The Telecom Act Turns 30

February 8 is the thirtieth anniversary of the Telecommunications Act of 1996. The legislation brought sweeping changes to the industry and was the impetus for me to start my consulting company in 1997. This blog includes some of my thoughts about the impact of the Act.

The Act was both overdue and premature. It was overdue because market forces had been creating pressure for rule changes since the divestiture of AT&T into the Baby Bell companies in 1984. The divestiture brought long-distance competition, but it was clear that the public wanted broader competition for voice service instead of only being bombarded by companies offering cheaper long-distance rates. The Act held out the possibility of real competition for voice services to the majority of the country.

In my opinion, the Act never unleashed the competition for telephone services envisioned by the authors of the bill. The Act did create a giant flurry of competitive activity as CLECs immediately sprang into life to compete for voice services. Unfortunately, most of these new competitors ether resold telephone company products or relied on using unbundled network elements from telephone company networks to cobble together telephone services. I had an office near the DC Beltway, and in 1999, I probably had a dozen competitors visit my office trying to sell me an integrated T1 that combined voice and data that completely relied on the telco network. As might have been expected, the big telcos quickly adapted to the new rules and were highly successful in complicating the process for anybody trying to compete with them.

I say the Act was clearly premature because it did not anticipate the explosion of residential broadband that began only a few years after the ink was dry on the new law. The public interest in the Internet quickly swamped any public interest in voice competition. The bundled T1 product being sold to businesses became quickly obsolete when DSL and cable modems brought faster broadband for a much lower price. The introduction of cheap broadband was a major factor in the collapse of the giant voice CLECs, which crashed and burned in the big tech collapse that peaked in 2001.

Because the Act did not anticipate broadband, the launch of DSL and cable modems was almost totally unregulated because Congress didn’t have an appetite for tackling the complexities of an update to the Act so soon after the 1996 Act. The giant broadband providers quickly solidified behind the concept of light-touch regulation to stave off any attempt to regulate the new broadband industry.

The Act didn’t address two issues that still plague the telecom industry today. The first is market concentration. The Act hoped to create an environment that fostered widespread facility-based voice competition. The advent of broadband made the whole industry forget about voice competition. It became quickly clear that the largest telcos and cable companies were going to snag the vast majority of broadband customers in the country. Competition between telcos and cable companies started on an even footing in 2000, but as cable company technology advanced faster than DSL technology, the cable companies became virtual monopoly broadband providers in their markets, and used that strength to force customers to buy bundles of broadband, cable TV, and telephone. Only after several decades are we finally seeing fiber overbuilders and FWA cellular broadband bringing true competition to cable company monopolies.

The Act also did nothing to tackle the second issue that has plagued the broadband industry since the beginning – the uneven and inequitable distribution of broadband technology. Rural areas fell behind urban broadband almost immediately. We still haven’t brought broadband to a lot of low-income MDUs in cities. While the FCC was tasked by the Act to make sure that rural markets had the same opportunities as urban markets, the agency has never done more than pay lip service to that obligation.

Perhaps one of the biggest failures of the 1996 Act is that it implicitly assumed that specific services are closely linked to specific infrastructure. This led to the bizarre situation where voice over copper remained regulated while VoIP over other technologies was not. Cable TV over coax stayed regulated, while streaming video over other technologies was not.

You’ll probably be seeing a bunch of articles that look at different consequences of the 1996 Act. In my mind, the Act was a success in that it shook up the heavily regulated and staid incumbent telephone companies. But the Act was also a failure since it allowed telephone companies to easily do end runs around the rules create by the Act. Ultimately, the Act fell far short of the intent the goals for those who wrote it.

Who Uses the Internet?

Pew Research Center released the results of a major survey that asked how Americans use the Internet, about smartphone ownership, and about the digital divide. There were over 5,000 completed surveys conducted in the first half of 2025.

