That Study In Every Paper Claiming Title II Will Result In $15 Billion In New Taxes? Yeah, That's Total Bunk

from the damn-lies-and-statistics dept

A few weeks back, we noted how a new study by the Progressive Policy Institute was making the claim that reclassifying ISPs under Title II would result in $15 billion in new state and federal taxes. As also noted, the claim was quickly picked up by media outlets and large ISP executives as the centerpiece of a campaign to convince the press, public and regulators that Title II will result in the sky falling. The cable industry was also quick to use the study as the underpinning of a series of ads pretending they care about soaring consumer bills (adorable!).

The problem, as usual in farmed telecom think tank wonkery, was that the study's findings were largely bunk. Consumer groups were quick to complain (pdf) that study author Hal Singer packed the study with conflations, misleading math (when calculations weren't obscured entirely) and the inclusion of unrelated programs and issues (like 911 funding) to intentionally bloat the predicted impact. Singer also misleadingly included the unrelated temporary moratorium on Internet service taxation in his findings, even though the Internet Tax Freedom Act (ITFA) has since been made permanent, wiping $4 billion, or 27%, off of Singer's prediction in one fell swoop.

None of this of course stopped the study and the scary $15 billion tax estimate from being used by ISPs, CEOs and loyal politicians to wage war on Title II, and the study has since been regurgitated unskeptically in thousands of news reports. Well, except for the Washington Post, which recently decided to actually fact check the study's findings (journalism!), only to discover that even if you could accurately state the full financial impact of Title II, the report went out of its way to paint as ugly of a scenario as possible:

"It is impossible to quantify the exact impact of the potential FCC decision, since Internet regulation is a new area of policy. New taxes are prohibited as long as the Internet Tax Freedom Act is in effect, so it is inaccurate to say there would be $15 billion in new taxes. There may be state charges and fees, but there is no proof that all of the current fees on telephone services would apply again to Internet services. It will not add up to $15 billion, and likely not add up to $11 billion — the worst-case scenario. The researchers agree it is a “high-end” estimate, which was the purpose of the report."

Amusingly, the Post's Michelle Ye Hee Lee contacted politicians that have bandied around the estimate, and few were interested in changing their positions when they were informed the $15 billion total was a phantom. Also of note, the story notes that Singer did at least edit his study when the Internet tax moratorium was introduced, but buried the update:

"There are too many unknowns to alarm consumers who are not well-versed in the technical and legal details of telecommunications regulations and laws. Given the uncertainties, it would be more appropriate to give a range of potential charges. But the researchers did not calculate a low-end figure for the report. In addition, the modification from $15 billion to $11 billion is a 27 percent decrease, yet the change is buried in a footnote and not readily visible for the public."

Note that none of this is to say that Title II won't see some form of tax increase, but most analysts (the ones not trying to scare people) appear to think it will be somewhere in the range of not that big of a deal. Even if Singer was able to successfully calculate the myriad trajectory of dozens of Internet policies and tech trends to come to a hard number, he should have at least used his crystal ball to try and factor the cost benefits neutrality rules -- and a healthy Internet -- would have on the consumer. Would a tax increase be offset by the savings from not being price-gouged by neutrality-violating duopoly? How much would most consumers be willing to pay in additional taxes for a healthy Internet? These are questions Singer doesn't want to ask.

After being called out by the Post, Singer took to Twitter with a unique defense of his bloated, intentionally-inaccurate missive, only highlighting the part of the story that shows there may be some kind of tax increase:

Free Press effort to discredit PPI study fails. @myhlee finds there will be some new charges. http://t.co/dXFKW4iQGp pic.twitter.com/LGIUTjUVQk

— Hal Singer (@HalSinger) January 16, 2015

When Mike pointed out Hal was being incredibly disingenuous, Singer actually responded by blaming the news outlets that used his inaccurate figure. He further argued that even though the Washington Post gave those "three pinocchios" to everyone citing his report, it didn't apply to him because he'd added that little footnote. "Your analysis clearly stating that I'm completely wrong is proof that I'm right," is a new one, and one I'll have to remember the next time I find myself creating bogus science to help prop up duopolists.

