One More Time With Feeling: Net Neutrality Didn't Hurt Broadband Investment In The Slightest

from the dollar-a-holler-science dept

Wed, Aug 24th 2016 6:29am — Karl Bode

You'll recall that ISPs (and the lobbyists, think tanks, politicians, and consultants paid to love them) argued incessantly that if we passed net neutrality rules, investment in broadband infrastructure would grind to a halt, leaving us all weeping gently over our clogged tubes. ISPs like Verizon proudly proclaimed that net neutrality rules would "jeopardize our investment and the development of innovation in Broadband Internet and related services." ISP-tied think tanks released study after statistically-massaged study claiming that net neutrality (and the reclassification of ISPs as common carriers under Title II) would be utterly catastrophic for the broadband industry and its consumers alike.

But as time wore on it became abundantly clear that these warnings were the empty prattle of a broken industry, using a thick veneer of bunk science to defend its monopoly over the uncompetitive broadband last mile.

Since net neutrality was passed there has been absolutely no evidence that a single one of these claims had anything even remotely resembling merit, with broadband expansion pushing forward at full speed, constrained only by the ongoing lack of competition in many markets. We've watched as outfits like Google Fiber continue to expand its footprint. We've watched as Verizon suddenly promised to deploy fiber to cities long neglected. We've watched as Comcast and AT&T rushed to try and keep pace with gigabit investments of their own. In short, nothing changed, and things may have even improved.

And now companies like Comcast, AT&T and Verizon are doling out what could be as much as $86.4 billion in what may be the most expensive spectrum auction ever:

"The FCC’s forward auction headed into Round 8 on Monday with a total of more than $11.5 billion in bids, according to the auction dashboard. The figure was up from just $8.5 billion in auction proceeds from the first round of bidding last week. Demand appeared to be holding strong...Forward auction bidders are striving to hit an $86.4 billion price target set by broadcasters in the reverse auction. If demand does not reach supply, then a second reverse auction will be held with a lower clearing target of 90 MHz, the FCC has said.

You'd think that carriers tripping over themselves to pursue fifth-gen (5G) wireless alone would be enough to put onerous claims about the negative impact of net neutrality rules to bed. But you'd be wrong. Revolving door regulators like Verizon lawyer turned FCC Commissioner Ajit Pai have consistently tried to claim that net neutrality somehow stifled investment, we just apparently didn't notice. Other sector chicken littles have turned to citing unrelated business downturns to try and obfuscate how full of crap the lion's share of these organizations and consultants were on the subject of net neutrality.

Tech Freedom, for example, spent some time last week rewteeting claims that Cisco's decision to lay off an estimated 5,500 employees was somehow thanks to net neutrality:

Hey, @FCC, how's that post-Title II infrastructure investment going ... ?#WhatHappensWhenYouIgnoreEconomics https://t.co/1E8umiojLZ
— Gus Hurwitz (@GusHurwitz) August 17, 2016

Except Cisco's global layoffs have nothing to do with some relatively simple net neutrality rules passed in the States. Cisco is downsizing because of the rise in virtualization and the company's shift from its hardware roots into a software-centric organization, something the company itself admits, and something you'd think an economist would understand. This conflation attempt isn't unique. Industry-tied think tanker Hal Singer has done yeoman's work the last year or two trying to claim networking investment is down despite all evidence pointing to the contrary.

Singer, whose study played the starring role in the industry's manufactured denial, continued to beat the same drum beat on Twitter last week:

@derekkerton @GusHurwitz @mmasnick no one is denying investment. Question is, compared to what benchmark? Relative to 2014, we're down 8%.
— Hal Singer (@HalSinger) August 18, 2016

But as noted previously Singer's 8% stat comes from his own study. A study repeatedly criticized for cherry-picking unrelated data to intentionally indicate a network investment downturn that doesn't exist. In many instances he included companies whose CAPEX was dropping because they'd just finished major deployments (Charter's finished deployment of new digital set top boxes, for example). Elsewhere, Singer and other think tankers have tried to claim that CAPEX reductions and cost savings due to the rise in software-defined networking (SDN) and network function virtualization (NFV) were actually caused by net neutrality.

