also restrict access to local airspace. UAS pilots should be aware of these local rules.

That April update has been followed up by a bigger, drone policy update from FAA. On July 14, the FAA went further than the April guidance and updated and replaced its 2015 guidance to states and localities about drone regulation and airspace policy.

In this July 2023 guidance, I was pleasantly surprised to see the FAA recognize some state and local authority in the “immediate reaches” airspace. Notably, in the new guidance the FAA expressly notes that that state laws that “prohibit [or] restrict . . . operations by UAS in the immediate reaches of property” are an example of laws not subject to conflict preemption.

A handful of legal scholars–like ASU Law Professor Troy Rule and myself–have urged federal officials for years to recognize that states, localities, and landowners have a significant say in what happens in very low-altitude airspace–the “immediate reaches” above land. That’s because the US Supreme Court in US v. Causby recognized that the “immediate reaches” above land is real property owned by the landowner:

[I]t is obvious that, if the landowner is to have full enjoyment of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere. …As we have said, the flight of airplanes, which skim the surface but do not touch it, is as much an appropriation of the use of the land as a more conventional entry upon it.

Prior to these recent updates, the FAA’s position on which rules apply in very low-altitude airspace–FAA rules or state property rules–was confusing. The agency informally asserts authority to regulate drone operations down to “the grass tips”; however, many landowners don’t want drones to enter the airspace immediately above their land without permission and would sue to protect their property rights. This is not a purely academic concern: the uncertainty about whether and when drones can fly in very low-altitude airspace has created damaging uncertainty for the industry. As the Government Accountability Office told Congress in 2020:

The legal uncertainty surrounding these [low-altitude airspace] issues is presenting challenges to integration of UAS [unmanned aircraft systems] into the national airspace system.

With this July update, the FAA helps clarify matters. To my knowledge, this is the first mention of “immediate reaches,” and implicit reference to Causby, by the FAA. The update helpfully protects, in my view, property rights and federalism. It also represents a win for the drone industry, which finally has some federal clarity on this after a decade of uncertainty about how low they can fly. Drone operators now know they can sometimes be subject to local rules about aerial trespass. States and cities now know that they can create certain, limited prohibitions, which will be helpful to protect sensitive locations like neighborhoods, stadiums, prisons, and state parks and conservation areas.

As an aside: It seems possible one motivation for the FAA adding this language is to foreclose future takings litigation (a la Cedar Point Nursery v. Hassid) against the FAA. With this new guidance, the FAA can now point out in future takings litigation that they do not authorize drone operations in the immediate reaches of airspace; this FAA guidance indicates that operations in the immediate reaches is largely a question of state property and trespass laws.

On the whole, I think this new FAA guidance is strong, especially the first formal FAA recognition of some state authority over the “immediate reaches.” That said, as a USDOT Inspector General report to Congress pointed out last year, the FAA has not been responsive when state officials have questions about creating drone rules to complement federal rules. In 2018, for instance, a lead State “participant [in an FAA drone program] requested a clarification as to whether particular State laws regarding UAS conflicted with Federal regulations. According to FAA, as of February 2022 . . . FAA has not yet provided an opinion in response to that request.”

Four years-plus of silence from the FAA is a long time for a state official to wait, and it’s a lifetime for a drone startup looking for legal clarity. I do worry about agency non-answers on preemption questions from states, and how other provisions in this new guidance will be interpreted. Hopefully this new guidance means FAA employees can be more responsive to inquiries from state officials. With the April and July airspace policy updates, the FAA, state aviation offices, the drone industry, and local officials are in a better position to create commercial drone networks nationwide, while protecting the property and privacy expectations of residents.

Further Reading

See my July report on drones and airspace policy for state officials, including state rankings: “2023 State Drone Commerce Rankings: How prepared is your state for drone commerce?”.

I stumbled across a surprising drone policy update in the FAA’s Aeronautical Information Manual (Manual) last week. The Manual contains official guidance and best practices to US airspace users. (My friend Marc Scribner reminds me that the Manual is not formally regulatory, though it often restates or summarizes regulations.) The manual has a (apparently) new section: “Airspace Access for UAS.” In subsection “Airspace Restrictions To Flight” (11-4-6) it notes:

There can be certain local restrictions to airspace. While the FAA is designated by federal law to be the regulator of the NAS [national airspace system], some state and local authorities may also restrict access to local airspace. UAS pilots should be aware of these local rules.

Legally speaking, the FAA is recognizing there is no “field preemption” when it comes to low-altitude airspace restrictions. In sharing this provision around with aviation and drone experts, each agreed this was a new and surprising policy guidance. The drone provisions appear to have been part of updates made on April 20, 2023. In my view, it’s very welcome guidance.

Some background: In 2015, the FAA released helpful “fact sheet” to state and local officials about drone regulations, as state legislatures began regulating drone operations in earnest. The FAA noted the several drone-related areas, including aviation safety, where federal aviation rules are extensive. The agency noted:

Laws traditionally related to state and local police power – including land use, zoning, privacy,
trespass, and law enforcement operations – generally are not subject to federal regulation.

To ensure state and federal drone laws were not in conflict, the FAA recommended that state and local officials consult with the FAA before creating “operational UAS restrictions on flight altitude, flight paths; operational bans; any regulation of the navigable airspace.”

That guidance is still current and still useful. Around 2017, however, it seems some within the FAA began publicly and privately taking a rather harder line regarding state and local rules about drone operations. For instance, in July 2018, someone at the FAA posted a confusing and brief new statement on the FAA website about state and local drone rules that is hard to reconcile with the 2015 guidance.

Others noticed and reported to Congress a change at the FAA and the legal uncertainty created as companies wanted to deploy and states and cities wanted reasonable rules on operations to protect their residents. Last year the USDOT Inspector General told Congress that in 2018 a lead State participant in an FAA drone program requested a clarification as to whether particular State laws regarding drones conflicted with FAA rules. When the Inspector General asked the FAA for an update, four years had passed, and “FAA has not yet provided an opinion in response to that request.” The GAO likewise told Congress a few years ago, an unsettled question has plagued the drone industry and state lawmakers for years: Can states enforce local restrictions for surface airspace? GAO reported that the federal government had not taken a formal position regarding whether local restrictions were enforceable.

Finally the FAA makes clear: Yes, in some circumstances, state and local officials may restrict access to local airspace.

Unfortunately the drone industry and aviation regulators nationwide have lost several years (and many companies) waiting for a clear federal position.

Courts on Field Preemption

Many drone advocates, even recently, assert that states and local regulators can’t restrict surface airspace. Some incorrectly claim, among other things, that only the FAA can regulate airspace and that state and local airspace rules are subject to “field preemption.” Courts have ruled against drone advocates in the three cases I’m aware of where field preemption was raised: Singer v. City of Newton, NPPA v. McCraw, and Xizmo v. New York City. As the court said in Singer:

the FAA explicitly contemplates state or local regulation of pilotless aircraft, defeating Singer’s argument that the whole field is exclusive to the federal government.

Legal Scholarship on Drone Regulation

Likewise, it was clear to many legal scholars that some state and local airspace rules would apply to drones. Around 2016, I set out to write a policy research paper on the need for clear and uniform federal rules about low-altitude airspace that small drones use (“surface airspace”). I ran into a problem with my thesis: surface airspace policy is not a straightforward exercise of federal regulation. Analysis by legal scholars like Prof. Troy Rule (ASU Law) Prof. Laura Donohue (Georgetown Law), and Prof. Henry Smith (Harvard Law) convinced me that any federal aviation rules purporting to authorize drone flights into surface airspace (say, below 200 feet altitude or so) would run into a buzzsaw of legal challenges from state governments and landowners concerning state authority, trespass, and private property takings.

That’s because it is black-letter law that “real property” in the US has a three-dimensional aspect that includes surface airspace. Further, determinations about landowners’ property rights and entitlements are typically determined by common law and state law, not federal aviation officials. 

My original thesis scrapped, my paper went in new direction. My research about drone policy took me through the history of surface airspace propertization, back to 19th century Anglo-American legal treatises and court decisions, which I explored in a working paper published by the Mercatus Center in 2020 (and edited and republished by the Akron Law Review). To accelerate commercial drone deployments nationwide, I proposed a “cooperative federalism”–not FAA alone–approach to permitting drone operations in surface airspace.

So: courts have been clear about this, legal scholars have been clear about this, and now, finally, the FAA has been clear about this in the updated Manual: “Some state and local authorities may also restrict access to local airspace. UAS pilots should be aware of these local rules.” 

With that long-awaited clear statement in April 2023, the major stakeholders–including FAA, state aviation offices, the drone industry, and local officials–can begin the hard work of building world-class commercial drone operations nationwide while protecting the property and privacy expectations of residents.

I write about telecom and tech policy and have found that lawmakers and regulators are eager to learn about new technologies. That said, I find that good tech policies usually die of neglect as lawmakers and lobbyists get busy patching up or growing “legacy” policy areas, like public pensions, income taxes, Medicare, school financing, and so forth. So it was a pleasant surprise this spring to see Arizona lawmakers prioritize and pass several laws that anticipate and encourage brand-new technologies and industries.

Flying cars, autonomous vehicles, telehealth–legislating in any one of these novel legal areas is noteworthy. New laws in all of these areas, plus other tech areas, as Arizona did in 2021, is a huge achievement and an invitation to entrepreneurs and industry to build in Arizona.

Re: AVs and telehealth, Arizona was already a national leader in autonomous vehicles and Gov. Ducey in 2015 created the first (to my knowledge) statewide AV task force, something that was imitated nationwide. A new law codifies some of those executive orders and establishes safety rules for testing and commercializing AVs. Another law liberalizes and mainstreams telehealth as an alternative to in-person doctor visits. 

A few highlights about new Arizona laws on legal areas I’ve followed more closely:

1. Urban air mobility and passenger drones

Arizona lawmakers passed a law (HB 2485) creating an Urban Air Mobility study committee. 26 members of public and private representatives are charged with evaluating current regulations that affect and impede the urban air mobility industry and making recommendations to lawmakers. “Urban air mobility” refers to the growing aviation industry devoted to new, small aircraft designs, including eVTOL and passenger drones, for the air taxi industry. Despite the name, urban air mobility includes intra-city (say, central business district to airport) aviation as well as regional aviation between small cities.

The law is well timed. The US Air Force is giving eVTOL aircraft companies access to military airspace and facilities this year, in part to jumpstart the US commercial eVTOL industry, and NASA recently released a new study (PDF) about regional aviation and technology. NASA and the FAA last year also endorsed the idea of urban air mobility corridors and it’s part of the national strategy for new aviation.

The federal government partnering with cities and state DOTs in the next few years to study air taxis and to test the corridor concept. This Arizona study committee might be to identify possible UAM aerial corridors in the state and cargo missions for experimental UAM flights. They could also identify the regulatory and zoning obstacles to, say, constructing or retrofitting a 2-story air taxi vertiport in downtown Phoenix or Tucson.

Several states have drone advisory committees but this law makes Arizona a trailblazer nationally when it comes to urban air mobility. Very few states have made this a legislative priority: In May 2020 Oklahoma law created a task force to examine autonomous vehicle and passenger drones. Texas joined Oklahoma and Arizona on this front–this week Gov. Abbot signed a similar law creating an urban air mobility committee.

2. Smart corridor and broadband infrastructure construction

Infrastructure companies nationwide are begging state and local officials to allow them to build along roadways. These “smart road” projects include installing 5G antennas, fiber optics, lidar, GPS nodes, and other technologies for broadband or for connected and autonomous vehicles. To respond to that trend, Arizona passed a law (HB 2596) on May 10 that allows the state DOT–solely or via public-private partnership–to construct and lease out roadside passive infrastructure.

In particular, the new law allows the state DOT to construct, manage, and lease out passive “telecommunication facilities”–not simply conduit, which was allowed under existing law. “Telecommunication facilities” is defined broadly:

Any cable, line, fiber, wire, conduit, innerduct, access manhole, handhole, tower, hut, pedestal, pole, box, transmitting equipment, receiving equipment or power equipment or any other equipment, system or device that is used to transmit, receive, produce or distribute by wireless, wireline, electronic or optical signal for communication purposes.

The new Section 28-7383 also allows the state to enter into an agreement with a public or private entity “for the purpose of using, managing or operating” these state-owned assets. Access to all infrastructure must be non-exclusive, in order to promote competition between telecom and smart city providers. Access to the rights-of-way and infrastructure must also be non-discriminatory, which prevents a public-private partner from favoring its affiliated or favored providers. 

Leasing revenues from private companies using the roadside infrastructure are deposited into a new Smart Corridor Trust Fund, which is used to expand the smart corridor network infrastructure. The project also means it’s easier for multiple providers to access the rights-of-way and roadside infrastructure, making it easier to deploy 5G antennas and extend fiber backhaul and Internet connectivity to rural areas.

It’s the most ambitious smart corridor and telecom infrastructure deployment program I’ve seen. There have been some smaller projects involving the competitive leasing of roadside conduit and poles, like in Lincoln, Nebraska and a proposal in Michigan, but I don’t know of any state encouraging this statewide.

For more about this topic of public-private partnerships and open-access smart corridors, you can read my law review article with Prof. Korok Ray: Smart Cities, Dumb Infrastructure.

3. Legal protections for residents to install broadband infrastructure on their property

Finally, in May, Gov. Ducey signed a law (HB 2711) sponsored by Rep. Nutt that protects that resembles and supplements the FCC’s “over-the-air-reception-device” rules that protect homeowner installations of wireless broadband antennas. Many renters and landowners–especially in rural areas where wireless home Internet makes more sense–want to install wireless broadband antennas on their property, and this Arizona law protects them from local zoning and permitting regulations that would “unreasonably” delay or raise the cost of installation of antennas. (This is sometimes called the “pizza box rule”–the antenna is protected if it’s smaller than 1 meter diameter.) Without this state law and the FCC rules, towns and counties could and would prohibit antennas or fine residents and broadband companies for installing small broadband and TV antennas on the grounds that the antennas are an unpermitted accessory structure or zoning violation.

The FCC’s new 2021 rules are broader and protect certain types of outdoor 5G and WiFi antennas that serve multiple households. The Arizona law doesn’t extend to these “one-to-many” antennas but its protections supplement those FCC rules and clearer than FCC rules, which can directly regulate antennas but not town and city officials. Between the FCC rules and the Arizona law, Arizona households and renters have new, substantial freedom to install 5G and other wireless antennas on their rooftops, balconies, and yard poles. In rural areas especially this will help get infrastructure and small broadband antennas installed quickly on private property.

Too often, policy debates by state lawmakers and agencies are dominated by incremental reforms of longstanding issues and established industries. Very few states plant the seeds–via policy and law–for promotion of new industries. Passenger drones, smart corridors, autonomous vehicles, and drone delivery are maturing as technologies. Preparing for those industries signals to companies and their investors that innovation, legal clarity, and investment is a priority for the state. Hopefully other states will take Arizona’s lead and look to encouraging the industries and services of the future.

Content moderation online is a newsworthy and heated political topic. In the past year, social media companies and Internet infrastructure companies have gotten much more aggressive about banning and suspending users and organizations from their platforms. Today, Congress is holding another hearing for tech CEOs to explain and defend their content moderation standards. Relatedly, Ben Thompson at Stratechery recently had interesting interviews with Patrick Collison (Stripe), Brad Smith (Microsoft), Thomas Kurian (Google Cloud), and Matthew Prince (Cloudflare) about the difficult road ahead re: content moderation by Internet infrastructure companies.

I’m unconvinced of the need to rewrite Section 230 but like the rest of the Telecom Act—which turned 25 last month–the law is showing its age. There are legal questions about Internet content moderation that would benefit from clarifications from courts or legal scholars.

(One note: Social media common carriage, which some advocates on the left, right, and center have proposed, won’t work well, largely for the same reason ISP common carriage won’t work well—heterogeneous customer demands and a complex technical interface to regulate—a topic for another essay.)

The recent increase in content moderation and user bans raises questions–for lawmakers in both parties–about how these practices interact with existing federal laws and court precedents. Some legal issues that need industry, scholar, and court attention:

Public Officials’ Social Media and Designated Public Forums

Does Knight Institute v. Trump prevent social media companies’ censorship on public officials’ social media pages?

The 2nd Circuit, in Knight Institute v. Trump, deemed the “interactive space” beneath Pres. Trump’s tweets a “designated public forum,” which meant that “he may not selectively exclude those whose views he disagrees with.” For the 2nd Circuit and any courts that follow that decision, the “interactive space” of most public officials’ Facebook pages, Twitter feeds, and YouTube pages seem to be designated public forums.

I read the Knight Institute decision when it came out and I couldn’t shake the feeling that the decision had some unsettling implications. The reason the decision seems amiss struck me recently:

Can it be lawful for a private party (Twitter, Facebook, etc.) to censor members of the public who are using a designated public forum (like replying to President Trump’s tweets)? 

