Thursday, March 12
Today the Federal Communications Commission (FCC) released its net neutrality order. In response, IIA asks on Congress to step in with a non-partisan and long-lasting legislative solution that preserves and maintains the “open Internet” without the burdens of utility-style regulation. Our full statement:
Market uncertainty accelerates today with the release of the FCC’s decision to impose public utility regulation on the Internet. Long drawn out legal challenges to the agency’s embrace of Title II regulation without clear statutory authority now await the Internet ecosystem. Yet, Congress can still rescue the nation from this fate by crafting a non-partisan and long-lasting legislative solution that would preserve and maintain an ‘open Internet’ without the burdens of utility-style regulation. Now is the time for a bi-partisan Congressional effort aimed at creating statutory permanence that helps advance innovation, investment, and broadband deployment for the benefit of all Americans.
Friday, March 06
The need for a permanent legislative solution to guarantee an open Internet against all risks, present and hypothetical, has been greatly enhanced by the confusion and lack of clarity that Title II proponents have created, perhaps unavoidably, as we break with 20+ years of bipartisan support for light-touch regulation of the Internet and charge forward on treating the most innovative sector of our economy as if it’s among the least. Even net neutrality champions have seemed flummoxed.
For example, one of the loudest champions supporting public utility style regulation for the nation’s broadband ecosystem was Netflix. Netflix publicly pushed the White House and the FCC to embrace Title II as a means to achieve marketplace concessions and prevent assignment of higher costs for consumption of greatest bandwidth. Yet, when Netflix’s Chief Financial Officer was asked at an investment conference this week, “Were we pleased it pushed to Title II,” he replied: “Probably not. We were hoping there would be a non-regulated solution.”
Netflix’s CFO was hardly alone in expressing concern for the potential harms that could cascade from treating the most dynamic and innovative sector of our economy as the most in need of Washington’s control. CloudFlare CEO Matthew Prince eloquently shared his “deep concerns” that the use of Title II to achieve net neutrality protections could well snatch defeat from the jaws of victory – “proponents of a free and open Internet may look back on today not as a great victory, but as the first step in what may turn out to be a devastating loss”. According to reporting by the Wall Street Journal, erstwhile net neutrality champion Eric Schmidt even lobbied the White House against use of the thermonuclear Title II option.
The lack of appreciation for the harms associated with the FCC’s decision to impose public utility style regulation (Title II) on broadband has not been limited to Netflix. During a recent CNBC interview, Title II proponent David Karp, founder and CEO of Tumblr, similarly made statements regarding the proposed Net Neutrality regulations that ironically affirmed why a “light-touch” regulatory approach is superior to Title II to maintain the current open, robust, and investment-friendly Internet. Mr. Karp and others have been led down the proverbial primrose path to believe that Title II is the only solution to keep any potential abuse at bay. However, it is worth reviewing many assertions made by Mr. Karp and other Title II advocates and the realities that contradict them.
The Title II rules will not “slow down innovation.”
Not true. Innovation developed at the Internet’s ‘edge’ by companies like Tumblr depends on robust high-speed broadband wired and wireless networks to reach consumers. Innovative success stories such as Tumblr thrived precisely because Title II was not applied to the Internet ecosystem. Title II regulations that slow broadband investment by Internet service providers will ultimately harm Internet innovation by those hoping for robust and rapidly-improving service.
New rules are needed to achieve “a competitive market for carriers where they’re competing to deliver us the fastest, best Internet.”
That market exists today. It’s the very market in which Tumblr has thrived. The U.S. benefits from robust competition among both wired and wireline Internet providers – competition that exceeds that in Europe, which today maintains Title II-like regulations on Internet providers.
Concerns that Title II will restrict investment “have been disproven.”
Wrong. To the contrary, light-touch regulation promotes greater investment, as highlighted in a recent Internet Innovation Alliance study that compares broadband and telco investment in the U.S. and Europe.
There is currently “a lot of artificial throttling going on, [even though broadband providers] have the bandwidth to deliver this.”