Home Broadband

About 78% of respondents live in a home that has a broadband subscription. That’s an interesting statistic since there have been past FCC reports that say that as many as 88% of homes have broadband. I wrote a blog once about the difficulty of counting homes in the US. It’s not obvious how to account for second homes and abandoned homes, as we’ve seen in the FCC fabric. But Pew’s results are based on the number of people and not homes. Some of the differences between Pew and FCC data would include large groups of people like the unhoused and members of the military who don’t live in a home.

The Pew survey shows that there is still a big difference in broadband penetration related to household incomes. 94% of those in households with an annual household income over $100,000 have a broadband subscription, while only 54% of those with household incomes under $30,000 have broadband. This highlights the essence of the still prevalent digital divide. There was a lot of hope that the federal ACP plan that provided a $30 monthly subsidy would help millions of households afford broadband, but the ACP experiment ended not long after it started.

There is also a difference depending on where people live. The broadband subscription rate is 84% in suburbs, 75% in urban areas, and 71% in rural areas.

There is also a difference by age. 87% of those between 30 and 49 have broadband, while only 70% of those over 65 have a subscription. Surprisingly, only 71% of those between 18 and 29 have broadband, which is down from 78% from a survey released in 2023, but about the same as a survey from 2021. It’s hard to know if this represents a trend such as a migration to cellphones, or if this is a group that changes a lot based on factors like jobs and the economy.

For those that love statistics, Pew has a separate report that trends these results over time.

Smartphone Usage

According to the Pew Survey, 16% of adults are “smartphone dependent”. Meaning they rely on a smartphone for broadband access and don’t subscribe to home broadband. When added to those with a home broadband subscription, 94% of adults subscribe to some form of broadband.

Smartphone usage also varies by income, in relationships that are the opposite of home broadband subscriptions. 27% of those living in homes with incomes under $30,000 reach the Internet only through a smartphone, while only 4% of those with household incomes over $100,000 rely completely on a smartphone.

The same relationship to home broadband applies when looking at age. 27% of those between 18 and 29 only reach the Internet through a smartphone, while only 11% of those between 30 and 39 do so.

Pew notes that the percentage of those who rely on a smartphone only to reach the Internet has doubled from 8% in 2013.

BEAD Non-deployment Complications

The NTIA should be getting close to approving all of the state BEAD initial grant proposals. Once that has been done, one of the last big steps will be for NTIA to announce how States can receive and use the BEAD non-deployment funds. When NTIA initiated the Benefit of the Bargain rules, the amounts of BEAD allocated to infrastructure plummeted, and the non-deployment funds mushroomed to over $20 billion, almost half of the original $42.45 billion BEAD funding.

NTIA will hold a listening session soon to hear ideas from State Broadband Office on how they would like to use the funding. Most States had specific proposals for using the funds, but States may not have specific plans for the increased amounts of non-deployment created by the Benefit of the Bargain changes.

The nondeployment process got complicated when the White House issued an executive order that said that NTIA “must provide that States with onerous AI laws … are ineligible for non-deployment funds, to the maximum extent allowed by Federal law.”

A number of State Attorneys General have expressed a willingness to sue NTIA should they be denied non-deployment in general, but also specifically if they are denied because they have state AI regulations. There is a great article, written by Lawfare, on the legal issues involved if this issue is taken to court. The article concludes that States have a great argument to question if NTIA or an executive order can overcome the intent of Congress when it passed the original BEAD rules.

One interesting observation in that article is that the White House is relying on a claim that State AI regulations may harm the development and deployment of AI. The argument is that AI applications drive demand for the Internet, so any State regulations that threaten the use of AI also threaten the value of BEAD-funded infrastructure. If that line of reasoning is deemed to be valid, it would imply that NTIA could withhold funding related to any other web applications that uses a lot of broadband.

The AI issue got more interesting when 22 states and the District of Columbia filed comments with the FCC in December that ask that the agency to not preempt any State AI regulations. While many of the States in the filing are blue, the filing included Arizona, Tennessee, and Utah.