That can’t be right. We have designated public forums in the physical world, like when a city council rents out a church auditorium or Lions Club hall for a public meeting. All speech in a designated public forum is accorded the strong First Amendment rights found in traditional public forums. I’m unaware of a case on the subject but a court is unlikely to allow the private owner of a designated public forum, like a church, to censor or dictate who can speak when its facilities are used as a designated public forum.

The straightforward implication from Knight Institute v. Trump seems to be that neither politicians nor social media companies can make viewpoint-based decisions about who can comment on or access an official’s social media account.

Knight Institute creates more First Amendment problems than it solves, and could be reversed someday. [Ed. update: In April 2021, the Supreme Court vacated the 2nd Circuit decision as moot since Trump is no longer president. However, a federal district court in Florida concluded, in Attwood v. Clemons, that public officials’ “social media accounts are designated public forums.” The Knight Institute has likewise sued Texas Attorney General Paxton for blocking user and claimed that his social media feed is a designated public forum. It’s clear more courts will adopt this rule.] But to the extent Knight Institute v. Trump is good law, it seems to limit how social media companies moderate public officials’ pages and feeds.

Cloud neutrality

How should tech companies, lawmakers, and courts interpret Sec. 512?

Wired recently published a piece about “cloud neutrality,” which draws on net neutrality norms of nondiscrimination towards content and applies them to Internet infrastructure companies. I’m skeptical of the need or constitutionality of the idea but, arguably, the US has a soft version of cloud neutrality embedded in Section 512 of the DMCA.

The law conditions the copyright liability safe harbor for Internet infrastructure companies only if: 

the transmission, routing, provision of connections, or storage is carried out through an automatic technical process without selection of the material by the service provider.

17 USC § 512(a).

Perhaps a copyright lawyer can clarify, but it appears that Internet infrastructure companies may lose their copyright safe harbor if they handpick material to censor. To my knowledge, there is no scholarship or court decision on this question.

State Action

What evidence would a user-plaintiff need to show that their account or content was removed due to state action?

Most complaints of state action for social media companies’ content moderation are dubious. And while showing state action is hard to prove, in narrow circumstances it may apply. The Supreme Court test has said that when there is a “sufficiently close nexus between the State and [a] challenged action,” the action of a private company will be treated as state action. For that reason, content removals made after non-public pressure or demands from federal and state officials to social media moderators likely aren’t protected by the First Amendment or Section 230.

Most examples of federal and state officials privately jawboning social media companies will never see the light of day. However, it probably occurs. Based on Politico reporting, for instance, it appears that state officials in a few states leaned on social media companies to remove anti-lockdown protest events last April. It’s hard to know exactly what occurred in those private conversations, and Politico has updated the story a few times, but examples like that may qualify as state action.

Any public official who engages in non-public jawboning resulting in content moderation could also be liable to a Section 1983 claim–civil liability for deprivation of an affected user’s constitutional rights.

Finally, what should Congress do about foreign state action that results in tech censorship in the US? A major theme of the Stretechery interviews ist that many tech companies feel pressure to set their moderation standards based on what foreign governments censor and prohibit. Content removal from online services because of foreign influence isn’t a First Amendment problem, but it is a serious free speech problem for Americans.

Many Republicans and Democrats want to punish large tech companies for real or perceived unfairness in content moderation. That’s politics, I suppose, but it’s a damaging instinct. For one thing, the Section 230 fixation distract free-market and free-speech advocates from, among other things, alarming proposals for changes to the FEC that empower it to criminalize more political speech. The singular focus on Section 230 repeal-reform distracts from these other legal questions about content moderation. Hopefully the Biden DOJ or congressional hearings will take some of these up.

On January 7, with the Pai FCC winding down, the agency made an important rule change that gives US households more broadband options. Small, outdoor broadband antennas installed on private property will be shielded from “unreasonable” state and local restrictions and fees, much like satellite TV dishes are protected today. The practical effect is most consumers can install small broadband devices on their rooftops, on their balconies, or on short poles in their yards in order to bring broadband to their home and their neighbors’. The FCC decision was bipartisan and unanimous and will open up tens of millions of new installation sites for certain 5G small cells, WISP systems, outdoor WiFi, mesh network nodes, and other wireless devices.

Previously, satellite dish installation was protected from most fees and restrictions but most small broadband antennas were not.

The rule change involved the FCC’s 20 year-old over-the-air-reception-device (OTARD) rules, which protect consumers from unreasonable local fees and restrictions when installing satellite TV dishes. The rules came about because in the 1990s states and cities often restricted or imposed fees on homeowners installing satellite TV dishes. Congress got involved and, circa 1998, the FCC created the OTARD rules, aka the “pizza box rules,” to protect the installation of TV dishes less than 1 meter diameter.

In recent years, homeowners and tenants increasingly want to install small, outdoor broadband antennas on their property to bring new services and competition to their neighborhood. However, they face many of the same problems satellite dish installers faced in the 1990s. From my comments (pdf) to the FCC in the proceeding:

For instance, a few years ago a woman in the Charlottesville, Virginia, area switched from cable to less expensive satellite TV service in order to save money after being laid off. She had a satellite dish installed in her front yard—the only place the dish could receive an adequate signal. A city zoning official sent her and about 30 neighbors letters informing them that their (OTARD rules-covered) satellite dishes were, per local ordinance, unpermitted accessory structures. Any homeowners who did not remove their dish faced fines of $250 per day.

Fortunately for the homeowners, the woman was familiar with the OTARD rules and informed the local officials of the FCC’s authority.38 After being informed of the FCC’s OTARD regulations, the city officials declined to enforce the local ordinance and agreed to revisit the ordinance for compliance with FCC rules.

Today, WISPs and other broadband providers face similar issues when trying to install antennas on private property. It’s hard to know how much the OTARD rules helped expand satellite TV penetration but it helped. The FCC rules coincided with the installation of 20-30 million small dishes on private property.

With the rules extended to broadband antennas, operators will have millions more low-cost siting options. One provider, Starry, wrote to the FCC that today “it takes on average 100 days to complete the permitting process for a single base station, which accounts for about 80% of the time that it spends in activating a site.” Starry says that with the January 2021 rule change, they’ll likely activate 25-30% more antenna sites in the next year, bringing a broadband option to 1 million additional households. Take projections with a grain of salt, but it’s clear the new rules will improve coverage and competition.

There are some exceptions. States and cities are able to restrict antenna installation if they can show a safety hazard or a historic preservation issue. Generally, however, the rules are protective of homeowners and tenants. The changes faced some opposition from cities, counties, and homeowners associations but it’s great to see a bipartisan and unanimous decision in the final days of Chairman Pai’s broadband expansion-focused tenure to give consumers more protection for installing and self-provisioning small broadband antennas.

My research focus lately has been studying and encouraging markets in airspace. Aviation airspace is valuable but has been assigned to date by regulatory mechanisms, custom, and rationing by industry agreement. This rationing was tolerable decades ago when airspace use was relatively light. Today, regulators need to consider markets in airspace–allowing the demarcation, purchase, and transfer of aerial corridors–in order to give later innovators airspace access, to avoid anticompetitive “route squatting,” and to serve as a revenue stream for governments, much like spectrum auctions and offshore oil leases.

Last month, the FAA came out in favor of “urban air mobility corridors”–point-to-point aerial highways that new eVTOL, helicopter, and passenger drones will use. It’s a great proposal, but the FAA’s plan for allocating and sharing those corridors is largely to let the industry negotiate it among themselves (the “Community Business Rules”):

Operations within UAM Corridors will also be supported by CBRs collaboratively developed by the stakeholder community based on industry standards or FAA guidelines and approved by the FAA.

This won’t end well, much like Congress and the Postmaster General letting the nascent airlines in the 1930s divvy up air routes didn’t end well–we’re still living with the effects of those anticompetitive decisions. Decades later the FAA is still refereeing industry fights over routes and airport access.

Rather, regulators should create airspace markets because otherwise, as McKinsey analysts noted last year about urban air mobility:

first movers will have an advantage by securing the most attractive sites along high-traffic routes.

Airspace today is a common-pool resource rationed via regulation and custom. But with drones, eVTOL, and urban air mobility, congestion will increase and centralized air traffic control will need to give way to a more federated and privately-managed airspace system. As happened with spectrum: a demand shock to an Ostrom-ian common pool resource should lead to enclosure and “propertization.”

Markets in airspace probably should have been created decades ago once airline routes became fixed and airports became congested. Instead, the centralized, regulatory rationing led to large economic distortions:

For example, in 1968, nearly one-third of peak-time New York City air traffic–the busiest region in the US–was general aviation (that is, small, personal) aircraft. To combat severe congestion, local authorities raised minimum landing fees by a mere $20 (1968 dollars) on sub 25-seat aircraft. General aviation traffic at peak times immediately fell over 30%—suggesting that a massive amount of pre-July 1968 air traffic in the region was low-value. The share of aircraft delayed by 30 or more minutes fell from 17% to about 8%.

This pricing of airspace and airport access was half-hearted and resisted by incumbents. Regulators fell back on rationing via the creation of “slots” at busy airports, which were given mostly to dominant airlines. Slots have the attributes of property–they can be defined, valued, sold, transferred, borrowed against. But the federal government refuses to call it property, partly because of the embarrassing implications. The GAO said in 2008:

[the] argument that slots are property proves too much—it suggests that the agency [FAA] has been improperly giving away potentially millions of dollars of federal property, for no compensation, since it created the slot system in 1968.

It may be too late to have airspace and route markets for traditional airlines–but it’s not too late for drones and urban air mobility. Demarcating aerial corridors should proceed quickly to bring the drone industry and services to the US. As Adam has pointed out, this is a global race of “innovation arbitrage”–drone firms will go where regulators are responsive and flexible. Federal and state aviation officials should not give away valuable drone routes, which will end up going to first-movers and the politically powerful. Airspace markets, in contrast, avoid anticompetitive lock-in effects and give drone innovators a chance to gain access to valuable routes in the future.

Research and Commentary on Airspace Markets

Law journal article. The North Carolina JOLT published my article, “Auctioning Airspace,” in October 2019. I argued for the FAA to demarcate and auction urban air mobility corridors (SSRN).

Mercatus white paper. In March 2020 Connor Haaland and I explained that federal and state transportation officials could demarcate and lease airspace to drone operators above public roads because many state laws allow local and state authorities to lease such airspace.

Law journal article. A student note in a 2020 Indiana Law Journal issue discusses airspace leasing for drone operations (pdf).

FAA report. The FAA’s Drone Advisory Committee in March 2018 took up the idea of auctioning or leasing airspace to drone operators as a way to finance the increased costs of drone regulations (pdf).

GAO report. The GAO reviewed the idea of auctioning or leasing airspace to drone operators in a December 2019 report (pdf).

Airbus UTM white paper. The Airbus UTM team reviewed the idea of auctioning or leasing airspace to UAM operators in a March 2020 report, “Fairness in Decentralized Strategic Deconfliction in UTM” (pdf).

Federalist Society video. I narrated a video for the Federalist Society in July 2020 about airspace design and drone federalism (YouTube).

Mercatus Center essay. Adam Thierer, Michael Koutrous, and Connor Haaland wrote about drone industry red tape how the US can’t have “innovation by regulatory waiver,” and how to accelerate widespread drone services.

I’ve discussed the idea in several outlets and events, including:

• Wall Street Journal op-ed
• 2019 Global Air Traffic Management Conference panel
• A Harvard Law School drone policy event
• Air Traffic Management magazine essay

Podcast Episodes about Drones and Airspace Markets

• In a Federalist Society podcast episode, Adam Thierer and I discussed airspace markets and drone regulation with US Sen. Mike Lee. (Sen. Lee has introduced a bill to draw a line in the sky at 200 feet in order to clarify and formalize federal, state, and local powers over low-altitude airspace.)
• Tech Policy Institute podcast episode with Sarah Oh, Eli Dourado, and Tom Lenard.
• Macro Musings podcast episode with David Beckworth.
• Drone Radio Show podcast episode with Randy Goers.
• Drones in America podcast episode with Grant Guillot.
• Uncommon Knowledge podcast episode with Juliette Sellgren.
• Building Tomorrow podcast episode with Paul Matzko and Matthew Feeney.
• sUAS News podcast episode and interview.

By Brent Skorup & Connor Haaland

We think drones are exciting technology with the potential to improve medical logistics, agriculture, transportation, and other industries. But drones fly at low altitudes and, to many Americans, drones represent a nuisance, trespasser, or privacy invasion when they fly over private property. This is why we think the FAA and states should work together to lease airspace above public roads—it would free up millions of miles of low-altitude airspace for operations while avoiding many lawsuits from public and private landowners.

In the meantime, states and landowners are pushing back on certain drone activities. Per Prof. Stephen Migala, about 10 states have created “no-fly zones” for drones, prohibiting flights over government property, state forests, or sensitive areas. Most state airspace rules prohibit drones at low-altitudes over “critical infrastructure” like nuclear, gas and electric facilities, bridges, dams, and communication networks. Some states prohibit drones over jails, prisons, and schools.

In Texas, in fact, there is litigation over a state ban on photography drones above critical infrastructure, sports venues, and prisons. One of the legal issues is whether state police powers over trespass, nuisance, and privacy allow states to exclude drones from low-altitude airspace. As we’ve pointed out in a GovTech piece, this is a festering issue in drone regulation—no one knows at what altitude private property (and state police powers) begins.

For private property owners who don’t want drones flying over their property, they might be able to bring a trespass lawsuit under existing state law. Around 20 states expressly vest air rights with landowners. However, many states also recognize a privilege of non-disruptive flight, so it’s unclear if a landowner would win a lawsuit in those states. We’re unaware of the issue being litigated.

Unfortunately, many landowners and annoyed neighbors are taking matters into their own hands and shooting drones out of the sky. We’ve identified over a dozen such encounters in the past eight years, though there are likely some near-misses and unreported cases out there.  (Don’t shoot a drone–it’s dangerous and, as the cases below show, you risk being arrested and convicted for criminal mischief or some other crime.)

1. In November of 2012, unknown shooters in Bucks County, Pennsylvania shot down a drone that was flying over their hunt club. The drone was flown by an animal rights group to bring scrutiny to pigeon shooting and this was the fourth time the activists’ drone had been shot down. No criminal charges appear to have been filed.
2. In October of 2014, a man shot down a drone in Lower Township, New Jersey. It’s unclear if the drone was hovering over his property or a neighbor’s. The man plead guilty to criminal mischief. 
3. In November 2014 in Modesto, California, a man allegedly instructed his minor son to shoot his neighbor’s drone out of the sky, and the drone was destroyed. The neighbor claims the drone was not over the man’s property and won $850 in small claims court from the man for damages and costs.
4. In July of 2015 in Bullitt County, Kentucky, William Meredith,  annoyed at a drone flying over his backyard while grilling with friends, shot the drone when it flew over his property. The drone’s owner, a neighbor, called the police upon discovering his destroyed drone. Meredith was arrested and charged under local law for firing a gun in a populated area. At the highly publicized trial in state court, the judge dismissed the charges with a brief statement that Meredith was justified in shooting because of the invasion of privacy.
5. In April of 2016, an unnamed woman shot down a drone in Edmond, Oklahoma. The drone was flown by a construction company employee who was inspecting gutters in the neighborhood. It’s unclear if the drone was flying over the woman’s property. The case was investigated by the police, who said that they did not expect to file charges
6. An unknown shooter in Aspen, Colorado shot down a drone during 4^th of July fireworks in 2016. It’s unclear if the drone was over the shooter’s property. The pilot of the fallen drone filed a report with local police and the FAA but the shooter remains a mystery.
7. In August of 2016, a woman allegedly shot down a drone in The Plains, Virginia with her 20-gauge shotgun. The woman alleged that the drone hovered 25 to 30 feet above her property and she believed it was being used to spy on her movie-star neighbor, Robert Duvall. The two men flying the drone left the scene when she told them she was calling the police. No charges were filed. 
8. In April of 2017, an unknown person in Morgan County, Georgia shot down a drone with a .22 rifle. It’s unclear whose property the drone was flying over. The drone owner filed a report but a suspect was never identified.
9. In October of 2017, a man allegedly shot down a drone in Jackson County, Oregon with his pellet rifle and later turned himself in for arrest. The photography drone was flying over a state recreation area. The local prosecutor charged the shooter with first degree criminal mischief, a felony in Oregon. (The drone’s owner feels that a felony charge is excessive. With a Google search, it’s unclear whether the man was convicted.)
10. In May of 2018, a man allegedly attempted to shoot down a drone with his handgun in Bradenton, Florida. It was a neighbor’s drone and the man claims it was on his property, hovering a few feet above the ground. Police were called and warned the man about the danger and legal risk of shooting drones. No charges were filed.
11. In February of 2019, a man allegedly shot down a drone in Long Island, New York with a shotgun. The drone was being used by an animal rescue group to find a lost dog. It’s unclear if the drone was flying over the man’s property. He was charged with third-degree criminal mischief and prohibited use of a weapon.
12. In May of 2020, a man allegedly shot down a drone flying over a chicken processing plant in Watonwan County, Minnesota. The drone operator was apparently taking video of the plant as a citizen-journalist. The man was charged with two felonies: criminal damage to property and reckless discharge of a firearm in city limits. 
13. In June 2020, someone shot a drone flying somewhere in western Pennsylvania at 390 feet above the ground. Despite being grazed and damaged, the drone managed to safely operate and land. It’s unclear if the drone was over the shooter’s property. The shooter is unknown and the drone operator contacted state police but has not filed a complaint.