Not really. Allegations of throttling are hypothetical. In fact, the FCC found only four instances of alleged anticompetitive throttling behavior, and all occurred before 2010. The core challenge remains: Managing the exponential explosion of content and data generated by “killer content”, such as Netflix’s popular “House of Cards.” Carriers desperately search for more spectrum for mobile broadband services, which is why wireless companies just spent $45 billion at the recent FCC spectrum auction gobbling up airwaves to provide mobile Internet services. But broadband providers, and new entrants such as Dish, may not make such desperately-needed investments in the future if they believe that Title II will inhibit their ability to recoup.
Title II will “move further in breaking down the near-monopoly situation we have right now.”
What monopolies? No broadband company has as much market share as the leading search engine or many of the leading tech players. Today’s broadband market is vibrantly competitive as consumers have multiple Internet options in markets across the U.S. Title II does not “break down” monopolies, since it was crafted to manage and regulate the one service provider that existed in the 1930s monopoly telephone market.
Despite Title II, providers will continue to build the broadband Internet at faster speeds and that the carriers are “just lying” when they claim otherwise.
Really? Public Internet service companies are responsible to their shareholders and logically invest only in markets where they have an ability to recoup their capital. Investment suffers in markets—like Europe—where a Title II-like regulatory regime prevails.
Thursday, February 26
Today the FCC voted 3-2 to impose Title II regulation on the Internet. In response, our Honorary Chairman Rick Boucher had this to say:
The FCC’s decision to embrace Title II regulation over the Internet now creates an opportunity for Congress to craft a non-partisan legislative solution that provides the legal certainty necessary to preserve and maintain an “open Internet” without the burdens of utility-style regulation. After more than a decade of wrangling about the proper regulatory classification of broadband services and the scope of the FCC’s authority, it is time for Congress to provide the certainty that consumers and industry need. IIA looks forward to working with members of Congress to ensure that the promise of broadband remains available for entrepreneurs, innovators and America’s consumers without a return to the days of utility regulation.
Wednesday, February 25
Earlier today, our Honorary Chairman Rick Boucher testified before the Subcommittee on Communications and Technology on the effects the FCC’s Net Neutrality proposal will have on the future of the Internet. In his testimony, Boucher — who served on the House Energy and Commerce and Judiciary Committees, along with the subcommittees on Communications, Technology and the Internet during his time in Congress — urged Congress to take up the issue via legislation. An excerpt:
If a Republican wins the 2016 presidential election, the new Administration would be unlikely to support a writ of certiorari to the U.S. Supreme Court if the rules are struck down by a U.S. Court of Appeals. It would be unlikely that in such an event the FCC in a Republican administration would initiate a new network neutrality proceeding. In fact it is probable that an FCC with a Republican majority would, as an early order of business, undertake a reversal of the reclassification order that will be approved tomorrow.
For these reasons, the network neutrality assurances of tomorrow’s reclassification order rest on a tenuous foundation. They are at risk of being lost. Legislation is, therefore, a superior solution. It would be virtually impenetrable from a judicial challenge, and would resolve this debate with a statutory permanence and degree of certainty not available through the regulatory process.
Read Rick Boucher’s full testimony.
Monday, February 23
Over the weekend, the San Francisco Chronicle published an op-ed from our own Larry Irving on the perils of the FCC reclassifying the Internet under Title II. An excerpt:
Advocates of net neutrality decry court rulings suggesting that the FCC might not have authority to protect the open Internet, and so utility-type regulation of broadband under Title II of the Communications Act is seen by many progressives — and by the president and his advisers — as the only way to unambiguously assure the FCC’s authority. Yet Title II regulation of the Internet seems like the wrong solution to those of us who support an open Internet but fear the impact of burdening still-evolving wired and wireless networks with centuries-old rules.
The U.S. government declaring the Internet an essential utility and applying Title II rules will also have an impact on policy deliberations about the Internet in other nations. Since the inception of the Internet, the U.S. government has urged international policymakers and regulators to exercise regulatory restraint. To reverse course at this critical time in the development of the global Internet seems self-defeating.
Check out Irving’s full op-ed over at the San Francisco Chronicle.