The final interesting aspect of the issue is legislation introduced by two republican Senators, Roger Wicker (R-MS) and Shelley Moore Capito (R-WV), titled the SUCCESS for BEAD Act. The legislation is viewed as a way to negate the Executive Order and would require States to receive full funding and to distribute non-deployment funds through a competitive subgrant process. This would require grantees to provide a 25% match. The non-deployment funds could be used for six purposes: infrastructure improvement in rural areas, the enhancement of public safety and/or national security, network resiliency and cybersecurity protections, federal or military facilities, improving network latency, and the advancement of AI and related technologies.

Meanwhile, NTIA is still referring to non-deployment funds as savings, although there has been an acknowledgement that some of the funds should be distributed to States. I suspect that if NTIA does anything less than full distribution of all of the funds, we’ll see some combination of legislation and lawsuits to gain access to the funds.

AI Needs Quality Upload Speeds

The pandemic exposed a huge weakness in cable company networks when it became clear that their networks did not have enough upload capacity to support people working and schooling from home. That period when people struggled to work from home might have been the trigger to convince millions of people that fiber was superior to cable technology. The cable companies reacted quickly and goosed upload speeds to the range of 30-40 Mbps. Since then, they have slowly been upgrading to much faster upload speeds using mid-splits and DOCSIS 4.0.

A recent article from Ookla suggests that the same need for faster upload speeds might be coming for cellular networks due to the way that people are starting to use AI in daily life. The article provides some examples of ways we might use AI in the near future. A person might scan a menu in a restaurant, and AI can provide real-time feedback to estimate the calories in each dish or highlight foods that might trigger an allergic reaction. This would require quickly uploading a picture of the menu to provide quick feedback. That’s not a data-intensive transaction, but consider instead using AI to provide real-time feedback to somebody walking around in a foreign city. AI could translate signs and describe the nature of stores or shops as they come into view.

 

U.S. cellular companies have allocated the smallest percentage of bandwidth to upload compared to the major cell providers around the world. AT&T, T-Mobile, and Verizon have allocated between 6.6% and 7.1% of total bandwidth capacity to upload. In contrast, China Telecom and China Unicom have allocated over 16% of bandwidth to upload.

In writing this blog, I took a speed test on AT&T and got a speed of 381/11 Mbps on my cellphone. I note this is the fastest download speed I’ve ever received on AT&T, by a lot, and shows the impact of the AT&T’s recent introduction of the spectrum acquired from EchoStar. I took several other tests with similar results, and at my house, the upload speeds are only about 3% of total bandwidth.

American cellular carriers seem to be in a race to claim the fastest network for bragging rights, and this has led them to maximize download speeds to an extreme degree. I doubt that many people are complaining except for folks who are trying to stream video from their phone. When I swap my phone over to WiFi, the upload speed in my Charter connection is more than 10 times faster than the AT&T cellular upload connection.

The article points out that carriers have options to boost upload speeds. The one that is discussed the most in the article is to convert cellular networks to dynamic TDD (time division duplexing), which would allow the phone to assign bandwidth available to the phone to either download or upload, according to the immediate need.

But that fix alone wouldn’t solve the problem, because a carrier would need to beef up the entire network in the upload direction to handle larger volumes of uploaded data. There are other interesting limitations. For example, if a carrier uses shared spectrum like CBRS for uploading, then setting a faster upload would have to be coordinated with the other major users of the spectrum to synchronize the network clocks.

The Ookla article also demonstrates that handsets can be a limitation by showing the upload speeds that can be achieved on different generations of Samsung Galaxy phones. with lower upload capability on older phones.

The slow upload speed on my tests might be an anomaly, but before AT&T introduced the new spectrum, my upload speeds were rarely faster than 5 Mbps. Ookla says that median upload speeds in the second half of 2025 were 18 Mbps for AT&T, 21 Mbps for Verizon, and 27 Mbps for T-Mobile – all slow in comparison to fiber and upgraded cable technologies.

Starlink Flexing Its Market Power

In a short period of time, Starlink has taken three actions that demonstrates the company’s growing market power. The companies market power will be strengthened with the impending merger between SpaceX and Elon Musk’s AI company, xAI. Analysts have estimated the combined companies could garner a market value over $1 trillion.