As you can see, the legal penalties for shooting a drone vary based on the circumstances and the prosecutor. Some got off with warnings but a few were charged with a felony under state law. Arguably, someone shooting a drone violates federal law, which imposes penalties on anyone who

willfully . . . damages, destroys, disables, or wrecks . . . any civil aircraft used . . . in interstate . . . commerce.

Federal penalties for willfully damaging an aircraft are stiff—fines and up to 20 years’ imprisonment. We’re unaware of federal prosecutors bringing a case against someone for shooting a drone. Perhaps federal prosecutors feel it’s excessive to use this statute, which was written with passenger planes in mind. Further, it’s unclear when drones are used in interstate commerce. As one federal judge said in a 2016 drone regulation case, Huerta v. Haughwout:

the FAA believes it has regulatory sovereignty over every cubic inch of outdoor air in the United States. . . . [I]t is far from clear that Congress intends—or could constitutionally intend—to regulate all that is airborne on one’s own property and that poses no plausible threat to or substantial effect on air transport or interstate commerce in general.

Hopefully lawmakers will clear up the ambiguity and demarcate where property rights end. As we pointed out in our recent 50-state drone report card, creating drone highways would prevent many issues. Congress should also consider drawing a federal-state dividing line in the sky, much like it drew a dividing line in the ocean in the Submerged Lands Act for energy development. For now, landowners, drone operators, the FAA, and state governments are all trying to determine the limits of their authority.

Section 230 is in trouble. Both presidential candidates have made its elimination a priority. In January, Joe Biden told the New York Times that the liability protections for social media companies should be revoked “immediately.” This week, President Trump called for revoking Section 230 as well. Most notably, after a few years of threatening action, the President issued an Executive Order about Section 230, its liability protections, and free speech online. (My article with Jennifer Huddleston about Section 230, its free speech benefits, and the common law precedents for Section 230 was published in the Oklahoma Law Review earlier this year.) 

There have been thousands of reactions to and news stories about the Executive Order and a lot of hyperbole. No, the Order doesn’t eliminate tech companies’ Section 230 protection and make it easier for conservatives to sue. No, the Order isn’t “plainly illegal.”

It’s fairly modest in reach actually. The Executive Order can’t change the deregulatory posture and specific protections of Section 230 but the President has broad authority to interpret the unclear meanings of statutes. Some of the thoughtful responses that stuck out are from Adam Thierer, Jennifer Huddleston, Patrick Hedger, and Adam White. I won’t reiterate what they’ve said but will focus on what the Order does and what the FCC can do.

Election Year Jawboning

The Order is a political document. For the baseball fans, it’s the political equivalent of a brushback pitch to tech companies–the pitcher throws an inside fastball intended to scare the batter without hitting him. (Enjoy 4 minutes of brushback pitches on YouTube.) Most of the time, a pitcher won’t get ejected by the umpire for throwing a brushback pitch. Likewise, here, I don’t see much chance of the Order being struck down by judges. The Order was wordsmithed, even in the last 24 hours before release, in a way to avoid legal troubles.

As Jesse Blumenthal points out in Slate, the Order is just the latest example of the long tradition of politicians using informal means and publicity to pressure media outlets. The political threats to TV and radio broadcasters during the Nixon, LBJ, and Kennedy years were extreme examples and are pretty well-documented.

More recently, there was a huge amount of jawboning of media companies in the runup to the 2004 election. Newspaper condemnation and legal threats forced a documentary critical of John Kerry off the air nationwide. Stations either pulled the documentary or only ran a few minutes of it because activists’ threatened to challenge TV station licenses for years at the FCC if stations ran the documentary. Many people remember the Citizens United case, which derived from the FEC’s censorship of an anti-John Kerry documentary in 2004 and an anti-Hillary Clinton documentary in 2008. Less remembered is that the conservative group started creating political documentaries only after the FEC rejected its complaint to get a Michael Moore’s anti-Bush documentary, Fahrenheit 9/11, off the air before the 2004 election.

The Title II net neutrality regulations were, per advocates close to the Obama White House, imposed largely to rally the base after Democrats’ 2014 midterm losses.

Implementation of the Executive Order

The timing of the Order–a few months before the election–seems intended to accomplish two things:

1. Rally the Trump base by publicly threatening tech companies’ liability protections and provoking tech companies’ ire.
2. Focus public and media scrutiny on tech companies so they think twice before suspending, demonetizing, or banning conservatives online.

The legal effect in the short term is negligible. Unless the relevant agencies (DOJ, FTC, NTIA, FCC) patched something together hastily, the Order won’t have an effect on tech companies and their susceptibility to lawsuits in the near term. The most immediate practical effect of the Order is the instructions to the NTIA. The agency is directed to petition the FCC to clarify what some unclear provisions of Sec. 230 mean, particularly the “good faith” requirement and how (c)(2) in the statute interacts with (c)(1).

It’s not clear why the Order makes this roundabout instruction to the NTIA and FCC. (The FCC is an independent agency and can refuse instructions from the White House.) “Good faith” is a term of art in contract law. It seems to me that referring this to the DOJ’s Office of Legal Counsel, not the FCC, would be the natural place for an administration to turn to to interpret legal terms of art and how provisions in federal statutes interact with each other. 

One reason the White House might use the roundabout method is because the administration knows the downsides of weakening Section 230 and isn’t actually intending to make material changes to existing interpretations of Sec. 230. The roundabout request to the FCC allows the White House to do something on the issue without upsetting established interpretations. And if the FCC refuses to take it up, the White House can tell supporters they tried but it was out of their hands.

Alternatively it could be that this was referred to the FCC because Section 230 is within the Communications Act and the FCC has more expertise and jurisdiction in communications law. The FCC has interpreted Section 230 before and has also interpreted what “good faith” means because Congress requires good faith negotiations between cable TV and broadcast TV operators.

If they took it up, I suspect FCC review would be perfunctory. The NTIA petition need not even get decided at the commission level. The FCC can delegate issues to bureau chiefs or other FCC staff. Bureaus can respond to a petition with an enforcement advisory or, after notice-and-comment, a declaratory ruling regarding the interpretative issues. It would take months to complete, but the full commission could also consider and rule on the NTIA petition.

But I suspect the commissioners don’t want to get dragged into election-year controversies. (As I mentioned above, White House staff may have even sent this to the FCC in order to let the issue die quietly.) The FCC is busy with pressing issues like spectrum auctions and rural broadband. Further, the NTIA-FCC relationship, while cordial, is not particularly good at the moment. Finally, the commissioners know the agency’s history of mission creep and media regulation. The Republican majority has consistently tried to untangle itself from legacy media regulations. An FCC inquiry into what “good faith” means in the statute and how (c)(2) in the statute interacts with (c)(1)–while an intriguing academic and legal interpretation exercise–would be a small but significant step towards FCC oversight of Internet services.

Section 230 is in Trouble

The fact is, Section 230 is in trouble. Courts have applied it reluctantly since its inception because of its broad protections. As Prof. Eric Goldman has meticulously documented, in recent years, courts have undermined Section 230 precedent and protection.

At some level the President and his advisors know that opening the door to regulation of the Internet will end badly for right-of-center and free speech. This was the foundation of the President’s opposition to Title II net neutrality rules. As he’s stated on Twitter:

Obama’s attack  on the internet is another top down power grab. Net neutrality is the Fairness Doctrine. Will target conservative media.

The Executive Order, while it doesn’t allow the FCC to regulate online media like Title II net neutrality did, is the Administration playing with fire. It’s essentially a bet that the Trump administration can get a short-term political win without unleashing long-term problems for conservatives and free speech online.

The Trump team may be right. But the Order, by inviting FCC involvement, represents a small step to regulation of Internet services. More significantly, there’s a reason prominent Democrats are calling for the elimination of Section 230. The trial bar, law school clinics, and advocacy nonprofits would like nothing more than to make it expensive for tech companies to defend their hosting and disseminating conservative publications and provocateurs.

Prominent Democrats are calling for the elimination of Sec. 230 and replacing it with a Fairness Doctrine for the Internet. If things go Democrats’ way, the Executive Order could give regulators, much of the legal establishment, and the left a foothold they’ve sought for years to regulate Internet services and online speech. Be careful what you wish for.

Last week the Federalist Society’s Regulatory Transparency Project released a podcast Adam and I recorded with FCC Chairman Pai:

Tech Roundup 9 – COVID-19 and the Internet: A Conversation with Ajit Pai

A few highlights: Chairman Pai’s legacy is still being written, but I suspect one of his lasting marks on the agency will be his integrating more economics and engineering in the FCC’s work.

He points out that that in recent decades, the FCC’s work has focused on the legal and policy aspects of telecommunications. My take: much of the dysfunctional legalism and regulatory arcana that’s built up in communications law is because Congress refuses to give the FCC a clean slate. Instead, communications laws have piled on to communications laws for 80 years. The regulatory thicket gives attorneys and insiders undue power in telecom policy. With the creation of the Office of Economics and Analytics and Engineering Honors program, Chairman Pai is creating institutions within the FCC to shift some expertise and resources to the economists and engineers.

We also discussed Marc Andreessen’s It’s Time to Build essay. A thought-provoking polemic (Adam has a response) that offers a challenge:

[T]o everyone around us, we should be asking the question, what are you building? What are you building directly, or helping other people to build, or teaching other people to build, or taking care of people who are building? If the work you’re doing isn’t either leading to something being built or taking care of people directly, we’ve failed you, and we need to get you into a position, an occupation, a career where you can contribute to building.

As we discuss in the podcast, the FCC has outperformed most public institutions on this front. The FCC in the past few years has untangled itself from the nonstop legal trench warfare of net neutrality regulation–an immense waste of time–to focus on making it faster and easier to build networks. As a result, the US is seeing impressive increases in network investment, coverage, and capacity relative to peer countries.

The COVID-19 crisis has been a stress test for the FCC and the broadband industry, and we’re grateful the Chairman took the time to discuss the agency, industry trends, and more with us.

The recently-passed CARES Act included $500 million for the CDC to develop a new “surveillance and data-collection system” to monitor the spread of COVID-19.

There’s a fierce debate about how to use technology for health surveillance for the COVID-19 crisis. Unfortunately this debate is happening in realtime as governments and tech companies try to reduce infection and death while complying with national laws and norms related to privacy.

Technology has helped during the crisis and saved lives. Social media, chat apps, and online forums allow doctors, public health officials, manufacturers, entrepreneurs, and regulators around the world to compare notes and share best practices. Broadband networks, Zoom, streaming media, and gaming make stay-at-home order much more pleasant and keeps millions of Americans at work, remotely. Telehealth apps allow doctors to safely view patients with symptoms. Finally, grocery and parcel delivery from Amazon, Grubhub, and other app companies keep pantries full and serve as a lifeline to many restaurants.

The great tech successes here, however, will be harder to replicate for contact tracing and public health surveillance. Even the countries that had the tech infrastructure somewhat in place for contact tracing and public health surveillance are finding it hard to scale. Privacy issues are also significant obstacles. (On the Truth on the Market blog, FTC Commissioner Christine Wilson provides a great survey of how other countries are using technology for public health and analysis of privacy considerations. Bronwyn Howell also has a good post on the topic.) Let’s examine some of the strengths and weaknesses of the technologies.

Cell tower location information

Personal smartphones typically connect to the nearest cell tower, so a cell networks record (roughly) where a smartphone is at a particular time. Mobile carriers are sharing aggregated cell tower data with public health officials in Austria, Germany, and Italy for mobility information.

This data is better than nothing for estimating district- or region-wide stay-at-home compliance but the geolocation is imprecise (to the half-mile or so). 

Cell tower data could be used to enforce a virtual geofence on quarantined people. This data is, for instance, used in Taiwan to enforce quarantines. If you leave a geofenced area, public health officials receive an automated notification of your leaving home.

Assessment: Ubiquitous, scalable. But: rarely useful and virtually useless for contact tracing.

GPS-based apps and bracelets

Many smartphone apps passively transmit precise GPS location to app companies at all hours of the day. Google and Apple have anonymized and aggregated this kind of information in order to assess stay-at-home order effects on mobility. Facebook reportedly is also sharing similar location data with public health officials.

As Trace Mitchell and I pointed out in Mercatus and National Review publications, this information is imperfect but could be combined with infection data to categorize neighborhoods or counties as high-risk or low-risk. 

GPS data, before it’s aggregated by the app companies for public view, reveals precisely where people are (within meters). Individual data is a goldmine for governments, but public health officials will have a hard time convincing Americans, tech companies, and judges they can be trusted with the data.

It’s an easier lift in other countries where trust in government is higher and central governments are more powerful. Precise geolocation could be used to enforce quarantines.

Hong Kong, for instance, has used GPS wristbands to enforce some quarantines. Tens of thousands of Polish residents in quarantines must download a geolocation-based app and check in, which allows authorities to enforce quarantine restrictions. It appears the most people support the initiative.

Finally, in Iceland, one third of citizens have voluntarily downloaded a geolocation app to assist public officials in contact tracing. Public health officials call or message people when geolocation records indicate previous proximity with an infected person. WSJ journalists reported on April 9 that:

If there is no response, they send a police squad car to the person’s house. The potentially infected person must remain in quarantine for 14 days and risk a fine of up to 250,000 Icelandic kronur ($1,750) if they break it.

That said, there are probably scattered examples of US officials using GPS for quarantines. Local officials in Louisville, Kentucky, for example, are requiring some COVID-19-positive or exposed people to wear GPS ankle monitors to enforce quarantine.

Assessment: Aggregated geolocation information is possibly useful for assessing regional stay-at-home norms. Individual geolocation information is not precise enough for effective contact tracing. It’s probably precise and effective for quarantine enforcement. But: individual geolocation is invasive and, if not volunteered by app companies or users, raises significant constitutional issues in the US.

Bluetooth apps

Many researchers and nations are working on or have released some type of Bluetooth app for contact tracing. This includes Singapore, the Czech Republic, Britain, Germany, Italy and New Zealand.  

For people who use these apps, Bluetooth runs in the background, recording other Bluetooth users nearby. Since Bluetooth is a low-power wireless technology, it really only can “see” other users within a few meters. If you use the app for awhile and later test positive for infection, you can register your diagnosis. The app will then notify (anonymously) everyone else using the app, and public health officials in some countries, who you came in contact with in the past several days. My colleague Andrea O’Sullivan wrote a great piece in Reason about contact tracing using Bluetooth.

These apps have benefits over other forms of public health tech surveillance: they are more precise than geolocation information and they are voluntary.

The problem is that, unlike geolocation apps, which have nearly 100% penetration with smartphone users, Bluetooth contact tracing apps have about 0% penetration in the US today. Further, these app creators, even governments, don’t seem to have the PR machine to gain meaningful public adoption. In Singapore, for instance, adoption is reportedly only 12% of the population, which is way too low to be very helpful.

A handful of institutions in the world could get appreciable use of Bluetooth contact tracing: telecom and tech companies have big ad budgets and they own the digital real estate on our smartphones.

Which is why the news that Google and Apple are working on a contact tracing app is noteworthy. They have the budget and ability to make their hundreds of millions of Android and iOS users aware of the contact tracing app. They could even go so far as push a notification to the home screen to all users encouraging them to use it.

However, I suspect they won’t push it hard. It would raise alarm bells with many users. Further, as Dan Grover stated a few weeks ago about why US tech companies haven’t been as active as Chinese tech companies in using apps to improve public education and norms related to COVID-19:

Since the post-2016 “techlash”, tech companies in Silicon Valley have acted with a sometimes suffocating sense of caution and unease about their power in the world. They are extremely careful to not do anything that would set off either party or anyone with ideas about regulation. And they seldom use their pixel real estate towards affecting political change.

[Ed.: their puzzling advocacy of Title II “net neutrality” regulation a big exception].