Wednesday, February 18
With the FCC expected to vote on regulating the Internet under Title II next week, our Honorary Chairman Rick Boucher appeared on Sirius XM’s The Morning Briefing to break down the potential negative effects the FCC plan could have. Give it a listen.
Monday, February 16
Last week, the Wall Street Journal published an op-ed from our own Rick Boucher and the author of our latest report, Fred Campbell, on the perils of following Europe’s lead to regulate the Internet. An excerpt:
Net-neutrality proponents assume that the impact of common-carrier regulations will be minimal and that the U.S. will maintain its technology lead forever, but the European regulatory example suggests that such an outcome is far from certain. It is more likely that imposing regulations crafted for last century’s monopoly telephone service will have a crippling and chilling effect on broadband investment. Investment drives innovation: As the Internet Innovation Alliance study demonstrates, Europe has fallen badly behind the U.S.
You can read the full op-ed over at the Wall Street Journal (subscription required).
Wednesday, February 11
Yesterday, FCC Commissioner Ajit Pai had some strong words about the Commission and President Obama’s apparent plans to apply Title II regulations to the Internet. He started off with a bang, stating:
I believe the public has a right to know what its government is doing, particularly when it comes to something as important as Internet regulation. I have studied the 332-page plan in detail, and it is worse than I had imagined. So today, I want to correct the record and explain key aspects of what President Obama’s plan will actually do.
Pai then broke down six points he believes the public are being “misled” about by the President and the FCC. Those six points are:
1. The plan doesn’t include rate regulation, a claim Commissioner Pai calls “flat-out false.” From his statement:
The plan repeatedly states that the FCC will apply sections 201 and 202 of the Communications Act, including their rate regulation provisions, to determine whether the prices charge by broadband providers are “unjust or unreasonable… Thus, for the first time, the FCC would claim the power to declare broadband Internet rates and charges unreasonable after the fact.
2. The plan is aimed at pro-competitive broadband service offerings that benefit consumers, which Pai warns will actually create a regulatory headache. His words:
The plan expressly states that usage-based pricing, data allowances — really, any offers other than an unlimited, all-you-can-eat data plan — are now subject to regulation. Indeed, the plan finds that these practices will be subject to case-by-case review under the plan’s new “Internet conduct” standard.
Pai also warns that the plan clearly places things like data allowances on mobile “on the chopping block,” which could mean consumers using less data will end up paying for those who use more.
3. In contrast to the “light-touch” regulation that has been applied to the Internet up until now, the plan gives the unelected members of the FCC “broad and unprecedented discretion to micromanage the Internet.” How? Well, Pai held up interconnection as an example, stating:
The plan states that the FCC can determine when a broadband provider must establish physical interconnection points, where they must locate those points, how much they can charge for the provision of that infrastructure, and how they will route traffic over those connections.
4. The real winners from the plan will, in fact, be lawyers. Pai again:
The plan allows class-action lawsuits — with attorneys’ fees — should any trial lawyer want to challenge an Internet service provider’s network management practices or rates. Indeed, the plan expressly declines to forbear from sections 206 and 207 of the Act, which authorize such private rights of action.
Translated: Get ready for a flurry of lawsuits. Or, as Pai described it, “more litigation and less innovation.”
5. The plan is ripe for regulatory creep. Specifically:
The plan is quite clear about the limited duration of its forbearance determinations, stating that the FCC will revisit the forbearance determinations in the future and proceed in an incremental manner with respect to additional regulation. In other words, over time, expect regulation to ratchet up and forbearance to fade.
6. The plan “opens the door to billions of dollars in new taxes on broadband.” This point, really, should concern everyone outside of the regulatory bubble. Pai’s explanation:
The plan repeatedly states that it is only deferring a decision on new broadband taxes (such as Universal Service Fund fees and Telecommunications Relay Service fees, among others)—not prohibiting them. And it takes pains to make clear that nothing in the draft is intended to foreclose future state or federal tax increases. Indeed, the plan engage in the same two-step we saw last year with respect to the E-Rate program: Lay the groundwork to increase taxes in the first order, then raise them in the second. One independent estimate puts the price tag of these and other fees at $11 billion.