The first move from Starlink came on January 15 when the company updated its user Privacy Policy. The revised terms say that, unless a customer opts out, Starlink can use user data “to train our machine learning or artificial intelligence models”, and that user data could be shared with third-party collaborators without providing more details to customers.

This should be disturbing to customers, because this doesn’t just mean sharing details of emails. In today’s broadband world, it could mean sharing video images, voice prints, and the giant amount of private information that an ISP can learn about its customers if it is looking.

Starlink’s second big move came when it sent a document to State Broadband Offices where Starlink is a tentative winner of BEAD grants. Starlink asked that LEO providers be excused from many of the BEAD obligations that will apply to other grant winners. The Starlink communication included a veiled threat that the company could pull out of BEAD if SBOs don’t meet its suggested terms.

Among the suggested changes, Starlink payments would not be linked to adding subscribers, and it would get 50% of BEAD funding up front and the rest over a specified schedule. Starlink would not have to provide financial reporting or provide any documentation about how it spends the grant funding. Starlink wants to be excused from speed test requirements since it can’t guarantee that subscribers have installed the satellite receiver properly. Starlink also wants to be excused from insurance and labor requirements.

On January 30, SpaceX asked the FCC for the ability to launch 1 million new satellites to create a giant orbital data center for AI. These satellites would be placed between 310 and 1,240 miles above Earth, in narrow 30-mile bands that would leave room to deconflict with other companies with similar goals. SpaceX says the giant satellite constellation is needed as the first step for humanity to become a Kardashev II-level civilization that fully harnesses the Sun’s power, while also providing enough AI capacity to serve billions of people. FYI, a Kardashev II-level civilization is one that fully harnesses the total energy output from its parent star. SpaceX says putting data centers in space is the most efficient way to meet the growing energy demands of AI data centers.

The constellation would use laser communications between satellites and would communicate back to Earth using Starlink’s current broadband constellation.  SpaceX says it could launch the data center satellites at a rapid pace using its new Starship launch vehicle.

Announcing these three things within a month shows a company that is feeling emboldened enough by market power to act as it wishes. If a terrestrial ISP openly said it will use customer data to train AI, it would risk being shunned in the market, but Starlink operates in many places where there are no other competitive options. I wonder how safe Starlink customers will feel about their data even if they opt out of sharing it with Starlink.

It’s going to be interesting to see how State Broadband Offices react to the Starlink demand for easier BEAD terms. Many of the SBOs didn’t want to make big awards to LEO satellite providers, and were coerced by  NTIA to do so with the Benefit of the Bargain rules. It’s not unimaginable that some States will outright reject Starlink’s request, which could lead to some interesting fights between States and NTIA.

The request to launch 1 million satellites could be a stunt to boost interest in the upcoming IPO and merger. Or it could be real. This FCC clearly favors satellite technology, but even for them, a request to launch 1 million satellites has to be an extreme request.

Broadband Shorts January 2026

This blog covers topics that I found interesting but which don’t warrant an entire blog.

Indoor CBRS. Federated Wireless announced a new product and a system that allows cellular carriers to use CBRS spectrum inside large buildings like hotels, malls, office buildings, and sports venues. The system places CBRS antennas throughout a building to provide the needed coverage. The concept behind the deployment is to let the carriers use free CBRS spectrum inside buildings to preserve licensed spectrum for outdoors. Currently, big crowds, like at a sporting event, can use licensed spectrum that reduces the coverage in the immediately surrounding areas. All except really old cellphones are capable of using CBRS spectrum.

Map of Data Centers by State. I found this map that shows the number of existing data centers in each state to be interesting.

Customer Interest in Satellite Cellular. A report published by GSMA Intelligence showed that 56% of the U.S. respondents to a survey said they would pay extra each month to be able to connect to satellite cellular. One of the interesting statistics from the survey is that 23% of cellular customers reported that they were unable to use basic texting at least 5 times per month. That’s not surprising to anybody who has studied rural cellular coverage, and who understands that the typical city has numerous dead zones for a given carrier.

