Stakeholders Diverge on Effects of Looming Net Neutrality Change

Ahead of Thursday’s Federal Communications Commission procedural vote aimed at repealing net neutrality rules adopted in 2015, opposing stakeholders are focusing on its potential economic effects. Not surprisingly they’re reaching starkly different conclusions.

The proposal, which guts the legal framework of the two-year-old rules and asks if any regulations are even necessary, will officially be opened for public comment on Thursday after a vote by the three-member FCC (which has two open seats). This will start the process to roll back the Obama-era regulation.

FCC Chairman Ajit Pai and other supporters of the change contend the current rules, which classify broadband providers as a “common carrier” similar to telephone companies, have hampered internet investment and innovation. He argued in an April speech in Washington that among the nation’s 12 largest internet service providers, “domestic broadband capital expenditures decreased by 5.6 percent, or $3.6 billion, between 2014 and 2016.”

But a study by Free Press, a pro-net neutrality group, says net neutrality rules in place now have actually produced an overall increase in investment.

That study differs from conclusions reached by the trade group U.S. Telecom, which backs Pai’s plan to reduce the government’s oversight of high-speed internet providers.

Via email, a spokeswoman for U.S. Telecom attributed at least some of the difference to Free Press’ inclusion of investments she said were not reflective of improvements to U.S. networks. That includes investments in Mexico and a phone-leasing program that Sprint sprung for.

However the numbers shake out there, Christopher Hooton, chief economist for the Internet Association, which represents more than 40 big-name internet companies like Google and Twitter, takes issue with the reliance on blanket capital expenditures alone.

“No one statistic proves anything,” he said on a teleconference with the media to release his own study. “ISP claims of depressed investment simply do not mesh with reality.”

The Internet Association report looked at investments specific to telecommunication infrastructure to show an increase of $77 billion in the area between 2009 and 2016.

In yet another study assessing the impact of Title II classification on investment, the Phoenix Center for Advanced Legal & Economic Public Policy Studies says even if you break down capital expenditures to more specific parts, you have to look for the “counterfactuals.” In other words, investment may have increased, but research shouldn’t discount the extent to which there might have been even larger increases if it weren’t for looming Title II reclassification.

With data from the Bureau of Economic Analysis, Phoenix Center’s chief economist George Ford explained in a teleconference that using data from comparative sectors he determined most closely matched the spending patterns of the communication industry over multiple decades — in this case, the manufacturing and transportation — to note any difference when Title II entered the conversation. In this way, he suggests a loss of $30 to $40 billion annually in telecommunication investments due to the threat of a title II classification.

Update: This story has been updated to clarify Christopher Hooton’s comments.

Morning Consult