Ironic, then, that Singer took to The Hill to pen an op-ed accusing the FCC of playing fast and loose with empirical evidence when it comes to efforts like net neutrality or cable box reform:

"It is simply irresponsible for regulators to rely on gut feelings – or political pressure or public opinion polls. Rather they should be guided by empirical evidence, rigorous analysis of regulatory costs and benefits and basic economic principles taught on every college campus across the country together. What matters most is not the sheer number of docketed public comments or the enthusiasm of those blockading of the Chairman’s driveway, but instead a sober analysis of the need for regulation in light of proven market failures."

Again, that's an ISP-funded think tanker, freshly proven incredibly, repeatedly, and quite-possible intentionally wrong across numerous fronts, blasting the FCC for ignoring actual economic data. Gosh, it's almost as if these folks are paid to be as intellectually rigid as possible, utterly immune to any attempts at honest discourse when presented with conflicting evidence. Do you get to give people lectures on economics and integrity when your bunk studies are used repeatedly to smear net neutrality rules designed to aid consumers, startups and small businesses nationwide? Apparently.

In short, ISPs and their "dollar-a-holler" think tankers used crap science and economics to intentionally mislead the public on net neutrality, but their predictions have been proven repeatedly and painfully wrong. But instead of acknowledging error and moving on to the next misleading argument, they've decided to double down and promote a broadband investment cataclysm that never actually happened.

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Filed Under: fcc, investment, net neutrality, spectrum, title ii, wireless
Companies: at&t, comcast, verizon

23 Comments

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Anonymous Coward, 24 Aug 2016 @ 6:35am

Once again, paid shill predictions fail to occur.
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TheResidentSkeptic (profile), 24 Aug 2016 @ 7:14am

Other than politicians..
... what is it they are investing in? USA has now fallen out of the top 20 countries in internet speed. They aren't investing in actual technological prowess or advancement here. They are dropping copper, dropping fiber (while bitching about google fiber), and only seem to be interested in investment in high-profit high-cost-to-the-consumer capped wireless.

Competition breeds advancement. Advancement enables innovation. Innovation creates new opportunities for growth and competition. Too many legacy industries are fighting against that vicious cycle.

Apparently, all that really matters is keeping wall street happy with fat profit margins.
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Anonymous Coward, 24 Aug 2016 @ 7:18am

"and something you'd think an economist would understand"

Ha. The reason these people love to describe their craft as part art, part science is so they they can call their work "proof" when they're right and have an easy escape route when they're not. They're the Magic 8-Balls of the business world.
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Anonymous Coward, 24 Aug 2016 @ 7:47am

'In short, nothing changed'

agree with that whole heartedly and never doubted it for a minute!

'things may have even improved'

now i think you going too far!!
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Pixelation, 24 Aug 2016 @ 8:53am

Of course
The pink elephant in the room is the question of how far our law makers are willing to let the industry go in fleecing their customers.
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Anonymous Coward, 24 Aug 2016 @ 9:01am

Monopolies getting bigger hurts investment, thanks Tom for approving the mergers!
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Anonymous Coward, 24 Aug 2016 @ 9:02am

Singer et al want to ask "How much investment has there been with net neutrality, relative to the investment that would have occurred without net neutrality?" From this perspective, net neutrality may well have hurt investment. (This is obviously very difficult to measure, allowing wide latitude for bullshit from all parties).

But the real question is whether the costs of net neutrality, even if high, are worth it for the public. Outside the regulatory-capture-land of the broadband industry, the answer is a resounding yes. Dumb pipes are critical, both to prevent ISPs from choosing winners in the marketplace and (more importantly) the political sphere. Without clear, enforceable rules, we simply have to trust ISPs not to use their last-mile monopoly to influence political speech. And since these are the same corporations that pay Singer et al copious sums of money to influence politics, such trust would be poorly placed.
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Anonymous Coward, 24 Aug 2016 @ 9:23am

Hasn't Google basically stopped with the fiber build out, tho, because of the cost? They're now looking at wireless.
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Derek Kerton (profile), 24 Aug 2016 @ 10:54am

Re:
Yes. But stay careful and vigilant.