Techlash aside, presumably US companies also aren’t receiving the government pressure Chinese companies are receiving to push public health surveillance apps and information. [Ed.: Bloomberg reports that France and EU officials want the Google-Apple app to relay contact tracing notices to public health officials, not merely to affected users. HT Eli Dourado]

Like most people, I have mixed feelings about how coercive the state and how pushy tech companies should be during this pandemic. A big problem is that we still have only an inkling about how deadly COVID-19 is, how quickly it spreads, and how damaging stay-at-home rules and norms are for the economy. Further, contact-tracing apps still need extensive, laborious home visits and follow-up from public health officials to be effective–something the US has shown little ability to do.

There are other social costs to widespread tech-enabled tracing. Tyler Cowen points out in Bloomberg that contact tracing tech is likely inevitable, but that would leave behind those without smartphones. That’s true, and a major problem for the over-70 crowd, who lack smartphones as a group and are most vulnerable to COVID-19.

Because I predict that Apple and Google won’t push the app hard and I doubt there will be mandates from federal or state officials, I think there’s only a small chance (less than 15%) a contact tracing wireless technology will gain ubiquitous adoption this year (60% penetration, more than 200 million US smartphone users). 

Assessment: A Bluetooth app could protect privacy while, if volunteered, giving public health officials useful information for contact tracing. However, absent aggressive pushes from governments or tech companies, it’s unlikely there will be enough users to significantly help.

Health Passport

The chances of mass Bluetooth app use would increase if the underlying tech or API is used to create a “health passport” or “immunity passport”–a near-realtime medical certification that someone will not infect others. Politico reported on April 10 that Dr. Anthony Fauci, the White House point man on the pandemic, said the immunity passport idea “has merit.”

It’s not clear what limits Apple and Google will put on their API but most APIs can be customized by other businesses and users. The Bluetooth app and API could feed into a health passport app, showing at a glance whether you are infected or you’d been near someone infected recently.

For the venues like churches and gyms and operators like airlines and cruise ships that need high trust from participants and customers, on the spot testing via blood test or temperature taking or Bluetooth app will likely gain traction. 

There are the beginnings of a health passport in China with QR codes and individual risk classifications from public health officials. Particularly for airlines, which is a favored industry in most nations, there could be public pressure and widespread adoption of a digital health passport. Emirates Airlines and the Dubai Health Authority, for instance, last week required all passengers on a flight to Tunisia to take a COVID-19 blood test before boarding. Results came in 10 minutes.

Assessment: A health passport integrates several types of data into a single interface. The complexity makes widespread use unlikely but it could gain voluntary adoption by certain industries and populations (business travelers, tourists, nursing home residents).

Conclusion

In short, tech could help with quarantine enforcement and contact tracing, but there are thorny questions of privacy norms and it’s not clear US health officials have the ability to do the home visits and phone calls to detect spread and enforce quarantines. All of these technologies have issues (privacy or penetration or testing) and there are many unknowns about transmission and risk. The question is how far tech companies, federal and state law officials, the American public, and judges are prepared to go.

Building broadband takes time. There’s permitting, environmental reviews, engineering, negotiations with city officials and pole owners, and other considerations.

That said, temporary wireless broadband systems can be set up quickly, sometimes in days and weeks, not months or years like wireline networks. Setting up outdoor WiFi, as some schools have done (HT Billy Easley II), is a good step but WiFi has its limits and more can be done.

The FCC has done a great job freeing up more spectrum on a temporary basis for the COVID-19 crisis, like allowing carriers to use Dish’s unused cellular spectrum. Wireless systems need more than spectrum, however. Operators need real estate, electricity, backhaul, and permission. This is where cities, counties, and states can help.

Waive or simplify permitting

States, counties, and cities should consider waiving or simplifying their permitting for temporary wireless systems, particularly in rural or low-income areas where adoption lags.

Cellular providers set up Distributed Antenna Systems (DAS) and Cells on Wheels (COWs) for events like football games, parades, festivals, and emergency response after hurricanes. These provide good coverage and capacity in a pinch.

There are other ad hoc wireless systems that can be set up quickly in local areas, like WISP transmitters, cellular or WISP backhaul, outdoor WiFi, and mesh networks.

Allow rent-free access to municipal property

Public agencies own real estate and buildings that would lend themselves to temporary wireless facilities. Not only do they have power, taller public buildings and water towers allow wireless systems to have greater coverage. Cities should consider leasing out temporary space rent free for the duration of the crisis.

Many cities and counties also have a dark fiber and lit fiber networks that serve public facilities like police, fire, and hospitals. If there’s available capacity, state and local public agencies should consider providing cheap or free access to the municipal fiber network.

Now, these temporary measures won’t work miracles. Operators are looking at months of cash constraints and probably don’t have many field technicians available. But the temporary waiver of permitting and the easy access to public property could provide quick, needed broadband capacity in rural and hard-to-reach areas.

I saw a Bloomberg News report that officials in Austria and Italy are seeking (aggregated, anonymized) users’ location data from cellphone companies to see if local and national lockdowns are effective.

It’s an interesting idea that raises some possibilities for US officials and tech companies to consider to combat the crisis in the US. Caveat: these are very preliminary thoughts.

Cellphone location data from a phone company is OK but imprecise about your movements. It can show where you are typically in a mile or half-mile area. 

But smartphone app location is much more precise since it uses GPS, not cell towers to show movements. Apps with location services can show people’s movements within meters, not half-mile, like cell towers.I suspect 90%+ of smartphone users have GPS location services on (Google Maps, Facebook, Yelp, etc.). App companies have rich datasets of daily movements of people.

Step 1 – App companies isolate and share location trends with health officials

This would need to be aggregated and anonymized of course. Tech companies with health officials should, as Balaji Srinivasan says, identify red and green zones. The point is not to identify individuals but make generalizations about whether a neighborhood or town is practicing good distancing practices.

Step 2 – In green zones, where infection/hospitalization are low and app data says people are strictly distancing, COVID-19 tests.

If people are spending 22 hours not moving except for brief visits to the grocery store and parks, that’s a good neighborhood. We need tests distributed daily in non-infected areas, perhaps at grocery stores and via USPS and Amazon deliveries. As soon as the tests production ramps up, tests need to flood into the areas that are healthy. This achieves two things:

• Asymptomatic people who might spread can stay home.
• Non-infected people can start returning to work and a life of semi-normalcy of movement with confidence that others who are out are non-contagious.

Step 3 – In red zones, where infection/hospitalization is high and people aren’t strictly distancing, public education and restrictions.

At least in Virginia, there is county-level data about where the hotspots are. I expect other states know the counties and neighborhoods that are hit hard. Where there’s overlap of these areas not distancing, step up distancing and restrictions.

That still leaves open what to do about yellow zones that are adjacent to red zones, but the main priority should be to identify the green and red. The longer health officials and the public are flying blind with no end in sight, people get frustrated, lose jobs, shutter businesses, and violate distancing rules.

To help slow the spread of the coronavirus, the GMU campus is moving to remote instruction and Mercatus is moving to remote work for employees until the risk subsides. GMU and Mercatus employees join thousands of other universities and businesses this week. Millions of people will be working from home and it will be a major test of American broadband and cellular networks. 

There will likely be a loss of productivity nationwide–some things just can’t be done well remotely. But hopefully broadband access is not a major issue. What is the state of US networks? How many people lack the ability to do remote work and remote homework?

The FCC and Pew research keep pretty good track of broadband buildout and adoption. There are many bright spots but some areas of concern as well.

Who lacks service?

The top question: How many people want broadband but lack adequate service or have no service?

The good news is that around 94% of Americans have access to 25 Mbps landline broadband. (Millions more have access if you include broadband from cellular and WISP providers.) It’s not much consolation to rural customers and remote workers who have limited or no options, but these are good numbers.

According to Pew’s 2019 report, about 2% of Americans cite inadequate or no options as the main reason they don’t have broadband. What is concerning is that this 2% number hasn’t budged in years. In 2015, about the same number of Americans cited inadequate or no options as the main reason they didn’t have home broadband. This resembles what I’ve called “the 2% problem“–about 2% of the most rural American households are extremely costly to serve with landline broadband. Satellite, cellular, or WISP service will likely be the best option.

Mobile broadband trends

Mobile broadband is increasingly an option for home broadband. About 24% of Americans with home Internet are mobile only, according to Pew, up from ~16% in 2015.

The ubiquity of high-speed mobile broadband has been the big story in recent years. Per FCC data, from 2009 to 2017 (the most recent year we have data), the average number of new mobile connections increased about 30 million annually. In Dec. 2017 (the most recent data), there were about 313 million mobile subscriptions.

Coverage is very good in the US. OpenSignal uses crowdsourced data and software to determine how frequently users’ phones have a 4G LTE network available (a proxy for coverage and network quality) around the world. The US ranked fourth the world (86%) in 2017, beating out every European country, save Norway.

There was also a big improvement was in mobile speeds. In 2009, a 3G world, almost all connections were below 3 Mbps. In 2017, a world of 4G LTE, almost all connections were above 3 Mbps.

Landline broadband trends

Landline broadband also increased significantly. From 2009 to 2017, there were about 3.5 million new connections per year, about 108 million connections in 2017. In Dec. 2009, about half of landline connections were below 3 Mbps.

There were some notable jumps in high-speed and rural broadband deployment. There was a big jump in fiber-to-the-premises (FTTP) connections, like FiOS and Google Fiber. From 2012 to 2017, the number of FTTP connections more than doubled, to 12.6 million. Relatedly, sub-25 Mbps connections have been falling rapidly while 100 Mbps+ connections have been shooting up. In 2017, there were more connections with 100 Mbps+ (39 million) than there were connections below 25 Mbps (29 million).

In the most recent 5 years for which we have data, the number of rural subscribers (not households) with 25 Mbps increased 18 million (from 29 million to 47 million).

More Work

We only have good data for the first year of the Trump FCC, so it’s hard to evaluate but signs are promising. One of Chairman Pai’s first actions was creating an advisory committee to advise the FCC on broadband deployment (I’m a member). Anecdotally, it’s been fruitful to regularly have industry, academics, advocates, and local officials in the same room to discuss consensus policies. The FCC has acted on many of those.

The rollback of common carrier regulations for the Internet, the pro-5G deployment initiatives, and limiting unreasonable local fees for cellular equipment have all helped increase deployment and service quality.

An effective communications regulator largely stays of the way and removes hindrances to private sector investment. But the FCC does manage some broadband subsidy programs. The Trump FCC has made some improvements to the $4.5 billion annual rural broadband programs. The 17 or so rural broadband subprograms have metastasized over the years, making for a kludgey and expensive subsidy system.

The recent RDOF reforms are a big improvement since they fund a reverse auction program to shift money away from the wasteful legacy subsidy programs. Increasingly, rural households get broadband from WISP, satellite, and rural cable companies–the RDOF reforms recognize that reality.

Hopefully one day reforms will go even further and fund broadband vouchers. It’s been longstanding FCC policy to fund rural broadband providers (typically phone companies serving rural areas) rather than subsidizing rural households. The FCC should consider a voucher model for rural broadband, $5 or $10 or $40 per household per month, depending on the geography. Essentially the FCC should do for rural households what the FCC does for low-income households–provide a monthly subsidy to make broadband costs more affordable.

Many of these good deployment trends began in the Obama years but the Trump FCC has made it a national priority to improve broadband deployment and services. It appears to be be working. With the coronavirus and a huge increase in remote work, US networks will be put to a unique test.

Michael Kotrous and I submitted a comment to the FAA about their Remote ID proposals. While we agree with the need for a “digital license plate” for drones, we’re skeptical that requiring an Internet connection is necessary and that an interoperable, national drone traffic management system will work well.

The FAA deserves credit for rigorously estimating the costs of their requirements, which they set at around $450 million to $600 million over 10 years. These costs largely fall on drone operators and on drone manufacturers for network (say, LTE) subscriptions and equipment.

The FAA’s proposed requirements aren’t completely hashed out, but we raised two points of caution.

One, many many drone flights won’t stray from a pre-programmed route or leave private property. For instance, roof inspections, medical supply deliveries across a hospital campus, train track inspections, and crop spraying via drone all remain on private property. They all pose a de minimis safety concern to manned aircraft and requiring networking equipment and subscriptions seems excessive.

Two, we’re not keen on the FAA and NASA plans for an interoperable, national drone traffic management system. A simple wireless broadcast from a drone should be enough in most circumstances. The FAA proposal would require drone operators to contract with UAS Service Suppliers (USSs) who would be contractors of the FAA. Technical standards would come later. This convoluted system of making virtually all drone operations known to the FAA is likely run aground with technical complexity, technical stagnation, FAA-blessed oligopoly in USS or all of the above.

The FAA instead should consider allowing states, cities, and landowners to make rules for drone operations when operations are solely on their property. States are ready to step in. The North Dakota legislature, for instance, authorized $28 million a few months ago for a statewide drone management system. Other states will follow suit and a federated, geographically-separated drone management system could develop, if the FAA allows. That would reduce the need for complex, interoperable USS and national drone traffic management systems.

Further reading:

Refine the FAA’s Remote ID Rules to Ensure Aviation Safety and Public Confidence, comment to the FAA (March 2020), https://www.mercatus.org/publications/technology-and-innovation/refine-faa%E2%80%99s-remote-id-rules-ensure-aviation-safety-and

Auctioning Airspace, North Carolina Journal of Law & Technology (October 2019), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3284704

Last week I attended the Section 230 cage match workshop at the DOJ. It was a packed house, likely because AG Bill Barr gave opening remarks. It was fortuitous timing for me: my article with Jennifer Huddleston, The Erosion of Publisher Liability in American Law, Section 230, and the Future of Online Curation, was published 24 hours before the workshop by the Oklahoma Law Review.

These were my impressions of the event:

I thought it was pretty well balanced event and surprisingly civil for such a contentious topic. There were strong Section 230 defenders and strong Section 230 critics, and several who fell in between. There were a couple cheers after a few pointed statements from panelists, but the audience didn’t seem to fall on one side or the other. I’ll add that my friend and co-blogger Neil Chilson gave an impressive presentation about how Section 230 helped make the “long tail” of beneficial Internet-based communities possible.

AG Bob Barr gave the opening remarks, which are available online. A few things jumped out. He suggested that Section 230 had its place but Internet companies are not an infant industry anymore. In his view, the courts have expanded Section 230 beyond drafters’ intent, and the Reno decision “unbalanced” the protections, which were intended to protect minors. The gist of his statement was that the law needs to be “recalibrated.”

Each of these points were disputed by one or more panelists, but the message to the Internet industry was clear: the USDOJ is scrutinizing industry concentration and its relationship to illegal and antisocial online content.

The workshop signals that there is now a large, bipartisan coalition that would like to see Section 230 “recalibrated.” The problem for this coalition is that they don’t agree on what types of content providers should be liable for and they are often at cross-purposes. The problematic content ranges from sex trafficking, to stalkers, to opiate trafficking, to revenge porn, to unfair political ads. For conservatives, social media companies take down too much content, intentionally helping progressives. For progressives, social media companies leave up too much content, unwittingly helping conservatives.

I’ve yet to hear a convincing way to modify Section 230 that (a) satisfies this shaky coalition, (b) would be practical to comply with, and (c) would be constitutional.

Now, Section 230 critics are right: the law blurs the line between publisher and conduit. But this is not unique to Internet companies. The fact is, courts (and federal agencies) blurred the publisher-conduit dichotomy for fifty years for mass media distributors and common carriers as technology and social norms changed. Some cases that illustrate the phenomenon:

In Auvil v. CBS 60 Minutes, a 1991 federal district court decision, some Washington apple growers sued some local CBS affiliates for airing allegedly defamatory programming. The federal district court dismissed the case on the grounds that the affiliates are conduits of CBS programming. Critically, the court recognized that the CBS affiliates “had the power to” exercise editorial control over the broadcast and “in fact occasionally [did] censor programming . . . for one reason or another.” Still, case dismissed. The principle has been cited by other courts. Publishers can be conduits.

Conduits can also be publishers. In 1989, Congress passed a law requiring phone providers to restrict “dial-a-porn” services to minors. Dial-a-porn companies sued. In Information Providers Coalition v. FCC, the 9th Circuit Court of Appeals held that regulated common carriers are “free under the Constitution to terminate service” to providers of indecent content. The Court relied on its decision a few years earlier in Carlin Communications noting that when a common carrier phone company is connecting thousands of subscribers simultaneously to the same content, the “phone company resembles less a common carrier than it does a small radio station.”

Many Section 230 reformers believe Section 230 mangled the common law would like to see the restoration of the publisher-conduit dichotomy. As our research shows, that dichotomy had already been blurred for decades. Until advocates and lawmakers acknowledge these legal trends and plan accordingly, the reformers risk throwing out the baby with the bathwater.

Relevant research:
Brent Skorup & Jennifer Huddleston, The Erosion of Publisher Liability in American Law, Section 230, and the Future of Online Curation (Oklahoma Law Review).

Brent Skorup & Joe Kane, The FCC and Quasi–Common Carriage: A Case Study of Agency Survival (Minnesota Journal of Law, Science & Technology).