Filed Under: hal singer, net neutrality, taxes, title ii
Companies: progressive policy institute

The Broadband Industry Pretends To Be Worried About Your Soaring Bill In Attempt To Undermine Net Neutrality

from the who-can-you-trust-if-you-can't-trust-the-phone-company dept

On the heels of Obama's surprise support of Title II-based net neutrality rules last month, we noted that the broadband industry's anti-Title II talking points (primarily that it will kill network investment and sector innovation) not only were just plain wrong, they were getting more than a little stale. That's a problem for the industry given the increasingly bi-partisan support of real net neutrality rules and the groundswell of SOPA-esque activism in support of Title II. As such, the industry's vast think tank apparatus quickly got to work on new talking points to combat net neutrality rules that actually might do something.

The first product of this renewed effort is this study by the AT&T-funded Progressive Policy Institute. The study's central thesis is that if Title II net neutrality regulations are passed, the nation will be awash in $15 billion in various new Federal and State taxes and fees:

"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 $15 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."

Like a well-oiled machine, the cable, phone and broadband industry got to work pushing its study across all the major news outlets over the last week. AT&T CEO Randall Stephenson quickly took to NBC (skip to 1:05) to claim the average household broadband bill would increase by $19 a month under Title II (note amusingly that he got the study numbers his own company helped pay for wrong). The cable industry also not-so-subtly took to using this graphic in ads proclaiming Title II will result in vicious price hikes for everyone: You'll probably be surprised to learn that the broadband industry had to resort to conflation, data cherry picking and a parade of worst-case scenarios to get these numbers. On the state level, Internet access has long received a Congressional exemption that's set to expire December 11 -- an issue totally unrelated to the Title II push. Congress can make sure the exemption is extended, keeping state sales taxes far away from broadband access. If they don't, again, it has nothing to do with Title II. Realize this, and nearly all of the PPI's estimate of $15 billion in new taxes as a direct result of Title II goes up in smoke right out of the gate.

In an e-mail conversation about the study I had with Free Press Research Director Derek Turner, Turner argues that PPI is also predicting a very worst-case scenario on Federal taxation that's simply not going to happen:

"The FCC could decide to forbear from requiring federal USF contributions for one. And whether or not the FCC does that, adding broadband into the USF mix wouldn't impact the overall size of the fund. That is, if broadband revenues were assessed but the fund size stayed constant, consumers would pay on broadband but, as a result, they'd pay less on their other services like wireless and wired voice. PPI asserts that consumers would pay more on aggregate than they do now (i.e. by adding broadband to the mix, their numbers imply that the burden for the fund will shift towards consumers from businesses), but the report out today offers no explanation of why the contribution percentage would tilt that way."

Of course the pretense that the broadband industry cares about how much your bills increase is also laughable, given the industry spends a large part of each day trying to figure out creative ways to pad your bill. This includes rate hikes, usage caps and a wide variety of fees imposed below the line to jack up the advertised rate post sale. These fees range from entirely bogus, non-government mandated "regulatory recovery fees" (pure-profit fees imposed to offset ambiguous government regulation despite a decade of deregulation) to new "broadcast TV fees" that simply bury a portion of programming costs below the line. They're all a variety of false advertising, but they highlight how the biggest increases to below-the-line charges and fees are coming from the industry itself.

The reality the broadband industry doesn't want to acknowledge is that very little changes for it under Title II if carriers aren't engaged in bad behavior. The broadband industry is fighting Title II solely to protect potential revenues generated from abusing uncompetitive markets. That this self-serving behavior is being dressed up as concern about the size of your broadband bill is the industry's best comedic work to date. Perhaps this slightly edited (by Mike) version of the NCTA ad is a bit more accurate:

Filed Under: bills, broadband, faux concern, hal singer, lobbyists, net neutrality, studies, taxes, title ii
Companies: at&t, ncta, progressive policy institute