That’s $11 billion that would be passed on to consumers, by the way, all so the FCC can apply outdated, railroad-era regulation in order to achieve something we already have: an open Internet.
Pai ended his remarks by calling on the President and the FCC to release the plan to the public before the Commission enshrines it into law. “We should have an open, transparent debate,” he stated, and given the six points described above, it’s hard to argue with him. Here’s hoping the President and Pai’s fellow Commissioners are listening.
You can check out Commissioner Pai’s full remarks at the FCC website.
Friday, February 06
Our Co-Chairman Bruce Mehlman and Larry Irving have a column in USA Today warning that the FCC risks stunting progress on the Internet. An excerpt:
[T]he war reached new heights this week, as FCC Chairman Tom Wheeler proposed regulating our most advanced companies based on the rules designed for our oldest.
For a majority of innovators and entrepreneurs around the nation, partisan paralysis is unwelcome news, likely to spawn years of litigation, cloud investment certainty and potentially slow our economy’s most powerful engine. For objective policy analysts, the partisan intensity surrounding the net neutrality debate is unnecessary and counterproductive. Bad politics is making for bad policy.
Check out the full column over at USA Today.
Wednesday, February 04
Says Congress should resolve the Open Internet debate with targeted legislation aimed at reinstating the 2010 Open Internet Rules and not imposing public utility regulation on broadband
WASHINGTON, D.C. – February 4, 2015 – In response to press reports highlighting the Federal Communication Commission’s (FCC) policy direction on new Open Internet rules, IIA issued the following statements from Rick Boucher, a former Democratic congressman who chaired the Energy and Commerce Subcommittee on Communications and the Internet and serves as honorary chairman of the Internet Innovation Alliance (IIA), and former Assistant Secretary of Commerce under Clinton – now IIA Founding Co-Chairman – Larry Irving:
From Congressman Boucher:
“I urge Chairman Wheeler to reconsider his plan to treat broadband services under common carrier rules. Subjecting broadband to public utility regulation under Title II is unnecessary for assuring continued Internet openness and would carry deeply harmful consequences. Internet infrastructure investment would be stifled at a time when we have a national goal of extending high-speed Internet service to 98 percent of Americans.
“A better way to preserve the open Internet, protect consumers and promote innovation is to encourage the private investment necessary to support the deployment of high-speed, next-generation broadband nationwide. I’m confident in Congress’ ability to secure a win for our nation with a bi-partisan legislative solution that empowers the FCC to re-promulgate the 2010 Open Internet Rule but precludes the imposition of onerous Title II regulations. This outcome would protect the Open Internet by remedying the D.C. Circuit’s objection that the Commission lacks the statutory authority to act and maintain the existing light-touch regulatory environment that is welcoming to high-speed broadband investment.”
From Larry Irving:
“Imposing Title II regulation on broadband Internet primarily will benefit lawyers. Endless litigation will create additional uncertainty in the market and impact Internet innovation and investment as companies and investors try to figure out what provisions do or do not apply in a new Title II world.
“Democrats primarily have driven the net neutrality debate, but today Republicans in Congress stand ready to work on a bipartisan basis on legislation aimed to ‘keep the Internet open.’ If an open Internet is the goal, why is the only acceptable mechanism for achieving that goal a centuries-old regulatory framework? Preserving the open Internet through bi-partisan legislation, achieving and declaring victory on an important issue, steering clear of interminable and disruptive litigation, and reducing consumer costs by veering away from antiquated Title II regulation would seem to be the better alternative.
“For more than two decades, from the earliest days of the Internet, I along with most Democrats involved in development of our nation’s Internet policy, have advocated a light regulatory touch for the Internet. I still believe that to be preferable to utility-style regulation for the fast-moving and constantly evolving Internet. But, as important, to craft the right solution for America, we need to end the partisan politics around the Open Internet issue and work towards and embrace bi-partisan solutions.”