Technopanics, Progress Studies, AI, spectrum, and privacy were hot topics at the Technology Liberation Front in the past year. Below are the most popular posts from 2019.

Glancing at our site metrics over the past 10 years, the biggest topics in the 2010s were technopanics, Bitcoin, net neutrality, the sharing economy, and broadband policy. Looking forward at the 2020s, I’ll hazard some predictions about what will be significant debates at the TLF: technopanics and antitrust, AVs, drones, and the future of work. I suspect that technology and federalism will be long-running issues in the next decade, particularly for drones, privacy, AVs, antitrust, and healthcare tech.

Enjoy 2019’s top 10, and Happy New Year.

10. 50 Years of Video Games & Moral Panics by Adam Thierer

I have a confession: I’m 50 years old and still completely in love with video games.

As a child of the 1970s, I straddled the divide between the old and new worlds of gaming. I was (and remain) obsessed with board and card games, which my family played avidly. But then Atari’s home version of “Pong” landed in 1976. The console had rudimentary graphics and controls, and just one game to play, but it was a revelation. After my uncle bought Pong for my cousins, our families and neighbors would gather round his tiny 20-inch television to watch two electronic paddles and a little dot move around the screen.

9. The Limits of AI in Predicting Human Action by Anne Hobson and Walter Stover

Let’s assume for a second that AIs could possess not only all relevant information about an individual, but also that individual’s knowledge. Even if companies somehow could gather this knowledge, it would only be a snapshot at a moment in time. Infinite converging factors can affect one’s next decision to not purchase a soda, even if your past purchase history suggests you will. Maybe you went to the store that day with a stomach ache. Maybe your doctor just warned you about the perils of high fructose corn syrup so you forgo your purchase. Maybe an AI-driven price raise causes you to react by finding an alternative seller.

In other words, when you interact with the market—for instance, going to the store to buy groceries—you are participating in a discovery process about your own preferences or willingness to pay.

8. Free-market spectrum policy and the C Band by Brent Skorup

A few years ago I would have definitely favored speed and the secondary market plan. I still lean towards that approach but I’m a little more on the fence after reading Richard Epstein’s work and others’ about the “public trust doctrine.” This is a traditional governance principle that requires public actors to receive fair value when disposing of public property. It prevents public institutions from giving discounted public property to friends and cronies. Clearly, cronyism isn’t the case here and FCC can’t undo what FCCs did generations ago in giving away spectrum. I think the need for speedy deployment trumps the windfall issue here, but it’s a closer call for me than in the past.

One proposal that hasn’t been contemplated with the C Band but might have merit is an overlay auction with a deadline. With such an auction, the FCC gives incumbent users a deadline to vacate a band (say, 5 years). The FCC then auctions flexible-use licenses in the band. The FCC receives the auction revenues and the winning bidders are allowed to deploy services immediately in the “white spaces” unoccupied by the incumbents. The winning bidders are allowed to pay the incumbents to move out before the deadline.

7. STELAR Expiration Warranted by Hance Haney

The retransmission fees were purposely set low to help the emerging satellite carriers get established in the marketplace when innovation in satellite technology still had a long way to go. Today the carriers are thriving business enterprises, and there is no need for them to continue receiving subsidies. Broadcasters, on the other hand, face unprecedented competition for advertising revenue that historically covered the entire cost of content production.

Today a broadcaster receives 28 cents per subscriber per month when a satellite carrier retransmits their local television signal. But the fair market value of that signal is actually $2.50, according to one estimate.

6. What is Progress Studies? by Adam Thierer

How do we shift cultural and political attitudes about innovation and progress in a more positive direction? Collison and Cowen explicitly state that the goal of Progress Studies transcends “mere comprehension” in that it should also look to “identify effective progress-increasing interventions and the extent to which they are adopted by universities, funding agencies, philanthropists, entrepreneurs, policy makers, and other institutions.”

But fostering social and political attitudes conducive to innovation is really more art than science. Specifically, it is the art of persuasion. Science can help us amass the facts proving the importance of innovation and progress to human improvement. Communicating those facts and ensuring that they infuse culture, institutions, and public policy is more challenging.

5. How Do You Value Data? A Reply To Jaron Lanier’s Op-Ed In The NYT by Will Rinehart

All of this is to say that there is no one single way to estimate the value of data.

As for the Lanier piece, here are some other things to consider:

A market for data already exists. It just doesn’t include a set of participants that Jaron wants to include, which are platform users.    

Will users want to be data entrepreneurs, looking for the best value for their data? Probably not. At best, they will hire an intermediary to do this, which is basically the job of the platforms already.

An underlying assumption is that the value of data is greater than the value advertisers are willing to pay for a slice of your attention. I’m not sure I agree with that.

Finally, how exactly do you write these kinds of laws?

4. Explaining the California Privacy Rights and Enforcement Act of 2020 by Ian Adams

As released, the initiative is equal parts privacy extremism and cynical-politics. Substantively, some will find elements to applaud in the CPREA, between prohibitions on the use of behavioral advertising and reputational risk assessment (all of which are deserving of their own critiques), but the operational structure of the CPREA is nothing short of disastrous. Here are some of the worst bits:

3. Best Practices for Public Policy Analysts by Adam Thierer

So, for whatever it’s worth, here are a few ideas about how to improve your content and your own brand as a public policy analyst. The first list is just some general tips I’ve learned from others after 25 years in the world of public policy. Following that, I have also included a separate set of notes I use for presentations focused specifically on how to prepare effective editorials and legislative testimony. There are many common recommendations on both lists, but I thought I would just post them both here together.

2. An Epic Moral Panic Over Social Media by Adam Thierer

Strangely, many elites, politicians, and parents forget that they, too, were once kids and that their generation was probably also considered hopelessly lost in the “vast wasteland” of whatever the popular technology or content of the day was. The Pessimists Archive podcast has documented dozens of examples of this reoccurring phenomenon. Each generation makes it through the panic du jour, only to turn around and start lambasting newer media or technologies that they worry might be rotting their kids to the core. While these panics come and go, the real danger is that they sometimes result in concrete policy actions that censor content or eliminate choices that the public enjoys. Such regulatory actions can also discourage the emergence of new choices.

1. How Conservatives Came to Favor the Fairness Doctrine & Net Neutrality by Adam Thierer

If I divided my time in Tech Policy Land into two big chunks of time, I’d say the biggest tech-related policy issue for conservatives during the first 15 years I was in the business (roughly 1990 – 2005) was preventing the resurrection of the so-called Fairness Doctrine. And the biggest issue during the second 15-year period (roughly 2005 – present) was stopping the imposition of “Net neutrality” mandates on the Internet. In both cases, conservatives vociferously blasted the notion that unelected government bureaucrats should sit in judgment of what constituted “fairness” in media or “neutrality” online.

Many conservatives are suddenly changing their tune, however.

After coming across some reviews of Thomas Philippon’s book, The Great Reversal: How America Gave Up on Free Markets, I decided to get my hands on a copy. Most of the reviews and coverage mention the increasing monopoly power of US telecom companies and rising prices relative to European companies. In fact, Philippon tells readers in the intro of the book that the question that spurred him to write Great Reversal is “Why on earth are US cell phone plans so expensive?”

As someone who follows the US mobile market closely, I was a little disappointed that the analysis of the telecom sectors is rather slim. There’s only a handful of pages (out of 340) of Europe-US telecom comparison, featuring one story about French intervention and one chart. This isn’t a criticism of the book–Philippon doesn’t pitch it as a telecom policy book. However, the telecom section in the book isn’t the clear policy success story it’s described as.

The general narrative in the book is that US lawmakers are entranced by the laissez-faire Chicago school of antitrust and placated by dark money campaigns. The result, as Philippon puts it, is that “Creeping monopoly power has slowly but surely suffocated the [US] middle class” and today Europe has freer markets than the US. That may be, but the telecom sectors don’t provide much support for that idea.

Low Prices in European Telecom . . .

Philippon says that “The telecommunications industry provides another example of successful competition policy in Europe.”

He continues:

The case of France provides a striking example of competition. Free Mobile . . . obtained its 4G license [with regulator assistance] in 2011 and became a significant competitor for the three large incumbents. The impact was immediate. . . . In about six months after the entry of Free Mobile, the price paid by French consumers had dropped by about 40 percent. Wireless services in France had been more expensive in the US, but now they are much cheaper.

It’s true, mobile prices are generally lower in Europe. Monthly average revenue per user (ARPU) in the US, for instance, is about double the ARPU in the UK (~$42 v. ~$20 in 2016). And, as Philippon points out, cellular prices are lower in France as well.

One issue with this competition “success story”: the US also has four mobile carriers, and had four mobile carriers even prior to 2011. Since the number of competitors is the same in France and the US, competition doesn’t really explain why there’s a price difference between France and the US. (India, for instance, has fewer providers than the US and France–and much lower cellular prices, so number of competitors isn’t a great predictor of pricing.)

. . . and Low Investment

If “lower telecom prices than the US” is the standard, then yes, European competition policy has succeeded. But if consumers and regulators prioritize other things, like industry investment, network quality (fast speeds), and rural coverage, the story is much more mixed. (Bret Swanson at AEI points to other issues with Philippon’s analysis.) Philippon’s singular focus on telecom prices and number of competitors distracts from these other important competition and policy dimensions.

According to OECD data, for instance, in 2015 the US exceeded the OECD average for spending on IT and communications equipment as a percent of GDP. France might have lower cell phone bills, but US telecom companies spend 275% more than French telecom companies on this measure (1.1% of GDP v. 0.4% of GDP) .

Further, telecom investment per capita in the US was much higher than its European counterparts. US telecom companies spent about 55 percent more per capita than French telecoms spent ($272 v. $175), according to the same OECD reports. And France is one of the better European performers. Many European carriers spend, on a per capita basis, less than half what US carriers spend. US carriers spend 130% more than UK telecoms spend and 145% more than German telecoms.

This investment deficit in Europe has real-world effects on consumers. OpenSignal uses crowdsourced data and software to determine how frequently users phones have a 4G LTE network available (a proxy for coverage and network quality) around the world. The US ranked fourth the world (86%) in 2017, beating out every European country, save Norway. In contrast, France and Germany ranked 60th and 61st, respectively, for this network quality measure, beat out by less wealthy nations like Kazakhstan, Cambodia, and Romania. 

The European telecom regulations and anti-merger policies created a fragmented market and financially strapped companies. As a result, investors are fleeing European telecom firms. According to the Financial Times and Bloomberg data, between 2012 and 2018, the value of Europe’s telecom companies fell almost 50%. The value of the US sector rose by 70% and the Asian sector rose by 13% in that time period.  

Price Wars or 5G Investment?

Philippon is right that Europe has chosen a different path than the US when it comes to telecom services. Whether they’ve chosen a pro-consumer path depends on where you sit (and live). Understandably, academics and advocates living in places like Boston, New York and DC look fondly at Berlin and Paris broadband prices. Network quality outside of the cities and suburbs rarely enters the picture in these policy discussions, and Philippon’s book is no exception. US lawmakers and telecom companies have prioritized non-price dimensions: network quality, investment in 5G, and rural coverage.

If anything, European regulators seem to be retreating somewhat from the current path of creating competitors and regulating prices. As the Financial Times wrote last year, the trend in Europe telecom is consolidation. The French regulator ARCEP reversed course last year signaled a new openness to telecom consolidation.

Still, there are significant obstacles to consolidation in European markets, and it seems likely they’ll fall further behind the US and China in rural network coverage and 5G investment. European telecom companies are in a bit of panic about this, which they expressed in a letter to the European Commission this month, urging reform.

In short, European telecom competition policy is not the unqualified success depicted in Great Reversal. To his credit, Philippon in the book intro emphasizes humility about prognostications and the limits of experts’ knowledge:

I readily admit I don’t have all the answers. …I would suggest . . . that [economists’] prescriptions be taken with a (large) grain of salt. When you read an author or commentator who tells you something obvious, take your time and do the math. Almost every time, you’ll discover that it wasn’t really obvious at all. I have found that people who tell you that the answers to the big questions in economics are obvious are telling you only half of the story.

Couldn’t have put it better myself.

Credit to Connor Haaland for research assistance.

A few weeks ago I was invited to provide testimony about rural broadband policy to the Communications and Technology Committee in the Pennsylvania Senate (video recording of the hearing). My co-panelists were Kathyrn de Wit from Pew and Prof. Sasha Meinrath from Penn State University.

In preparing for the testimony I was surprised to learn how much money leaves Pennsylvania annually to fund the federal Universal Service Fund programs. In recent years, a net $200 million leaves the state annually and is disbursed at USAC and in other states. That’s a lot of money considering Pennsylvania, like many geographically large states, has its own broadband deployment problems.

From the Intro:

The federal government has spent more than $100 billion on rural telecommunications in the past 20 years. Most of that total comes from the federal Universal Service Fund (USF), which disburses about $4.5 billion annually to rural providers across the country. In addition, the Pennsylvania Universal Service Fund redistributes about $32 million annually from Pennsylvania phone customers to Pennsylvania phone companies serving rural areas.

Are rural residents seeing commensurate benefits trickle down to them? That seems doubtful. These programs are complex and disburse subsidies in puzzling and uneven ways. Reform of rural telecommunications programs is urgently needed. FCC data suggest that the current USF structure disproportionately penalizes Pennsylvanians—a net $800 million left the state from 2013 to 2017.

I made a few recommendations, which mostly apply for state legislators in other states looking at rural broadband issues.

• Urge the FCC to transform the USF into broadband vouchers for rural households.
• Prevent unreasonable restrictions on small, outdoor antennas on private property.
• Instruct the state broadband advisory committee to recommend best practices for rural towns and counties.
• Create a “vertical assets inventory” for wireless providers to use in rural areas.

I also came across an interesting program in Pennsylvania spearheaded in 2018 by Gov. Wolf. It’s a $35 million grant program to rural providers. From the Governor’s website:

The program was a partnership between the Office of Broadband Initiatives and PennDOT. The $35 million of incentive funding was provided through PennDOT to fulfill its strategic goal of supporting intelligent transportation systems, connected vehicle infrastructure, and improving access to PennDOT’s facilities. In exchange for incentive funding, program participants were required to supply PennDOT with the use of current and future network facilities or services.

It’s too early to judge the results of that program but I’ve long thought state DOTs should collaborate more with state telecom officials. There’s a lot of federal and state transportation money that can do double duty in supporting broadband deployment efforts, a subject Prof. Korok Ray and I take up in our recently-released Mercatus Paper, “Smart Cities, Dumb Infrastructure.”

For more, you can find my full testimony at the Mercatus website.

The Ray-Skorup paper, “Smart Cities, Dumb Infrastructure,” about transportation funds and their use in telecom networks is on SSRN.

Last month I spoke at the Innovation Summit in Orlando, hosted by the James Madison Institute. My co-panelists on the transportation panel were Jamal Sowell, President and CEO of Enterprise Florida, state senator Jeff Brandes, who cosponsored Florida’s autonomous vehicle legislation this year, and Stephanie Smith from Uber. Romina Boccia from the Heritage Foundation was our moderator.

It was a great event and the panel discussion made clear that Florida is at the forefront of autonomous vehicle policy. The panel got me thinking about some nationwide trends that are pushing people towards ride-sharing and, eventually, mobility as a service and autonomous vehicles. Florida seems well positioned but many of these trends will affect the ridesharing and autonomous vehicle market in the next decade.

Rising Cost of Car Ownership

Cars are expensive to own and maintain. Using AAA estimates, the annual cost of a new car in 2019 is $9,300 (nearly $800 per month). These costs are mostly depreciation and insurance, but also include gas, registration, and maintenance.

Used cars are significantly cheaper to own since depreciation is steepest early in a car’s life. I haven’t seen much research on used car costs but out of curiosity I estimated the cost of ownership of our used car. We recently sold my wife’s 2010 Corolla, which she’d bought in 2012. The annual cost of ownership of the Corolla (insurance, maintenance, gas, depreciation) came to about $4,200 ($350 per month).

But costs are much higher for families. Parents adding a teenage boy to their car insurance policy, for instance, can expect their annual insurance costs to jump over $6,000.

Using the AAA numbers and these insurance numbers, we can estimate the costs for adding a new vehicle and a teenage driver for a family budget: from about $15,000 annually (getting a teen driver a new sedan) to about $10,000 annually (getting a teen driver a used compact).

Further, car repair is only going to increase with time. The introduction of sensors and other technology into new cars has caused a spike in repair and insurance costs. Automakers are also adding expensive-to-fix components to engines, like turbochargers and CVTs, in an attempt to comply with federal CAFE standards.

One signal of the increasing costs of repair is rising insurance rates. Over the last four years, the consumer price index for auto insurance increased about 27%, During the same period the CPI for all goods increased about 6%. That increase even exceeds the CPI for hospital services (18%).