Sometimes, they can actually take their fake predictions and make them reality to prove a point. They are not unwilling to burn bridges, salt fields, and toss the baby out with the bathwater.
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Whatever (profile), 24 Aug 2016 @ 10:56am

Fail
Sorry Karl, once again you fail because you can't seem to see past your hatred of these companies to realize they are being smart.

You seem surprised they are buying up spectrum? Did you even actually read the quote, which suggests it's possible that they won't even want to pay the minimum set forward, which would trigger another auction round?

Moreover, did you consider WHY they are buying spectrum? It's in no small part because it's a limited resource, and something they can control and profit from. It would be the same as buying empty lots in real estate. All the lots around it are built up, the lots are right in the best locations, and there won't be any more of it. That is a recipe for long term profits. It doesn't mean they are going to do much of anything with it today, tomorrow, or the next day.

Buying up empty lots doesn't give you 1 iota more service, and doesn't innovate anything. Rather, they are buying the space and keeping others people out.

Net neutrality has spurred plenty of innovation and investment - on in house, zero rated services and walled gardens of "doesn't count against bandwidth bills" services. It's driving a wedge between in house services and the web at large, and there is absolutely nothing the FCC can do about what companies do on their internal networks.
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Derek Kerton (profile), 24 Aug 2016 @ 10:56am

Re:
As an economist, allow me to defend the dark arts.

Economics is good, useful, relatively consistent and reliable, informative, and predictive.

Economists? Meh.
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Derek Kerton (profile), 24 Aug 2016 @ 10:58am

Re:
"How much investment has there been with net neutrality, relative to the investment that would have occurred without net neutrality?"

And this question is fairly easily answered by modeling and comparing the US market to markets with greater competition and stronger NN.
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Derek Kerton (profile), 24 Aug 2016 @ 11:03am

Re:
Yeah, but you're kinda mixing up the ends and the means.

Google has not stopped moving towards its end goals:
1) Offer gigabit broadband to people as a trial business
2) Use competition and awareness of Google ISP service to push other ISPs in the direction of faster Internet, which behooves Google.

Fiber was the means to that end, but has high costs per home passed. So, as wireless offers better and better performance, Google will look to it more and more. Don't forget, they've already looked at Muni Wi-Fi, Balloons, drones, fiber, fixed wireless, and probably lots of other stuff as means to the end.
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Derek Kerton (profile), 24 Aug 2016 @ 11:19am

I See Someone Who Doesn't Know Spectrum Policy
"It doesn't mean they are going to do much of anything with it today, tomorrow, or the next day."

Listen, I'll give you full points for your "Moreover" paragraph, and understanding the perverse incentives for spectrum rights buyers, but then you drop the ball.

You seem unaware that, in just about every nation, the regulators REQUIRE build-out and use from the spectrum auction winners, in a deliberate effort to block the kind of property speculation you describe.

Modern telcos are not stupid, but neither is the modern FCC. Nobel Econ winner Ronald Coase started to modernize the FCC's thinking to market-based in 1959, and its improved steadily since. The FCC knows that spectrum is a scarce resource, which ultimately belongs to the public. So any licensee of that spectrum is required to build-out service on it for the stated purpose, and thus offer consumer surplus to the citizens in the form of a communication or media service. Spectrum licenses are "use it or lose it".

http://www.gao.gov/products/GAO-14-236

This blurb talks about the problem you think still exists unfettered, the "hold up problem". It's not completely solved, but it is highly constrained by regs.

https://en.wikipedia.org/wiki/Spectrum_management#Spectrum_property_rights_model
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Anonymous Coward, 24 Aug 2016 @ 11:25am

"It is simply irresponsible for regulators to rely on inputs from an industry that has near monpololistic control of a market and wants to wring as much monney out of it as possible. Rather they should be guided by empirical evidence, rigorous analysis of regulatory costs and benefits and basic economic principles taught on every college campus across the country together. What matters most is not the sheer number of dollar bills the industry lobbies (legalized bribary) officials with or how much money congress critters invested in these industries will lose, or the enthusiastic hand jobs lobbiest give officials, but instead a sober analysis of the need for regulation in light of proven market failures."
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That One Guy (profile), 24 Aug 2016 @ 11:42am

Those are some impressive blinders there
What matters most is not the sheer number of docketed public comments or the enthusiasm of those blockading of the Chairman’s driveway, but instead a sober analysis of the need for regulation in light of proven market failures."