Tuesday, February 03
Earlier today, our Co-Chairman Larry Irving appeared on The Morning Briefing to break down the current debate over net neutrality. Among Irving’s points: net neutrality can be ensured without Title II, Congress will surely need to act at some point, and the FCC’s current path could easily become mired in litigation for years. Check out Irving’s full interview below.
Monday, January 26
Our Co-Chairman Jamal Simmons has penned an op-ed for Forbes warning that reclassifying broadband under Title II would mean higher taxes for consumers. An excerpt:
A recent study by Progressive Policy Institute economists Robert Litan and Hal Singer is the first significant effort to quantify how much it could potentially cost consumers if broadband services are reclassified as “telecommunications services” under Title II of the Communications Act of 1934. By regulating broadband service under Title II, the Federal Communications Commission would essentially be required to treat this service under the same rules as the old telephone monopoly from decades ago. By switching from the current light-touch regime to Title II, broadband Internet services would be subjected to a panoply of requirements, such as for entry and exit. That also means broadband would likely become burdened with a host of new state and local taxes and fees, the kind we pay on our monthly home and/or wireless phone bills. These taxes and fees are normally passed on to consumers; when they rise, consumers end up paying more. Expect the same with broadband.
You can read Simmons’ full op-ed over at Forbes.
Wednesday, January 21
Yesterday, the Washington Post published a must-read piece from Larry Downes breaking down why everyone who supports an open Internet should support the net neutrality bill making its way through Congress. An excerpt:
The proposed law is short and sweet. It grants the FCC authority to enforce tough new limits on how ISPs manage network traffic, directly addressing the kinds of practices both the agency and the White House have argued could, if implemented by ISPs in the future, threaten the continued success of the U.S. Internet.
At the same time, it would cleanly resolve the long-running conflict between the agency and the federal courts, who have rejected two earlier net neutrality efforts from the FCC on the ground that Congress never delegated oversight of broadband ISPs to the agency.
You can — and should — head on over to the Washington Post to read Downes’ full piece, but if you’re in a hurry we’ve put together an infographic highlighting the eight reasons he gives for supporting the bill.
Tuesday, January 13
Our Honorary Chairman Rick Boucher has taken to the pages of Roll Call to argue that Congress should act now to ensure net neutrality. An excerpt:
The coming month, before the FCC acts presents a timely opportunity for Congress to step in and resolve the debate on terms that would seemingly be agreeable to Democrats and Republicans, broadband providers and consumers seeking continued access to robust high-speed Internet services. The FCC promulgated its open Internet rule in 2010 against a backdrop of consensus that had been reached through lengthy discussions among the stakeholders. While not all of the parties were in agreement, a critical mass of consumer groups, broadband providers and policymakers created the consensus that resulted in the FCC’s open Internet framework. It’s notable that among broadband providers, AT&T publicly expressed support for the rule, and it was ultimately approved with the FCC’s Democratic members voting affirmatively. Even more noteworthy is that in the four years since the open Internet rule was adopted, broadband providers have integrated its requirements into daily operations, and high-speed Internet access service has expanded absent consumer complaints of violations.
Check out Boucher’s full op-ed over at Roll Call.
Thursday, January 08
Our Honorary Chairman Rick Boucher recently penned an op-ed for Bloomberg on the critical need to reform Lifeline. An excerpt:
Each day brings new examples of how broadband-delivered Internet services are fundamentally changing the nature of communications. In the 1980’s, the wired telephone was the predominant communications platform for almost everyone. Today, just five percent of Americans rely exclusively on “plain old telephone service.” The rest use a variety of communications devices, a growing number of which are broadband-enabled.
So the question is not just whether to expand Lifeline to include broadband, an idea endorsed by two FCC commissioners and the chairman at the agency’s December open meeting; the question is how to incorporate broadband without exploding the cost of the program.
You can check out Boucher’s full op-ed over at Bloomberg.
Monday, January 05
Now that 2015 is officially underway — and a new, Republican-controlled Congress is arriving in Washington — the FCC has announced its plan for net neutrality will be revealed in February. Via Brian Fung of the Washington Post:
The timing indicates Wheeler does not see the need for more public input on the benefits and drawbacks of using Title II, as earlier reports suggested. It also implies the FCC will not be able to avoid a showdown with Congress over net neutrality. Republican lawmakers are expected to introduce legislation this month to preempt any FCC rule on the subject.