This is likely one reason car leasing is becoming more popular, even with good-credit drivers–leasing allows you to shift the (increasing) costs of car depreciation and maintenance to leasing companies.

Mobility as a Service and AVs in Florida

Florida seems to have the perfect recipe for AV and mobility as a service success. First and foremost, they have a governor and state legislature that is welcoming AV companies.

The state also has:

• many students, retirees, tourists, and uninsured drivers who need rides but don’t use a car regularly
• very high insurance premiums
• no-fault auto insurance, which simplifies the claims process in personal injury cases
• flat terrain and no snow

Suppose a couple in Florida is considering getting a third car, a new car for their teenage son. If their son isn’t interested in getting a drivers license (which is increasingly common) and they live in an area with high penetration of ridesharing services, they might be willing to purchase an annual subscription to mobility as a service. For many families on the fence about getting a second or third car, even a $10,000 annual subscription might make financial sense.

AV tech is slowly but surely approaching mass-market deployment. This month, Waymo announced they were increasing the number of autonomous vehicles on Phoenix-area roads without safety drivers in the front seats. These trends in auto leasing and putting off getting a license is accelerating in urbanized areas in the South. It’s probably where mobility as a service companies and, eventually, AV companies will find their largest potential market.

In the US there is a tangle of communications laws that were added over decades by Congress as–one-by-one–broadcast, cable, and satellite technologies transformed the TV marketplace. The primary TV laws are from 1976, 1984, and 1992, though Congress creates minor patches when the marketplace changes and commercial negotiations start to unravel.

Congress, to its great credit, largely has left alone Internet-based TV (namely, IPTV and vMVPDs) which has created a novel “problem”–too much TV. Internet-based TV, however, for years has put stress on the kludge-y legacy legal system we have, particularly the impenetrable mix of communications and copyright laws that regulates broadcast TV distribution.

Internet-based TV does two things–it undermines the current system with regulatory arbitrage but also shows how tons of diverse TV programming can be distributed to millions of households without Congress (and the FCC and the Copyright Office) injecting politics into the TV marketplace.

Locast TV is the latest Internet-based TV distributor to threaten to unravel parts the current system. In July, broadcast programmers sued Locast (its founder, David Goodfriend) and in September, Locast filed its own suit against the broadcast programmers.

Many readers will remember the 2014 Aereo decision from the Supreme Court. Much like Aereo, Locast TV captures free broadcast TV signals in the markets it operates and transmits the programming via the Internet to viewers in that market. That said, Locast isn’t Aereo.

Aereo’s position was that it could relay broadcast signals without paying broadcasters because it wasn’t a “cable company” (a critical category in copyright law). The majority of the Supreme Court disagreed; Aereo closed up shop.

Locast has a different position: it says it can relay broadcast signals without paying because it is a nonprofit.

It’s a plausible argument. Federal copyright law has a carveout allowing “nonprofit organizations” to relay broadcast signals without payment so long as the nonprofit operates “without any purpose of direct or indirect commercial advantage.”

The broadcasters are focusing on this latter provision, that any nonprofit taking advantage of the carveout mustn’t have commercial purpose. David Goodfriend, the Locast founder, is a lawyer and professor who, apparently, sought to abide by the law. However, the broadcasters argue, his past employment and commercial ties to pay-TV companies mean that the nonprofit is operating for commercial advantage.

It’s hard to say how a court will rule. Assuming a court takes up the major issues, judges will have to decide what “indirect commercial advantage” means. That’s a fact-intensive inquiry. The broadcasters will likely search for hot docs or other evidence that Locast is not a “real” nonprofit. Whatever the facts are, Locast’s arbitrage of the existing regulations is one that could be replicated.

Nobody likes the existing legacy TV regulation system: Broadcasters dislike being subject to compulsory licenses; Cable and satellite operators dislike being forced to carry some broadcast TV and to pay for a bizarre “retransmission” right. Copyright holders are largely sidelined in these artificial commercial negotiations. Wholesale reform–so that programming negotiations look more like the free-market world of Netflix and Hulu programming–would mean every party has give up something they like improve the overall system.

The Internet’s effect on traditional providers’ market share has been modest to date, but hopefully Congress will anticipate the changing marketplace before regulatory distortions become intolerable.

Additional reading: Adam Thierer & Brent Skorup, Video Marketplace Regulation: A Primer on the History of Television Regulation and Current Legislative Proposals (2014).

Last month, Senator and presidential candidate Elizabeth Warren released a campaign document, Plan for Rural America. The lion’s share of the plan proposed government-funded and -operated health care and broadband. The broadband section of the plan proposes raising $85 billion (from taxes?) to fund rural broadband grants to governments and nonprofits. The Senator then placed a Washington Post op-ed to decrying the state of rural telecommunications in America. 

While it’s commendable she has a plan, it doesn’t materially improve upon existing, flawed rural telecom subsidy programs, which receive only brief mention. In particular, the Plan places an unwarranted faith in the power of government telecom subsidies, despite red flags about their efficacy. The op-ed misdiagnoses rural broadband problems and somehow lays decades of real and perceived failure of government policy at the feet of the current Trump FCC, and Chairman Pai in particular.

As a result, the proposals–more public money, more government telecom programs–are the wrong treatment. The Senator’s plan to wire every household is undermined by “the 2% problem”–the cost to build infrastructure to the most remote homes is massive. 

Other candidates (and perhaps President Trump) will come out with rural broadband plans so it’s worth diving into the issue. Doubling down on a 20 year old government policy–more subsidies to more providers–will mostly just entrench the current costly system.

How dire is the problem?

Somewhere around 6% of Americans (about 20 million people) are unserved by a 25 Mbps landline connection. But that means around 94% of Americans have access to 25 Mbps landline broadband. (Millions more have access if you include broadband from cellular and WISP providers.)

Further, rural buildout has been improving for years, despite the high costs. From 2013 to 2017, under Obama and Trump FCCs, landline broadband providers covered around 3 or 4 million new rural customers annually. This growth in coverage seems to be driven by unsubsidized carriers because, as I found in Montana, FCC-subsidized telecom companies in rural areas are losing subscribers, even as universal service subsidies increased.

This rural buildout is more impressive when you consider that most people who don’t subscribe today simply don’t want Internet access. Somewhere between 55% to 80% of nonadopters don’t want it, according to Department of Commerce and Pew surveys. The fact is, millions of rural homes are connected annually despite the fact that most nonadopters today don’t want the service.

These are the core problems for rural telecom: (1) poorly-designed, overlapping, and expensive programs and (2) millions of consumers who are uninterested in subscribing to broadband.

Tens of billions for government-operated networks

The proposed new $85 billion rural broadband fund gets most of the headlines. It resembles the current universal service programs–the fund would disburse grants to providers, except the grants would be restricted to nonprofit and government operators of networks. Most significant: Senator Warren promises in her Plan for Rural America that, as President, she will “make sure every home in America has a fiber broadband connection.” 

Every home?

This fiber-to-every-farm idea had advocates 10 years ago. The idea has failed to gain traction because it runs into the punishing economics of building networks.

Costs rise non-linearly for the last few percent of households and $85 billion would bring fiber only to a small sliver of US households. According to estimates from the Obama FCC, it would cost $40 billion to build fiber to the final 2% of households. Further, the network serving those 2% of households would require an annual subsidy of $2 billion simply to maintain those networks since revenues are never expected to cover ongoing costs. 

Recent history suggests rapidly diminishing returns and that $85 billion of taxpayer money will be misspent. If the economics wasn’t difficult enough, real-world politics and government inefficiency also degrade lofty government broadband plans. For example, Australia’s construction of a nationwide publicly-owned fiber network–the nation’s largest-ever infrastructure project–is billions over budget and years behind schedule. The RUS broadband grant debacle in the US only supports the case that $85 billion simply won’t go that far. As Will Rinehart says, profit motive is not the cause of rural broadband problems. Government funding doesn’t fix the economics and government efficacy.

Studies will probably be come out saying it can be done more cheaply but America has been running a similar experiment for 20 years. Since 1998, as economists Scott Wallsten and Lucía Gamboa point out, the US government has spent around $100 billion on rural telecommunications. What does that $100 billion get? Mostly maintenance of existing rural networks and about a 2% increase of phone adoption.

Would the Plan improve or repurpose the current programs and funding? We don’t know. The op-ed from Sen. Warren complains that:

the federal government has shoveled more than a billion in taxpayer dollars per year to private ISPs to expand broadband to remote areas, but these providers have done the bare minimum with these resources.

This understates the problem. The federal government “shovels” not $1 billion, but about $5 billion, annually to providers in rural areas, mostly from the Universal Service Fund Congress established in 1996.

As for the “public option for broadband”–extensive construction of publicly-run broadband networks–I’m skeptical. Broadband is not like a traditional utility. Unlike electricity, water, or sewer, a city or utility network doesn’t have a captive customer base. There are private operators out there.

As a result, public operation of networks is a risky way to spend public funds. Public and public-private operation of networks often leads to financial distress and bankruptcy, as residents in Provo, Lake County, Kentucky, and Australia can attest.

Rural Telecom Reform

I’m glad Sen. Warren raised the issue of rural broadband, but the Plan’s drafters seem uninterested in digging into the extent of the problem and in solutions aside from throwing good money after bad. Lawmakers should focus on fixing the multi-billion dollar programs already in existence at the FCC and Ag Department, which are inexplicably complex, expensive to administer, and unequal towards ostensible beneficiaries. 

Why, for instance, did rural telecom subsidies break down to about $11 per rural household in Sen. Warren’s Massachusetts in 2016 when it was about $2000 per rural household in Alaska? 

Alabama and Mississippi have similar geographies and rural populations. So why did rural households in Alabama receive only about 20% of what rural Mississippi households receive? 

Why have administrative costs as a percentage of the Universal Service Fund more than doubled since 1998? It costs $200 million annually to administer the USF programs today. (Compare to the FCC’s $333 million total budget request to Congress in FY 2019 for everything else the FCC does.)

I’ve written about reforms under existing law, like OTARD rule reform–letting consumers freely install small, outdoor antennas to bring broadband to rural areas–and transforming the current program funds into rural broadband vouchers. There’s also a role for cities and counties to help buildout by constructing long-lasting infrastructure like poles, towers, and fiber conduit. These assets could be leased out a low cost to providers.

Conclusion

After years of planning, the FCC reformed some of the rural telecom program in 2017. However, the reforms are partial and it’s too early to evaluate the results. The foundational problem is with the structure of existing programs. Fixing that structure should be a priority for any Senator or President concerned about rural broadband. Broadband vouchers for rural households would fix many of the problems, but lawmakers first need to question the universal service framework established over 20 years ago. There are many signs it’s not fit for purpose.

The Technology Liberation Front just marked its 15th year in existence. That’s a long time in the blogosphere. (I’ve only been writing at TLF since 2012 so I’m still the new guy.)

Everything from Bitcoin to net neutrality to long-form pieces about technology and society were featured and debated here years before these topics hit the political mainstream.

Thank you to our contributors and our regular readers. Here are the most-read tech policy posts from TLF in the past 15 years (I’ve omitted some popular but non-tech policy posts).

No. 15: Bitcoin is going mainstream. Here is why cypherpunks shouldn’t worry. by Jerry Brito, October 2013

Today is a bit of a banner day for Bitcoin. It was five years ago today that Bitcoin was first described in a paper by Satoshi Nakamoto. And today the New York Times has finally run a profile of the cryptocurrency in its “paper of record” pages. In addition, TIME’s cover story this week is about the “deep web” and how Tor and Bitcoin facilitate it.

The fact is that Bitcoin is inching its way into the mainstream.

No. 14: Is fiber to the home (FTTH) the network of the future, or are there competing technologies? by Roslyn Layton, August 2013

There is no doubt that FTTH is a cool technology, but the love of a particular technology should not blind one to look at the economics.  After some brief background, this blog post will investigate fiber from three perspectives (1) the bandwidth requirements of web applications (2) cost of deployment and (3) substitutes and alternatives. Finally it discusses the notion of fiber as future proof.

No. 13: So You Want to Be an Internet Policy Analyst? by Adam Thierer, December 2012

Each year I am contacted by dozens of people who are looking to break into the field of information technology policy as a think tank analyst, a research fellow at an academic institution, or even as an activist. Some of the people who contact me I already know; most of them I don’t. Some are free-marketeers, but a surprising number of them are independent analysts or even activist-minded Lefties. Some of them are students; others are current professionals looking to change fields (usually because they are stuck in boring job that doesn’t let them channel their intellectual energies in a positive way). Some are lawyers; others are economists, and a growing number are computer science or engineering grads. In sum, it’s a crazy assortment of inquiries I get from people, unified only by their shared desire to move into this exciting field of public policy.

. . . Unfortunately, there’s only so much time in the day and I am sometimes not able to get back to all of them. I always feel bad about that, so, this essay is an effort to gather my thoughts and advice and put it all one place . . . .

No. 12: Violent Video Games & Youth Violence: What Does Real-World Evidence Suggest? by Adam Thierer, February 2010

So, how can we determine whether watching depictions of violence will turn us all into killing machines, rapists, robbers, or just plain ol’ desensitized thugs? Well, how about looking at the real world! Whatever lab experiments might suggest, the evidence of a link between depictions of violence in media and the real-world equivalent just does not show up in the data. The FBI produces ongoing Crime in the United States reports that document violent crimes trends. Here’s what the data tells us about overall violent crime, forcible rape, and juvenile violent crime rates over the past two decades: They have all fallen. Perhaps most impressively, the juvenile crime rate has fallen an astonishing 36% since 1995 (and the juvenile murder rate has plummeted by 62%).

No. 11: Wedding Phtography and Copyright Release by Tim Lee, September 2008

I’m getting married next Spring, and I’m currently negotiating the contract with our photographer. The photography business is weird because even though customers typically pay hundreds, if not thousands, of dollars up front to have photos taken at their weddings, the copyright in the photographs is typically retained by the photographer, and customers have to go hat in hand to the photographer and pay still more money for the privilege of getting copies of their photographs.

This seems absurd to us . . . .

No. 10: Why would anyone use Bitcoin when PayPal or Visa work perfectly well? by Jerry Brito, December 2013

A common question among smart Bitcoin skeptics is, “Why would one use Bitcoin when you can use dollars or euros, which are more common and more widely accepted?” It’s a fair question, and one I’ve tried to answer by pointing out that if Bitcoin were just a currency (except new and untested), then yes, there would be little reason why one should prefer it to dollars. The fact, however, is that Bitcoin is more than money, as I recently explained in Reason. Bitcoin is better thought of as a payments system, or as a distributed ledger, that (for technical reasons) happens to use a new currency called the bitcoin as the unit of account. As Tim Lee has pointed out, Bitcoin is therefore a platform for innovation, and it is this potential that makes it so valuable.

No. 9: The Hidden Benefactor: How Advertising Informs, Educates & Benefits Consumers by Adam Thierer & Berin Szoka, February 2010

Advertising is increasingly under attack in Washington. . . . This regulatory tsunami could not come at a worse time, of course, since an attack on advertising is tantamount to an attack on media itself, and media is at a critical point of technological change. As we have pointed out repeatedly, the vast majority of media and content in this country is supported by commercial advertising in one way or another-particularly in the era of “free” content and services.

No. 8: Reverse Engineering and Innovation: Some Examples by Tim Lee, June 2006

Reverse engineering the CSS encryption scheme, by itself, isn’t an especially innovative activity. However, what I think Prof. Picker is missing is how important such reverse engineering can be as a pre-condition for subsequent innovation. To illustrate the point, I’d like to offer three examples of companies or open source projects that have forcibly opened a company’s closed architecture, and trace how these have enabled subsequent innovation . . . .

No. 7: Are You An Internet Optimist or Pessimist? The Great Debate over Technology’s Impact on Society by Adam Thierer, January 2010

The cycle goes something like this. A new technology appears. Those who fear the sweeping changes brought about by this technology see a sky that is about to fall. These “techno-pessimists” predict the death of the old order (which, ironically, is often a previous generation’s hotly-debated technology that others wanted slowed or stopped). Embracing this new technology, they fear, will result in the overthrow of traditions, beliefs, values, institutions, business models, and much else they hold sacred.

The pollyannas, by contrast, look out at the unfolding landscape and see mostly rainbows in the air. Theirs is a rose-colored world in which the technological revolution du jour is seen as improving the general lot of mankind and bringing about a better order. If something has to give, then the old ways be damned! For such “techno-optimists,” progress means some norms and institutions must adapt—perhaps even disappear—for society to continue its march forward.

No. 6: Copyright Duration and the Mickey Mouse Curve by Tom Bell, August 2009

Given the rough-and-tumble of real world lawmaking, does the rhetoric of “delicate balancing” merit any place in copyright jurisprudence? The Copyright Act does reflect compromises struck between the various parties that lobby congress and the administration for changes to federal law. A truce among special interests does not and cannot delicately balance all the interests affected by copyright law, however. Not even poetry can license the metaphor, which aggravates copyright’s public choice affliction by endowing the legislative process with more legitimacy than it deserves. To claim that copyright policy strikes a “delicate balance” commits not only legal fiction; it aids and abets a statutory tragedy.