While this finding is clearly encouraging for the companies busy deploying satellites for cell service, the 60% finding is likely overstated for now and will probably decrease once the public understands the limits of satellite cellular. It doesn’t work well indoors and is a challenge from a moving vehicle. It seems likely that satellite cellular will be far less robust in terms of data capabilities. I suspect over time that the fledgling industry will tackle these shortcomings, and this could eventually become popular product for anybody who  lives or routinely works in areas with poor cell coverage.

Starlink Approved for More Satellites. The FCC recently authorized Starlink to operate an additional 7,500 next-generation satellites. This order doubles Starlink’s authorized next-generation satellites to 15,000, still only half of its request for 30,000 additional satellites. The FCC deferred any decision on the remaining 14,988 Starlink requests to use orbits above 600 kilometers. This order also allows Starlink to expand the use of spectrum in the Ku- and Ka-bands for links to customers, and the V-, E-, and W-bands for connections to earth station gateways.

CommScope Cancels Fiber Factory Expansion. On the day that CommScope was renamed as Vistance Networks, the company announced it is cancelling plans to expand its fiber manufacturing facility in Catawba, North Carolina. In doing so, the company will be foregoing a $2 million economic development grant that would have covered some of the $60 million expansion cost. The expansion was going to create 250 additional jobs.

One reason for the change is a recent transaction where CommScope spun off much of its manufacturing capacity to Amphenol.  The announcement also said part of the change was due to the smaller amount of fiber being constructed with BEAD grants. While there is a lot of current discussion about a short-term supply chain issue with obtaining fiber, it’s likely that the company also looked out at fiber demand five and ten years from now.

Who Lives in Rural America?

We’ve spent a lot of time and money in recent years to get better broadband for rural America. I thought it would be of interest to look at who lives in rural America. The statistics in this blog come from a recent blog published by FHFA, the Federal Housing Finance Agency. The data comes from the U.S. Census Bureau and is supplemented by data from the Census’s American Community Survey (ACS).

Rural Population. There are 81.7 million people living in rural areas, or 24.4% of the total population. The percentage of rural residents varies widely by state, with Massachusetts being the most urbanized state with 4.1% of people living in rural areas, and Vermont the most rural state with 80.9% of residents living in rural areas.

Ages of Residents. There is a higher percentage of senior residents over 65 in rural areas, at 19.2%, compared with urban areas of 15.7%. A lot of the reason for this is the lower percentage of residents between the ages of 18 and 64 in rural areas, at 44.6%, compared to 49.7% in urban areas. This highlights one of the biggest issues for rural America – working-age people leave rural areas to find employment. Both rural and urban areas have 22% of the population under 18 years of age, but 5% of rural people leave to join the workforce.

The age issue is a real concern for rural counties. According to Census estimates, almost half of U.S. counties have lost population since 2021. The fear is that an aging rural population will mean an acceleration of the population loss issue.

Incomes. Median household incomes are lower in rural America. 39.5% of rural households have a household income under $50,000, compared to 32.5% of urban households. Rural areas also have what FHFA calls income compression, meaning that there is not as much difference between the poorest and wealthiest in rural areas. For example, around 13.5% of rural households have annual incomes over $150,000, while that percentage in urban areas is over 22%.

Housing. As you might expect, the rest of the FHFA report focuses on housing statistics. One of the most interesting statistics looks at the percentage of homes purchased as second homes or for investment purposes. In rural areas, those categories represented 18% of homes in 2018 and 21% of homes in 2019. That dropped to 11% of home purchases in 2023. In urban areas, these categories totaled to 11% in 2018, down to 9% in 2023. I can only guess, but factors that would contribute to this change in rural areas might be related to the overall economy, but also to the fact that a lot of retiring baby boomers may have invested in second homes in the earlier time frame.

A really interesting statistic is the median household income of those who bought homes. In rural areas, that was around $87,000 in 2019 and grew to almost $90,000 in 2023. In urban areas, the median household income of home buyers was $95,000 in 2019 and grew to over 102,000 by 2023. These statistics point to two trends. First, homes in rural areas tend to cost less, meaning that borrowers can qualify for loans with a lower household income. But the high level of the median household incomes in both rural and urban areas highlights the difficulty that young households have in affording to buy a home.