Since Republicans have made clear they are opposed to regulating broadband providers under Title II, it’s looking increasingly doubtful that the issue will be put to rest anytime soon.
Wednesday, December 10
In a letter to Members of Congress and the FCC, 60 companies — including IBM, Cisco, Intel, and others — have warned that reclassifying broadband under Title II will reduce investment and threaten the very health of the thriving Internet ecosystem. An excerpt:
Reversing course now by shifting to Title II means that instead of billions of broadband investment driving other sectors of the economy forward, any reduction in this spending will stifle growth across the entire economy.
This is not idle speculation or fear mongering. And as some have already warned, Title II is going to lead to a slowdown, if not a hold, in broadband build out, because if you don’t know that you can recover on your investment, you won’t make it. One study estimates that capital investment by certain broadband providers could be between $28.1 and $45.4 billion lower than expected over the next five years if wireline broadband reclassification occurs. If even half of the ISPs decide to pull back investment to this degree, the impact on the tech equipment sector will be immediate and severe, and the impact would be even greater if wireless broadband is reclassified.
The investment shortfall would then flow downstream, landing first and squarely on technology companies like ours, and then working its way through the economy overall. Just a few years removed from the worst recession in memory, that’s a risk no policymaker should accept, let alone promote.
You can read the letter, submitted by the Telecommunications Industry Association, here.
Monday, December 08
As with most heated debates, the current net neutrality kerfuffle has been heavy on rhetoric and light on facts.
Sure, those of us who believe the Internet has thrived — and will continue to thrive — without the heavy mitts of regulation point to study after study after article (most recently from the Progressive Policy Institute, of all places) warning that Title II reclassification would do much more harm than good for the open Internet, but facts and research aren’t nearly as effective as facetious cries about a “two-tiered Internet!” and “They are coming for your Netflix!”
That being said, since I’m a glutton for punishment I’m going to highlight yet another article, this one penned by economist (and IIA friend) Bret Swanson for the Wall Street Journal.
Swanson’s piece has a blunt title — “The U.S. Leads the World in Broadband” — and rather than shouting about the Internet sky falling, he crunches some numbers to show that… well, just what the title says.
From his piece (which is behind a paywall):
Mr. Obama recently called on the FCC to impose “the strongest possible rules” on Internet service providers to make sure they don’t “limit your access to a website” or “decide which online stores you should shop at or which streaming services you can use.”
Neither of these rationales for regulatory intervention is true, however, and there’s a simple way to show it. An international comparison of Internet traffic can tell us about the quality of broadband networks and the vibrancy and openness of content markets. Traffic represents all the bits flowing over our networks—email, websites, texts, chats, photos, digital books and movies, video clips, social feeds, searches, transactions, cloud interactions, phone and video calls, interactive maps and apps, software downloads, and much more.
And just what did the numbers tell Swanson?
What I found was that at 18.6 exabytes (18.6 billion gigabytes) a month, the U.S. generates far more traffic per capita and per Internet user than any other major nation save South Korea, which is a vertical metropolis and thus easy to wire with fiber optics. U.S. traffic per capita is 2.1 times that of Japan and 2.7 times that of Western Europe. Several years ago, U.S. and Canadian traffic measures were similar, but today the U.S. has raced ahead by 25%.
The U.S. lead is similar in traffic per Internet user, which tends to reflect how intensely people use broadband and mobile connections. The U.S. outdoes its closest European rival, the U.K., by 57%. The U.S. outdoes all of Western Europe—the best comparison in terms of geography, population and economic development—by a factor of 2.5.
All due respect to my friends and colleagues on the other side of the Title II debate, but does that look like the U.S. broadband market is hurting? Is the Internet really in need of saving by the unelected officials at the FCC?
Perhaps the most exacerbating thing about the Title II argument is the fact that both sides want essentially the same thing — for the Internet to stay open and thriving. What we disagree on is which tool, if any, the FCC should use.