No. 5: Cyber-Libertarianism: The Case for Real Internet Freedom by Adam Thierer & Berin Szoka, August 2009

Generally speaking, the cyber-libertarian’s motto is “Live & Let Live” and “Hands Off the Internet!” The cyber-libertarian aims to minimize the scope of state coercion in solving social and economic problems and looks instead to voluntary solutions and mutual consent-based arrangements.

Cyber-libertarians believe true “Internet freedom” is freedom from state action; not freedom for the State to reorder our affairs to supposedly make certain people or groups better off or to improve some amorphous “public interest”—an all-to convenient facade behind which unaccountable elites can impose their will on the rest of us.

No. 4: Here’s why the Obama FCC Internet regulations don’t protect net neutrality by Brent Skorup, July 2017

It’s becoming clearer why, for six years out of eight, Obama’s appointed FCC chairmen resisted regulating the Internet with Title II of the 1934 Communications Act. Chairman Wheeler famously did not want to go that legal route. It was only after President Obama and the White House called on the FCC in late 2014 to use Title II that Chairman Wheeler relented. If anything, the hastily-drafted 2015 Open Internet rules provide a new incentive to ISPs to curate the Internet in ways they didn’t want to before.

No. 3: 10 Years Ago Today… (Thinking About Technological Progress) by Adam Thierer, February 2009

As I am getting ready to watch the Super Bowl tonight on my amazing 100-inch screen via a Sanyo high-def projector that only cost me $1,600 bucks on eBay, I started thinking back about how much things have evolved (technologically-speaking) over just the past decade. I thought to myself, what sort of technology did I have at my disposal exactly 10 years ago today, on February 1st, 1999? Here’s the miserable snapshot I came up with . . . .

No. 2: Regulatory Capture: What the Experts Have Found by Adam Thierer, December 2010

While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity. Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism. . . . Yet, countless studies have shown that regulatory capture has been at work in various arenas: transportation and telecommunications; energy and environmental policy; farming and financial services; and many others.

No. 1: Defining “Technology” by Adam Thierer, April 2014

I spend a lot of time reading books and essays about technology; more specifically, books and essays about technology history and criticism. Yet, I am often struck by how few of the authors of these works even bother defining what they mean by “technology.” . . . Anyway, for what it’s worth, I figured I would create this post to list some of the more interesting definitions of “technology” that I have uncovered in my own research.

By Brent Skorup and Will Gu

The Chinese aviation regulator (CAAC) set out guidelines in January 2019 for drone airworthiness standards. CAAC also released proposed plans in May 2019 for the 30-year development of the unmanned civilian aircraft industry. These proposed plans, while broad and general, highlight unmanned civilian aircraft—like drones and eVTOL—as one of future pillars of the Chinese economy, alongside areas like artificial intelligence and 5G. These pillars are the industries in which the Chinese government wants China to surpass Western countries’ capabilities in the “fourth industrial revolution.” The documents are available online and we’ve translated the documents. Below is a summary of highlights from that translation. 

Industrial Plans for Unmanned Civil Aviation 

Unlike the deliberative, industry-led development in most other countries, China is taking a more top-down approach in the May 2019 plans for unmanned civil aviation. The approach in the document roughly translates as “social + industrial management,” which CAAC lays out in five-year industrial plans. Both the January and May documents outline government action from building domestic supply chains to building drone infrastructure to implementing safety protocols to training personnel.  

Some key dates from the January guidelines: 

• Develop drone air worthiness standards by the end of 2019 
• Create eVTOL requirements by the end of 2019 

Some key dates from the 5-year plans released in May: 

• Allocate segregated, low-altitude airspace by 2025 
• Develop widespread commercial urban air mobility by 2035 
• Develop world-class unmanned aerospace manufacturing by 2035 

As a first step, CAAC is pressing ahead on national airworthiness standards because international standards have been slow to develop. A Chinese government database records over 280,000 registered drones for surveillance, agriculture, and delivery uses. There’s seems to be a real-time drone UTM system in place, but we’ve found little information about its capabilities. (Balancing competition, interoperability, and dynamic improvements in UTM will be a difficult task for aviation regulators worldwide.) According to the Chinese Ministry of Industry and Information Technology, drone operators are allocated spectrum at 800 MHz, 1.4 GHz, and 2.4 GHz. 

JD.com, the largest retailer in China, has been doing trial deliveries since 2016. Another drone company, SF Express, received the first commercial drone delivery license in 2018, a year before the first US drones were approved for commercial delivery. SF Express drones can carry up to 30 kg (about 66 lbs).  

The eVTOL industry in China appears far ahead of the US. EHang has been flying tourists in a 2-passenger autonomous eVTOL for a few months, and an unconfirmed report says the company sold 18 of their eVTOL aircraft this month. In the US, eVTOL operators like Uber likely won’t fly passengers in trial flights until 2023, at the earliest. 

National airworthiness standards are needed, in part the Chinese regulators say, because of unsettling news of drones interfering with airports’ operations. However, the more pressing reason for developing standards is for Chinese industry to take the global lead in commercial unmanned aircraft. China aims to establish international norms and standards—a goal mentioned several times in both documents—similar to how China led the way attending global standards-body meetings and developing protocols in the 5G race. 

The Path Ahead 

One likely obstacle to autonomous urban air mobility and drone cargo development in China is the Chinese military. Most progress in these areas have to be coordinated with the military because of airspace use. According to 2017 Reuters reporting, local media estimate that the military controls about 80% of Chinese airspace. Chinese civil airspace is already somewhat crowded and integrating eVTOLs and other large drones will be a delicate process. 

What stands out from these documents how China perceives itself as lagging in traditional commercial aviation compared to the United States and Europe. That perception seems to serve as a motivation to leapfrog the West and lead the globe in developing commercial drone, eVTOL, and urban air mobility standards and services. The Chinese government has ambitious plans and is moving quickly. In many ways they appear to be leading early but—like 5G—this race is a marathon, not a sprint. 

The urban air mobility stories keep stacking up in 2019. A few highlights and a few thoughts.

Commercial developments

There have been tons of urban air mobility announcements, partnerships, and demos in 2019. EHang, the Chinese drone maker, seems to be farthest along in eVTOL development, though many companies are working with regulators to bring about eVTOL services in the next five years. 

In April, representatives said EHang will start selling its two-passenger, autonomous eVTOL next year for about $350,000 to commercial operators. Ehang’s co-founder says its 2-passenger autonomous eVTOL is already completing routine flights in China for tourists between a hotel and local attractions.

Uber recently announced they’ll offer shared-ride helicopter service between Manhattan and JFK airport, starting in July. This week, Voom (Airbus) announced they will expand their helicopter ridesharing service to San Francisco. They’ve been operating in Sao Paulo and Mexico City already.

These helicopter rides are targeting popular urban routes (airport-to-airport, CBD-to-airport, etc.) for customers who are willing to pay to shorten a one-hour car ride to a ten-minute helicopter ride. Fees are typically $150 to $250 one-way. Both companies want to get a sense of demand, price, and frequency for eVTOL services.

[BS – July 9 update: Last week Xin Gou, a pilot, reported on Twitter that EHang had sold 18 of its 2-passenger eVTOL aircraft, 10 in China, 8 overseas. To my knowledge, these are the first sales of passenger eVTOL aircraft in the world.]

What’s the Plan?

This makes the development of airspace markets and unmanned traffic management (UTM) systems all the more urgent. What regulators must guard against is first-movers squatting on high-revenue aerial routes.

Airspace is nominally a common-pool resource, rationed via regulation and custom. That worked tolerably well for the Wright brother era and the jet age. Still, there are massive distortions and competitive problems because an oligopoly of first movers attained popular routes and airport terminals. The common-pool resource model for airspace also leaves regulators with few tools to ration access sensibly.

From my airspace policy paper:

For example, in 1968, nearly one-third of peak-time New York City air traffic—the busiest region in the United States—was general aviation (that is, small, personal) aircraft. To combat severe congestion, local authorities raised minimum landing fees by a mere $20 (1968 dollars) on sub 25-seat aircraft. General aviation traffic at peak times immediately fell by more than 30 percent, suggesting that a massive amount of pre-July 1968 air traffic in the region was low value. The share of aircraft delayed by 30 or more minutes fell from 17 percent to about 8 percent. Similarly, Logan Airport raised fees on small aircraft in the 1980s in order to lessen congestion. The scheme worked, and general aviation traffic fell by about one-third, though the fee hike was later overturned.

There’s a revolution in aviation policy occurring. The arrival of drones, eVTOL, and urban air mobility requires a totally different framework. It seems inevitable that a layer-cake or corridor approach to airspace management will develop, even though the FAA currently resists that. As with American frontier or radio spectrum: a demand shock to Ostromian common pool resource leads to enclosure and property rights.

Already, first movers and the government are collaborating on UTM and airspace policy. But regulators must resist letting collaboration today degrade into oligopoly tomorrow. This early collaboration on technology and norms is necessary but the regulators will be under immense pressure, inside and outside the agency, to have a single UTM provider, or a few hand-picked vendors. 

A single UTM system or a tightly-integrated system with a few private system operators would reproduce many of the problems with today’s air traffic management. It is very hard to update information-rich systems, especially air traffic control systems, the delayed, over-budget NextGen modernization shows. Today there are 16,000 FAA workers working on the NextGen project, which has been ongoing since 1983. UTM will be an even more information-rich system. An system-wide upgrade to UTM would make NextGen modernization look simple by comparison.

Further, once the urban air mobility market develops, the first movers (UTM and eVTOL operators) will resist newcomers and new UTM technologies in the future. Exclusive aerial corridors, as opposed to shared corridors planned for today by regulators, would allow competitive UTM systems with only basic interoperability requirements.

Quick Hits

NETT Council: In March, USDOT Secretary Chao announced the formation of the Non-Traditional and Emerging Transportation Technology Council. It sounds great, and one of the likely topics the Council will take up is urban air mobility.

ASI Aviation Report, “Taking Off”: The Adam Smith Institute (UK) this week published an excellent report from Matthew Lesh about improving competition and service in aviation. The UK often leads the world in deregulation and market-based management of government property (like AIP in spectrum policy), and ASI has been influential in aviation policy in particular. Report highlights:

1. Analysis of terminal competition policies for Heathrow (which is in the midst of a major expansion project)
2. Proposes additional slot auctions for takeoff and landing slots at UK airports
3. Endorses aerial corridor auctions for air taxis and eVTOL

Government study of airspace auctions: My proposal that the FAA auction aerial corridors for eVTOL caught the attention of the FAA’s Drone Advisory Committee and was included in a working group’s 2018 report about ways to finance drone and eVTOL regulation. Section 360 of the FAA Reauthorization Act, passed a few months after the working group report came out, then instructed the GAO to study ways of financing drone and eVTOL regulation. The law specifies that the GAO must study the six proposals in that working group report, including the auction of aerial corridors.

Lincoln Network Conference: I recently had the privilege of speaking at the Lincoln Network’s Reboot American Innovation conference. Jamie Boone (CTA) and I gave a fireside chat about the fast-moving urban air mobility sector. Matt Parlmer, founder of Ohlogen, was a great moderator. Video here.

eVTOL in North Carolina: The North Carolina state appropriations bill, which is nearing passage, allocates some funds to the Lt. Governor’s office to study eVTOLs, consult with experts, and convene an eVTOL summit in the next year. The Lt. Governor might also form a state advisory committee on eVTOL, a good, forward-looking policy for states given the rapid pace of progress in urban air mobility. To my knowledge, North Carolina is the first state to dedicate funding for study of this industry.

Two weeks ago, Gov. Polis signed a bill that generally cuts off Colorado state funds from ISPs that commit “net neutrality violations” in the state. Oddly, I’ve seen no coverage from national outlets and barely a mention from local outlets. Perhaps journalists and readers have tired from what Larry Downes has dubbed the net neutrality farce, a debate about Internet regulation that has distracted the FCC and lawmakers for over a decade.

There’s not much new in the net neutrality debate, but Colorado did tread new ground: a House amendment to allow ISPs to filter adult content barely failed, on a tied vote 32-32. Net neutrality in the US runs into First Amendment and Section 230 problems, and that amendment is the first time I’ve seen the issue raised by a state legislature.

A few thoughts on the law because in March I was invited to testify before a Colorado House committee about net neutrality, broadband, and the policy implications of the then-pending bill. I commended the bill drafters for scrupulously attempting to narrow their bill to intra-state consumer protection issues. Nevertheless, it was my view that the Colorado law, as written, wouldn’t survive judicial review if litigated.

States can have agreements with vendors and contractors and can require them to abide by certain contractual terms. However, courts have held that states cannot, as Seth Cooper has pointed out, use their contractual relationships with firms to extract concessions that are “tantamount to regulation.” State agencies cannot attempt an end-around federal laws that prevent state regulation of Internet services generally, and net neutrality regulation in particular.

My testimony:

Good afternoon. My name is Brent Skorup and I am a senior research fellow at the Mercatus Center at George Mason University. I also serve on the Broadband Deployment Advisory Committee of the Federal Communications Commission (FCC).

It is commendable that state legislatures, governors, and cities around the country, including in Colorado, are prioritizing broadband deployment. The focus should remain on the pressing broadband issues of competition and deployment. The political battles in Washington, DC, about net neutrality, which I have observed over the past decade, have alarmingly spread to statehouses in recent months, and they will distract from far more important issues.

Lawmakers should enter the debate with their eyes wide open about the stakes and the unintended effects of internet regulation. By imposing network management rules on certain providers, SB 19-078 conflicts with federal policy, codified in the Telecommunications Act, that internet access should be “unfettered by Federal or State regulation.”

First, net neutrality laws and regulations do not accomplish what they purportedly accomplish. As the FCC revealed when it defended its net neutrality regulations in federal court in 2016, any no-blocking rule is mostly unenforceable. As a tech journalist put it, internet service providers (ISPs) can “exempt [themselves] from the net neutrality rules”—the rules are “essentially voluntary.” The same problem arises with state net neutrality laws.

Second, state internet regulations are unlikely to survive judicial review. Internet access is inherently interstate: simply streaming a YouTube video or sending an email often transmits data across state lines. State attempts to regulate treatment of internet access therefore likely violate federal law, which vests authority to regulate interstate communications with the FCC.

Third, the bill penalizes small, rural carriers. There’s a saying in politics: “If you’re not at the table, you’re on the menu.” It appears that Colorado’s rural broadband providers are “on the menu.” The bill applies internet regulations only to companies receiving state support (13 companies, each one serving rural areas). With the exception of CenturyLink, these are very small telecommunications companies, and the smallest had 64 customers. It is a puzzle why the state would add regulations and compliance costs to rural ISPs at a time when the FCC and most states are doing everything possible to help deploy broadband in rural areas.

This is not a plea to “do nothing” in Colorado regarding broadband. The FCC’s Broadband Deployment Advisory Committee has several recommendations for states and localities to improve broadband deployment.

Further, the FCC and some states are considering making it easier for private property owners to install wireless antennas without local regulation and fees, much like how satellite dishes are installed.

Finally, the legislature could also urge flexibility from the FCC regarding the federal high-cost fund, which disburses about $60 million annually to carriers in Colorado. My preliminary estimates using FCC data suggest that, under a new voucher program, every rural household in Colorado could receive $15 to $20 per month to reduce their monthly broadband bill.

Testimony on the Mercatus website here.

An interesting divide has opened up in recent months among right-of-center groups about what the FCC should do with the “C Band.” A few weeks ago, the FCC requested public comment on how to proceed with the band.

The C Band is 500 MHz of spectrum that the FCC, like regulators around the globe, dedicated for satellite use years ago and gave to satellite companies to share among each other. Satellite operators typically use it to transmit cable programming to a regional cable network operations center, where it is bundled and relayed to cable subscribers. However, the C Band would work terrifically if repurposed for 5G and cellular services. As Joe Kane explained in a white paper, the FCC and telecom companies are exploring various ways of accomplishing that.

Free-market groups disagree. Should the FCC prioritize:

The quick deployment of new wireless services? Or:

Deficit reduction and limiting FCC-granted windfalls?

This is a complex question since we’re dealing with the allocation of public property. Both sides, in my view, have a defensible free-market position. There are other non-trivial C Band issues like interference protection and the FCC’s authority to act here, but I’ll address the ideological split on the right.

The case for secondary markets

The full 500 MHz of “clean” C Band in the US would be worth tens of billions to cellular companies. However, the current satellite users don’t want to part with all of it and a group of satellite companies using the spectrum estimate they could sell 200 MHz to cellular carriers if the FCC would liberalize its rules to allow flexible uses (like 5G), not merely satellite services. The satellite providers would then be able to sell much of their spectrum on the secondary market (probably to cellular providers) at a nice premium.

