Section 1 of the Communications Act of 1934 provides that it shall be the policy of the United States “to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges . . .” Yet while universal deployment has been a stated federal social goal for nearly 90 years, decades of experience demonstrate that the economics are hard to overcome.

We live in a large country with a diverse population. Some folks live in cities; others live in remote areas which are expensive to serve. Complicating matters, even when service is deployed, there is no guarantee of adoption as many Americans do not view broadband access as essential to their lives—regardless of price. For this reason, Congress wisely included qualifiers when articulating its goal of universal deployment.

For example, as noted above, Section 1 includes the phrase “so far as possible.” Similarly, Section 706 of the Telecommunications Act of 1996 calls for broadband deployment only on an economically “reasonable” basis. Accordingly, although the U.S. government over the years has spent untold billions to increase broadband deployment and adoption—through, among others, the FCC’s Universal Service program, Rural Utilities Service (RUS) subsidies, and now the Infrastructure Investment and Jobs Act (IIJA)—Congress has always recognized that 100% deployment and adoption is an unrealistic goal given the economic and demographic character of the United States. Instead, progress at the margins is the more realistic objective.

Despite these economic fundamentals, some believe that the lack of broadband deployment in some areas is caused by a deliberate practice of “digital redlining” by internet service providers (ISPs). Understood properly, their argument is essentially that profit-maximizing firms (some of them publicly-held corporations no less) are deliberately forgoing revenue by refusing to provide service in certain areas out of racial animus. While there is no evidence of ISPs acting with premeditated racist intent, progressive activists nonetheless managed to prod Congress to include Section 60506 into the IIJA to address the issue of “Digital Discrimination.”

Under Section 60506, the FCC is charged with adopting final rules to facilitate equal access to broadband internet access service (taking into account the issues of technical and economic feasibility) to prevent “digital discrimination of access . . .”  As with a lot of legislation these days, Section 60506 is hardly a model of economic logic or legal clarity.

Perhaps the biggest analytical rub is that Section 60506 does not limit itself to traditional discriminatory criteria such as “race, ethnicity, color, religion, or national origin”; Section 60506 now goes one step farther by also adding “income” as a protected class. From an economic perspective, adding “income” as a protected class is highly problematic.

Firms will invest when it is profitable to do so, and profit is related to demand. In turn, broadband demand is positively related to income, so income is a proxy for demand. So if there is insufficient demand for a service in parts of an ISP’s service territory (and subsidies to make up the cost difference are not available), then firms will not invest—it is not economically feasible. Income and economic feasibility are closely related—nearly indistinguishable. For this reason, after careful review of the economic evidence, the FCC squarely rejected calls to include income as a protected class in its 2007 Cable Franchise Reform Order (a decision which was later upheld by the Sixth Circuit Court of Appeals). The IIJA, however, ignores that FCC precedent.

But there are other problems with Section 60506.

For example, Section 60506 essentially codifies the argument that if everyone in a service territory cannot get broadband at the same time, then no one should get broadband at all. In other words, Section 60506 is nothing more than a buildout requirement cloaked in racial discrimination language. Such a buildout requirement is odd given that Congress in the IIJA provided over $40 billion to subsidize broadband deployment to everyone, or at least everyone that can be served at a reasonable cost (though in some cases subsidies are provided in unreasonable settings).

Moreover, Section 60506 is poorly drafted and will inevitably lead to unintended regulatory consequences. Other than a mandate for the FCC to write rules, Section 60506 is ambiguous as to the exact statutory powers it bestows upon the Commission, including the scope of penalties the FCC may impose for any violation. Instead, Section 60506 contains three different statements of federal policy about the need to address amorphous concepts such as “digital discrimination” or “deployment discrimination.” Will the FCC view these policy statements as hortatory, or will the FCC try to convert these statements into new affirmative grants of authority to expand its power as it tried (successfully no less) to do with Section 706 during the ten-year net neutrality fight?

Most importantly, it is not the federal government’s job to second-guess the business decisions of private companies. The last thing anybody should want is for the FCC to be the final arbiter of what constitutes a “technically or economically feasible” business investment. Yet that is exactly what Section 60506 provides for. Given that the FCC already pulled this exact maneuver when it reviewed AT&T’s supposedly voluntary buildout commitments when it sought to acquire DirectTV, the potential for regulatory mischief is high.

The FCC’s recent Notice of Proposed Rulemaking to implement Section 60506 indicates that regulatory mischief is indeed upon us. For example, in its NPRM, the agency proposes to use disparate impact analysis to determine whether there is discrimination, rather than requiring proof of discriminatory intent. The Commission’s interpretation of disparate impact requires little more than speculation about redlining before an accuser can impose heavy costs on a broadband provider—costs which will inevitably be passed through to consumers.

So how do we make lemonade out of lemons?

A recent paper by Dr. T. Randolph Beard and Dr. George S. Ford entitled Digital Discrimination: Fiber Availability and Speeds by Race and Income may shed some light. In this paper, the authors first provide a definition of digital discrimination and describe the sort of empirical conditions and methods needed to quantify it. Having defined the problem and analytical framework, the authors then conduct an empirical analysis of digital discrimination in fiber deployment and broadband speeds is performed. Their results are encouraging: they could not find any systematic evidence of digital discrimination by race or income level. The authors point to the difficulty of defining “income” discrimination when income is so tightly related to demand (and costs, in some cases).

Racial discrimination—in all of its insidious forms—is a scourge on our society. Accordingly, if someone can produce smoking gun evidence that an ISP willfully engaged in racist discriminatory behavior, then throw the book at them. But that is not what Congress accomplished in enacting Section 60506. Instead, all Congress succeeded in doing was enacting a poorly drafted (albeit politically correct) statute that will have the perverse effect of deterring—not encouraging—more broadband deployment. Deploying to unprofitable areas is akin to a tax on deployment, and taxes do not encourage activities.

Nothing can be done at this point about repealing or modifying Section 60506, and there is no evidence of digital redlining to suggest that the legislation is even required. Still, as the IIJA mandates that the FCC draft rules to implement Section 60506, the question is whether current FCC leadership can disregard partisan politics and enact sensible policies to root out any real instances of digital discrimination. Given the proposals contained in its NPRM, the prospects appear grim.

Note from the Editor: The Federalist Society takes no positions on particular legal and public policy matters. Any expressions of opinion are those of the author. We welcome responses to the views presented here. To join the debate, please email us at [email protected].