Given the very real threats of reduced private investment in, and increased prices for, broadband that Title II could usher in, the choice should be simple. As Swanson writes:
The U.S., with 4% of the world’s population, has 10% of its Internet users, 25% of its broadband investment and 32% of its consumer Internet traffic. The U.S. policy of Internet freedom has worked. Why does Washington want to intervene in a thriving market?
Monday, December 01
As the FCC continues to mull its path toward ensuring net neutrality, none other than the Progressive Policy Institute has published new research highlighting just how much damage Title II reclassification could mean for consumers. An excerpt:
Self-styled consumer advocates are pressuring federal regulators to “reclassify” access to the Internet as a public utility. If they get their way, U.S. consumers will have to dig deeper into their pockets to pay for both residential fixed and wireless broadband services.
How deep? We have calculated that the average annual increase in state and local fees levied on U.S. wireline and wireless broadband subscribers will be $67 and $72, respectively. And the annual increase in federal fees per household will be roughly $17. When you add it all up, reclassification could add a whopping $17 billion in new user fees on top of the planned $1.5 billion extra to fund the E-Rate program. The higher fees would come on top of the adverse impact on consumers of less investment and slower innovation that would result from reclassification.
We can all agree that the Internet must continue to be open, but as the Title II debate shows, not everyone seems to understand just what reclassifying Internet service would mean. Hopefully, research from the likes of the Progressive Policy Institute will help bring everyone up to speed. You can check out their full report here.
Wednesday, November 19
“The Impact of Title II Regulation of Internet Providers On Their Capital Investments” is a 22-page study penned by economists Kevin A. Hassett and Robert J. Shapiro. It was submitted to the FCC as part of an ex part by the US Telecom Association. If you care about the future of the Internet, you need to add it to your reading list.
For the study, Hassett and Shapiro approached the question of Title II reclassification armed with numbers. Specifically, an alarming drop in projected private investment should the FCC choose to reclassify. As the economists write:
If the status quo continues, with data services unencumbered by Title II regulation, the several ISPs in our sample are expected to spend approximately $218.8 billion in new capital investments over the next five years in their wirelines and wireless networks. In contrast, under Title II regulation of all wireline data services, these ISPs’ wirelines and wireless capital investments over the next five years would drop an estimated range of $173.4 billion to $190.7 billion. Title II regulation of ISPs thus reduces these companies’ total investments by $28.1 billion to $45.4 billion (between 12.8 percent and 20.8 percent) over the next five years. Wireline investment by these firms would be 17.8 percent to 31.7 percent lower than expected.
That’s a lot of numbers with the word billion attached, but the main focus should really be on the percentages. You don’t have to be an economist to realize that a reduction of total investment dollars of 12.8 percent to 20.8 percent (and wireline investment dollars of 17.8 percent to 31.7 percent) would have a profound effect on America’s communications infrastructure. And by profound, I mean decidedly negative — not just for network expansion and upgrades, but for innovation across the Internet board.
The blow to innovation, Hassett and Shapiro argue, would be particularly hard on wireless networks. Again, from the study:
[T]he network managements practices which Title II regulation would potentially bar enable wireless investment and innovation, because wireless networks face serious capacity constraints. Thus, regulations that discourage or bar those practices raise the risk of introducing new products and applications: Without those practices, carriers would be less able to manage unpredictable changes in network demand associated with their introduction, and so maintain the quality of network services for all of its users.
In other words, the next big app or service could cripple wireless networks, and under Title II, providers would be hamstrung by regulations to solve the problem in a timely manner. Want to launch an innovative new streaming video app? Good luck gaining users when your app meets a road block of network congestion.
Too often the debate surrounding net neutrality is one of extremes, and I freely admit the above scenario falls within that category. But also too often, the economic realities of building, upgrading, and maintaining networks are either ignored or downplayed. Net neutrality doesn’t have to be an emotional issue; we all benefit from the Internet continuing to be open. The question is, how best do we ensure that happens while at the same time encouraging the investment necessary to keep networks growing. As Hassett and Shapiro’s study makes clear, the numbers show Title II would do more damage than good.