Prof. Dan Lyons and Roslyn Layton wrote in support of the secondary market plan on the AEI blog and at Forbes, respectively. Joe Kane also favors the approach. As they say, the benefit of secondary market sales is that it will likely lead a significant and fast repurposing of the C Band for mobile use. The consumer benefits of “upzoned” spectrum are large and with every year of inaction, billions of dollars of consumer welfare evaporate. Hazlett and Munoz estimate that spectrum reallocated from a restricted use to flexible use generates annual consumer benefits in the same order of magnitude as auction value of the spectrum.

I’d add that there’s a history of the FCC upzoning spectrum (SMR spectrum in 2004, EBS spectrum in 2004, AWS-4 in 2011, WCS spectrum in 2012). The FCC is considering doing this with some government spectrum that Ligado or others could repurpose for mobile broadband. In these cases, the FCC upzoned spectrum so that it can be used for higher-valued uses, not legacy uses required by previous FCCs. The circumstances and technologies vary, but some of these bands were repurposed quickly for better uses by cellular providers and are used for 4G LTE today by tens of millions of Americans.

The case for FCC auction

Liberalizing spectrum quickly gets spectrum to higher-valued uses but does raise the complaint that the existing users are gaining an unfair windfall. I’m not sure when the C Band was allocated for satellite but many legacy assignments of spectrum were given to industries for free.

When the FCC upzones spectrum, it typically increases the value of the band. The “secondary market” plan is akin to the government giving away a parcel of public land to a developer to be used for a gas station, then deciding years later to upzone the land so that condo or office buildings can be built on it. It’s a better use for the land, but the gas station operator gains a big windfall when the property value increases. Not only is there a windfall, the government captures no revenue from the increase in the value of public property.

Free-market groups like Americans for Tax Reform, Taxpayers Protection Alliance, and Citizens Against Government Waste favor the FCC reclaiming the spectrum from satellite providers, perhaps via incentive auction, and collecting government revenue by re-selling it. If the FCC went the incentive auction route, the FCC would purchase the “satellite spectrum” (ie a low price) from the current C Band users, upzone it, and re-sell that spectrum as “mobile spectrum” (ie a high price) in an open auction. The FCC and the Treasury pocket the difference, probably several billion dollars here.

The FCC has only done one incentive auction, the 600 MHz auction. There, the FCC purchased “TV spectrum” from broadcasters and re-sold it to wireless carriers.

The benefit of this is deficit reduction and there’s more perceived fairness since there’s no big, FCC-granted windfall to legacy users. The downside is that it’s a slower, more complicated process since the FCC is deeply involved in the spectrum transfer. Arguably, however, the FCC should be deeply involved and interested in government revenue since spectrum is public property.

My view

A few years ago I would have definitely favored speed and the secondary market plan. I still lean towards that approach but I’m a little more on the fence after reading Richard Epstein’s work and others’ about the “public trust doctrine.” This is a traditional governance principle that requires public actors to receive fair value when disposing of public property. It prevents public institutions from giving discounted public property to friends and cronies. Clearly, cronyism isn’t the case here and FCC can’t undo what FCCs did generations ago in giving away spectrum. I think the need for speedy deployment trumps the windfall issue here, but it’s a closer call for me than in the past.

One proposal that hasn’t been contemplated with the C Band but might have merit is an overlay auction with a deadline. With such an auction, the FCC gives incumbent users a deadline to vacate a band (say, 5 years). The FCC then auctions flexible-use licenses in the band. The FCC receives the auction revenues and the winning bidders are allowed to deploy services immediately in the “white spaces” unoccupied by the incumbents. The winning bidders are allowed to pay the incumbents to move out before the deadline.

With an overlay auction, you get fairly rapid deployment–at least in the white spaces–and the government gains revenue from the auction. This type of auction was used to deploy cellular (PCS) in the 1990s and cellular (AWS-1) in the 2000s. However, incumbents dislike it because the deadline devalues their existing spectrum holdings.

I think overlay auctions should be considered in more spectrum proceedings because they avoid the serious windfall problems while also allowing rapid deployment of new services. That doesn’t seem in the cards, however, and secondary markets seems like the next best option.

Every week, it seems, there is a news story about another air taxi startup or test flight. Another signal of the industry’s development is that at a House Transportation and Infrastructure hearing last week, Eric Fanning, the President and CEO of the Aerospace Industries Association, devoted most of his testimony to urging lawmaker action on air taxi (also called vertical takeoff and landing aircraft and, colloquially, flying cars) policy and infrastructure.

The technology is exciting but federal officials are interested in whether the air taxi industry will be a drain on taxpayers. Using government estimates of the air taxi industry and current tax rates for infrastructure-based industries like wireless and oil extraction, I estimate that the air taxi industry could deposit tens of billions of dollars into the US Treasury annually. Hopefully the hundreds of air taxi “vertiports” required are privately funded as well.

Air Taxi Market Size

In November, I published a Wall Street Journal piece about the rapid development and promise of the air taxi industry. Some people inquired as to the potential size of the air taxi market and government revenue. I wasn’t aware of any estimates at the time. Nevertheless, I estimated that the US market could one day reach $200 billion in revenue annually–about the size of the current US aviation market and the US wireless broadband market.

Other analyst and government estimates are now coming out, turns out, my estimates were on the conservative side. For instance, a NASA-funded study (.pdf) estimated that, at the upper limit, the US market could approach $500 billion annually, which is nearly the size of the US auto market. That would require tens of thousands of air taxis serving over 10 million passengers per day.

Experts at McKinsey, NASA, and JP Morgan Chase estimate that the global air taxi market could be anywhere from $615 billion to $3 trillion annually by 2040. Given the potential for this industry, other countries are moving quickly to commercialize air taxis. A German consultancy, Roland Berger, predicts there will be 3,000 commercial air taxis by 2025. The drone expert at the World Economic Forum believes Chinese companies are far ahead when it comes to autonomous air taxi service. That said, the operator of the Frankfurt airport announced a partnership with an eVTOL company recently, and the powerful Japanese trade and industry ministry has convened a 25-member private-public council to develop air taxis. Japanese regulators intend to make Japan the birthplace of urban air taxi service.

Private or Public Funding of Vertiports?

A key decision for US lawmakers is whether the hundreds of vertiports in the US will be privately funded and operated or will, like today’s airports, receive subsidies and public operation. A NASA study estimates that each major US city could support on average about 200 “vertiports.” That would be a major drain on taxpayers if publicly funded.

My working paper on the subject of air taxi traffic management contemplates entirely private funding of urban vertiports and infrastructure. It also proposes that the government auction aerial corridors to air taxi operators. Private infrastructure and the auction of exclusive aerial corridors, in my view, is the safest and most fiscally responsible way to develop the American air taxi market.

However, the FAA and NASA’s plans are unclear on whether air taxi infrastructure will be funded by taxpayers or funded privately. There’s a good chance the FAA and NASA will import the norms and regulations for traditional aviation–open access airspace and public funding of shared airports–into the urban air mobility market. I think that would create an anticompetitive market and be an unnecessary drain on taxpayers.

Government Revenue From the Air Taxi Industry

How much government revenue could be generated by the air taxi industry? We can look to other assets that are auctioned by government for analogues: spectrum and offshore oil sites. There is no “spectrum tax,” but wireless taxes and fees resemble a de facto tax on cellular spectrum. The Tax Foundation puts government (federal, state, and local) wireless taxes and fees at around 9% of annual wireless revenues. For oil leases on federal property, there is a government royalty amounting to about 12.5% of oil revenue.

With these figures in mind, let’s assume that government taxes and fees will one day amount to about 10% of air taxi revenues. Supposing that the US air taxi market will one day fall between my conservative estimate, $200 billion annually, and NASA’s best-case estimate, $500 billion annually, the air taxi industry could one day generate about $20 billion to $50 billion in tax revenue annually. That doesn’t include the auction revenues of aerial corridors, if implemented. If spectrum auctions and offshore oil leases are the best comparison, the auction of aerial corridors could return another $100 billion to the US Treasury.

These are tentative estimates. Market size estimates vary widely, and much depends on whether a workable regulatory framework develops. In any case, like aviation 100 years ago, it’s an exciting area to watch.

Air taxis and electric vertical takeoff and landing aircraft (eVTOLs) will receive significant regulator attention in 2019 as companies test these aircraft and move towards commercialization. I’m fairly bullish on the technology and its potential and I’m pleased to see state lawmakers and mayors, however, seem to be waking up to the massive possibilities of this industry.

A recent NASA-commissioned study estimates that in the best-case scenario, the U.S. air taxi market would be worth about $500 billion annually, which is nearly the size of the U.S. auto sector. This translates into about 1 million air taxis in the air and 11 million flights per day. Morgan Stanley researchers recently estimated that the global flying car market could be about $1.5 trillion annually by 2040.

You can quibble with the numbers, but it’s clear that aircraft companies and governments believe flying cars are no longer science fiction. Uber plans to offer commercial eVTOL flights in 2023, with testing beginning in 2020. Boeing plans testing later this year.

Federal and state lawmakers need to start preparing for the industry. In November, I published a paper and a Wall Street Journal op-ed proposing that the FAA demarcate and auction highways in the sky–exclusive aerial corridors–for air taxi flights, as a way to manage airspace congestion and preserve competition.

As I wrote in the Detroit News a few weeks ago, state lawmakers also need to start planning for air taxis. States don’t manage aircraft flights but they do manage zoning, property rights, and other areas where state policy can inhibit or encourage the air taxi industry. I mentioned in the op-ed that there are two things states can do in the near future.

Aerial Navigational Easement

First, a good policy is to grant small aircraft a navigational easement to low-altitude airspace. Trespass lawsuits from landowners could scare away companies and innovators who want to test passenger drone and air taxi flights.

About half of states created these aerial navigation easements in the 1920s and 1930s so that trespass lawsuits would not interfere with the new aviation industry. Per these state statutes, flights over property are allowed so long as they do not substantially interfere with the homeowner’s use and enjoyment of the land.

Aerial navigation easement laws have a few benefits: They:

1. Reaffirm the primacy of landowner property interests.
2. Reinforce state prerogatives to determine property rights.
3. Encourage the drone and air taxi industry by precluding most trespass lawsuits.
4. Avoid a fight with federal regulators by leaving air traffic management policy untouched.

This 80-year old policy will see new relevance in the states this year. Last month, in Washington, a landowner sued a drone operator for aerial trespass. Washington, notably, does not provide for an aerial navigational easement in law.

Air Taxi Advisory Committee

Second, governors or legislatures should consider creating advisory committees for the air taxi industry. Air taxis will raise all sorts of novel state and local issues. A few come to mind:

• Should municipal zoning laws for helipads and air taxi “vertiports” be liberalized?
• EVTOLs require substantial electrical grid improvements and distributed, powerful charging stations on rooftops and landing sites. Are state regulations standing in the way?
• Air taxis, like trains and autos, create significant noise and local nuisance laws could essentially preclude all air taxi testing and operation. What decibel levels are appropriate to balance industry and public acceptance? Should that be decided at the state or local level?

State advisory committees were created for another emerging technology sector–autonomous vehicles. Committees are composed of stakeholders, including public safety representatives, consumer groups, industry representatives, and academics. They can create policy recommendations for legislators and participate in hearings as air taxis come closer to commercialization.

For the air taxi industry to reach its potential, there needs to be collaboration between and foresight from state and federal lawmakers. Air taxi technology has moved far ahead of law, regulation, and public perception. Fortunately, I expect state and local officials to start examining their current laws and whether modernization is in order to stimulate this transportation sector.

Below are the top 10 posts on the Technology Liberation Front in 2018. Everything from privacy, to 5G, to tech monopolies, and net neutrality. Enjoy, and Happy New Year!

10. How Well-Intentioned Privacy Regulation Could Boost Market Power of Facebook & Google, April 25.

9. Nationalizing 5G networks? Why that’s a bad idea., January 29. (Republished at The Federalist.)

8. The Pacing Problem, the Collingridge Dilemma & Technological Determinism, August 16.

7. GDPR Compliance: The Price of Privacy Protections, July 9.

6. Evasive Entrepreneurialism and Technological Civil Disobedience: Basic Definitions, July 10.

5. No, “83% of Americans” do not support the 2015 net neutrality regulations, May 18.

4. The FCC can increase 5G deployment by empowering homeowners, July 26.

3. Doomed to fail: “net neutrality” state laws, February 20.

2. Should We Teach Children to Be Entrepreneurs, or How to Pay Licensing Fees?, Aug. 21.

1. The Week Facebook Became a Regulated Monopoly (and Achieved Its Greatest Victory in the Process), April 10.

One year ago, the FCC majority passed the 2017 Restoring Internet Freedom Order, largely overturning the 2015 Open Internet Order. I consider the 2017 Order the most significant FCC action in a generation. The FCC did a rare thing for an agency—it voluntarily narrowed its authority to regulate a powerful and massive industry.

In addition to returning authority to the Federal Trade Commission and state attorneys general, the 2017 Order restored common-sense regulatory humility, despite the court’s blessing the Obama FCC’s unconvincing, expansive interpretation of FCC authority. National policy, codified in law, is that the Internet and Internet services should be “unfettered by Federal or State regulation,” which, if it means anything, means Internet services cannot be regulated as common carriers.

Net neutrality is dead

Net neutrality advocates who want the FCC to have common carriage powers over Internet applications and networking practices were outraged by the approval of the 2017 Order. Joe Kane at R Street has a good roundup of some of the death-of-the-Internet hyperbole from the political class and advocates. Some disturbed net neutrality supporters took it too far, including threats to the lives and families of the Republican commissioners, especially Chairman Pai.

But the 2017 Order hadn’t killed net neutrality. It was already dead. A few hours after the passage of the Restoring Internet Freedom Order, I was on a net neutrality panel in DC for an event about the First Amendment and the Internet. (One of my co-panelists dropped out out of caution because of the credible bomb threat at the FCC that day.) I pointed out at that event that while you wouldn’t know it from the news coverage, the Obama FCC had already killed net neutrality’s core principle—the prohibition against content blocking. The 2015 “net neutrality” Order allowed ISPs to block content. Attributing things to the 2015 Order that it simply doesn’t do is what Commissioner Carr has called the “Title II head fake.” The 2017 Order simply freed ISPs and app companies to invest and innovate without fear of plodding scrutiny and inconclusive findings from a far-off FCC bureau.

Long live net neutrality

The net neutrality movement will live on, however. The main net neutrality proponents aren’t that concerned with ISP content blocking; they want FCC regulation of the Internet companies and new media. It’s no coincidence that most of the prominent net neutrality advocates come out of the media access movement, which urged the FCC’s Fairness Doctrine, equal time laws, and programming mandates for TV and radio broadcasts.

The newer net neutrality coalition, as then-FCC Chairman Wheeler conceded frankly, doesn’t know precisely what Internet regulation would look like. What they do know is that ISPs and Internet companies are operating with inadequate public supervision and government design. 

As Public Knowledge CEO Gene Kimmelman has said, the 2015 Order was about threatening the industry with vague but severe rules: “Legal risk and some ambiguity around what practices will be deemed ‘unreasonably discriminatory’ have been effective tools to instill fear for the last 20 years” for the telecom industry. Title II functions, per Kimmelman, as a “way[] to keep the shadow and the fear of ‘going too far’ hanging over the dominant ISPs.” Internet regulation advocates, he said at the time, “have to have fight after fight over every claim of discrimination, of new service or not.”

So it’s Internet regulation, not strict net neutrality, that is driving the movement. As former Obama administration and FCC adviser Kevin Werbach said last year, “It’s not just broadband providers that are fundamental public utilities, at some level Google is, at some level Facebook is, at some level Amazon is.” 

Fortunately, because of the Restoring Internet Freedom Order, IP networks and apps companies have a few years of regulatory reprieve at a critical time. Net neutrality was invented in 2003 and draws on common carriage principles that cannot be applied sensibly to the various services carried on IP networks. Unlike the “single app” phone network regulated with common carriage, these networks transmit thousands of services and apps–like VoIP, gaming, conferencing, OTT video, IPTV, VoLTE, messaging, and Web–that require various technologies, changing topologies, and different quality-of-service requirements. 5G wireless will only accelerate the service differentiation that is at severe tension with net neutrality norms.

Rather than distract agency staff and the Internet industry with metaphysical debates about “reasonable network” practices, the Trump FCC has prioritized network investment, spectrum access, and rural broadband. Hopefully the next year is like the last.

Addendum: The net neutrality reprieve has not only freed up FCC staff to work on more pressing matters, it’s freed  up my time to write about tech policy areas that the public will benefit from. In November I published a Mercatus working paper and a Wall Street Journal op-ed about flying car policy.