Low Latency AI Networks

A partnership has been announced that has the goal of creating a low-latency private Internet for AI traffic. The three partners involved are Moonshot Energy, a manufacturer of electrical and modular infrastructure for AI data centers, QumulusAI, Inc., a provider of GPU-as-a Service, and Connected Nation Internet Exchange, which has been promoting the creation of more Internet Exchanges.

The group’s goal is to initially create 25 carrier-neutral interexchange points designed to handle only low-latency traffic. The goal is to scale to 125 locations, many which would be located at major research university campuses and municipalities. The coalition has labeled the new hubs as AI Pods.

The goal of this coalition is to create a network designed specifically for AI and other data traffic that requires low latency. The network will be designed with highly efficient switches at the hub sites that will move traffic quickly. This would essentially be a private network that would isolate low-latency traffic from the large volumes of general Internet traffic that can clog up Internet hubs at busy times.

The idea of creating private networks for data is an old one. Many universities in the country are connected to the Internet2 fiber network that allows for low-cost transfer of large amounts of research and other data between universities. Many corporations have created private networks between company sites to keep corporate data traffic out of normal Internet traffic flow and to provide a higher level of security.

Tackling this as a new venture makes a lot of sense. If the companies that run the large Internet hubs  decided to somehow give priority to AI or other traffic to reduce latency, they would awaken cries about violations of network neutrality, since such behavior is exactly what network neutrality is supposed to block. If the normal Internet hubs gave priority to bits from AI data centers, then all other traffic would get a lower priority and see more problems from delays. However, a private network for AI avoids such issues by isolating AI traffic from other traffic.

The first data site for the network is scheduled for activation in July 2026, located at the campus of Wichita State University. The coalition is working towards providing dual, geographically diverse fiber routes between the new AI hubs using 400 GB transport. Each AI site would house redundant 400 GB IX ports and switches. Data centers that want to connect to the network would acquire dark fiber to one of the AI hubs.

QumulusAI says the new network would result in moving GPU computing directly to the network edge, meaning the AI network could be expanded to reach large businesses and other users of large amounts of AI data.

Connected Nation has been touting the benefits of creating more Internet hubs for a number of years. These new hubs would also become carrier-neutral locations for the interexchange of normal Internet traffic, which would lower the cost to ISPs to reach the Internet.

The Value of Broadband to a Community

Bento J Lobo, PH.D, of the University of Chattanooga, authored a report, From Gig City to Quantum City: The Value of Fiber Optic Infrastructure in Hamilton County, TN 2011-2035, that quantifies the benefit of the citywide municipal fiber network to the City.

The fiber network is operated by EPB, the electric and fiber utility owned by the City of Chattanooga, Tennessee. The utility serves just under 200,000 homes and businesses. EPB began offering communications services to the business community in 2000. The utility began offering gigabit broadband to residents in 2010 and offered 10 gigabit service in 2015. EPB implemented smart-grid technology to support the electric grid in 2013. Broadband speed offerings were increased to 25 gigabits in 2022. In the same year, the company started to offer fiber connections that support quantum computing.

The study concludes that the fiber network has brought $5.3 billion in value to Hamilton County and Chattanooga between 2011 and 2025. Lobo also says that the fiber network has created over 10,000 jobs during that time.

The study includes a lot of interesting statistics to support those conclusions.

  • The fiber network enabled 17.9% of employees in the City to work from home during the pandemic, compared to 9.7% for the U.S. as a whole.
  • From 2010 to 2025, there were 255 major projects that invested $6.3 billion in new or existing businesses. This was a major improvement over the decade preceding the fiber network.
  • The City has attracted numerous tech startups, particularly in the early years when the network was unique in offering gigabit speeds.
  • In June 2024, EPB achieved a penetration rate of 70% residential and a 41% business.
  • In 2025, 30% of customers are purchasing gigabit broadband.
  • Some of the community benefits come from affordable pricing. 300 Mbps service is $57.99, and gigabit is $67.99 – prices that have remained the same since 2019.