Beyond the idea that the public and their wants should apparently just be ignored because what do they know I guess, that last line coming from someone against net neutrality is just hilarious.

The market has absolutely failed, there's companies literally writing state laws left and right to make sure that they don't have to compete, companies abusing their monopoly positions to try to double/triple bill customers and other companies just because they can...

Running with the idea that the FCC should base their actions on 'a sober analysis of the need for regulations in light of proven market failures' they did, or at least seem to be trying to despite the kicking and screaming of the companies involved(plus one or two of those in the FCC), to address at least some of those 'proven market failures' via net neutrality and some basis privacy rules and regulations.
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Anonymous Coward, 24 Aug 2016 @ 1:03pm

Re: Re:
Is that like stats don't lie, statisticians do?
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Anonymous Coward, 25 Aug 2016 @ 5:59am

Re:
"How much investment has there been with net neutrality, relative to the investment that would have occurred without net neutrality?"

This is a bullshit question. Investment in what, a walled garden? We all know how well that worked out for AOL.

Does this boil down to a decision based solely upon money?
How much money does it take to convince people to shoot themselves in the foot?
How much of a dividend increase today would it take to offset the inevitable correction in the future?
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Anonymous Coward, 25 Aug 2016 @ 6:00am

Re: Fail
Sorry Whatever, once again you fail because you can't seem to see past your hatred
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Gregory Gilbert, 25 Aug 2016 @ 7:29am

It's the bureaucratic creep....
It's too early to tell and we would have to put the two environments side by side and compare which we can't do.

BTW: It wasn't net neutrality, it was Title II, which there use to be bipartisan support for. But thanks to political drive where we demonized people and clouded the issue, more power was given to the government.

Not saying it's going to be bad or good, it's just that I already didn't like the way the debate went, which isn't a good sign.
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Whatever (profile), 26 Aug 2016 @ 8:46am

Re: I See Someone Who Doesn't Know Spectrum Policy
"Modern telcos are not stupid, but neither is the modern FCC. Nobel Econ winner Ronald Coase started to modernize the FCC's thinking to market-based in 1959, and its improved steadily since. The FCC knows that spectrum is a scarce resource, which ultimately belongs to the public."

I agree. But the typical deal is a certain amount of time to start using it, but what will happen is that "technology will move" and it will take much longer than that to roll out anything meaningful. The FCC will continue to monitor but realistically can't constrain companies to roll out services that would be overtaken by technology in a short period of time.

So what you get is the same sort of roll out that LTE had - a little bit, a little more, a little more, and finally a big push to make it nationwide when they were absolutely certain that the technology was stable, wasn't going to get wiped out by something new, and that enough consumers were "device committed" to the new format - all of course while supporting the existing 3G and 2G devices.

In the meantime, the spectrum is locked up, nobody else cna move in, so there is little chance for disruption - just slow and steady progress - that is the way big companies like it.
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Whatever (profile), 26 Aug 2016 @ 8:48am

Re: Re: Fail
I have not hatred here. Karl writes some reasonable articles, but often has way too much hatred for the companies themselves. it makes it harder for him to understand their logic and the ways they want to work.

Thanks for trolling!
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Jeff Kling, 28 Aug 2016 @ 4:18pm

Broadband Investment
Broadband investment begins with fiber. Is there a sufficient amount of fiber going in the ground? It is able to backhaul the amount of wireless data being generated by Users and CDN's? One thing that Broadband Investment is NOT! That would be taking CAF II money to move DSLAM's from 3rd & 4th tier cities to Pig Path Arkansas.
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