The following table is a summary of the claimed community benefits:Some explanation of the savings categories:

  • High-speed Broadband Contribution. This recognizes the financial benefit to the utility from profits generated by fiber and by savings in costs allocated to electric service. This includes an economic multiplier that assumes that for every dollar of EPB fiber revenue, an additional 67 cents of economic value us generated in the local economy.
  • Smart Grid Savings. Smart grid savings come from increased grid efficiency, peak demand reduction, reduced outages, faster restoration after storm events, reduced pollution, and reduced power theft.
  • Residential Bill Savings. These are the savings realized by the public due to broadband rates seen in similar communities that don’t have a municipal ISP.
  • Consumer Surplus. Consumer surplus refers to the difference between what a consumer is willing to pay and what they actually pay. The study uses this as a proxy to measure non-monetary benefits of broadband, such as shopping, entertainment, work and job searches, news, health care, personal finances, social networking, travel, education, and interactions with governments.

Media Coverage of Fiber Infrastructure. The City of Chattanooga has gotten tremendous nationwide publicity due to the fiber network. The high-quality exposure has drawn innovators and entrepreneurs to the city.

Supreme Court Examines FCC’s Ability to Fine

The Supreme Court has accepted a case that will determine the FCC’s ability to levy fines against the companies it regulates. The lower court cases that brought the issue to the Supreme Court come from fines that the FCC levied against AT&T, T-Mobile, and Verizon after the companies sold customer location data. The FCC said that the carriers did not properly vet the companies that bought customer data, and that many of those companies widely resold the data.

The Fifth Circuit Court sided with AT&T and said that the FCC’s process was unconstitutional. The Second Circuit Court sided with the FCC when reviewing the Verizon fine. The DC Circuit also sided with the FCC when reviewing the fine against T-Mobile.  As often happens when lower courts issue conflicting rulings, the Supreme Court has agreed to review the findings of the lower courts.

The Circuit Court cases invoked a Supreme Court ruling in 2024 in the case of SEC v Jaresky. In that case, the defendant was accused of committing fraud and misrepresenting himself to investors. The Securities and Exchange Commission fined Mr. Jaresky $300,000 and ordered him to disgorge the unlawful profits he made of $685,000. Mr. Jaresky appealed to the Supreme Court and argued that the SEC didn’t have the regulatory authority to directly fine him, and that the SEC had violated his right to a jury trial.

The Supreme Court surprisingly sided with Jaresky and ordered that he should have been given the option for a jury trial rather than a trial by an SEC administrative judge. It was obvious after the Jaresky ruling that companies that were fined by other regulatory agencies would make the same claim if they were denied the right of a jury trial. In this case, the three cellular companies made the argument that the FCC fines were unconstitutional and got contradictory rulings from different lower courts. It’s fairly obvious that the carriers went to different courts hoping for conflicting rulings.

This is a major case for the FCC, since a ruling against it eliminates its ability to fine regulated companies for violating FCC rules. The ability to levy fines has always been one of the agency’s most effective enforcement tools and is one of the few remedies that is less drastic than yanking an FCC license to operate. The FCC has been using fines a lot recently in its attempt to cut down on robocalls and texts. The FCC will become a fairly toothless regulatory agency without the ability to levy fines. Carriers, both large and small, will be less afraid to violate FCC rules if they don’t fear that their violation would warrant a referral to the Justice Department.

This is a really interesting tactic by the cellular carriers. If these particular cases had been referred to a jury instead of an administrative judge, it’s not hard to imagine the fines being a lot larger. It’s not hard to imagine a jury that doesn’t like the idea of a giant corporation selling data that shows everywhere they travel with their cellphone.

This also opens up the possibility of State regulators tackling these kinds of issues and issuing fines if the FCC finds itself unable to do so. I have to think that selling customer data violates the law in multiple states.

If the Jaresky case is the precedent, then it’s hard to think the Court won’t side with the carriers and rule against the FCC. This Supreme Court seems to be very much against what they view as regulatory overstepping of authority, and the Jaresky case is only one of their rulings that are weakening federal regulatory agencies.