AT&T Successfully Derails California's Tough New Net Neutrality Law

from the AT&T-wins-again dept

This truly is, as they say, why we can't have nice things.

In the wake of the FCC's ham-fisted net neutrality repeal, more than half the states in the country are now exploring their own, state-level net neutrality protections. California's proposal, Senator Scott Weiner's SB 822, was seen as particularly promising in that it went even farther on some important issues than the 2015 FCC rules it was intended to replace. The EFF went so far as to call California's proposal the "gold standard" for state-level net neutrality laws, noting it did a better job policing many of the problem areas where modern anti-competitive behavior occurs, such as zero rating or interconnection.

You probably saw that AT&T just got done spending $86 billion to acquire Time Warner. The company harbors dreams of using its combined dominance over broadband and media content to anti-competitive advantage, something that's undeniable if you've watched AT&T do business for any particular length of time.

Since California's law would have severely hampered AT&T's dreams of dominating the streaming video and ad wars to come, the company got right to work derailing California's legislative push in its usually-underhanded way. The company managed to convince California Assemblyman Miguel Santiago to introduce a series of last-minute secretive Tuesday night amendments that were then voted on without debate during a Wednesday morning hearing:

"The committee, lead by Assemblyman Miguel Santiago, D-Los Angeles, issued amendments to the bill late Tuesday night. Among its recommendations were to permit a controversial internet service provider practice called “zero rating,” where some websites and apps don’t count against a consumer’s data allotment. Opponents view zero rating as a backdoor way of discriminating against online services that don’t strike free-data deals with broadband and wireless companies."

In the early days of net neutrality, ISPs like AT&T engaged in more ham-fisted and non-transparent abuse of their broadband monopolies. Like the time AT&T blocked Facetime from working unless users upgraded to more expensive data plans, or the time Comcast throttled all upstream BitTorrent traffic then repeatedly lied about it.

As people got smarter to what ISPs were up to, ISPs began getting more nefariously clever. Like the time ISPs let their peering and interconnection points intentionally congest to kill settlement-free peering and drive up costs for companies like Netflix, slowing down Netflix streams for everyone until the company paid up. Or the way that ISPs now impose arbitrary and unnecessary usage caps, then exclude their own streaming services from them while still penalizing competitors (aka zero rating), something it took years for the last FCC to finally realize was just as anti-competitive.

Fast forward to this week. To convince lawmakers to back off the restrictions on zero rating, AT&T first employed the use of a group dubbed CALinnovates, one of numerous groups AT&T covertly funds to pee in the discourse pool. CALinnovates then circulated an incredibly misleading study among lawmakers falsely claiming that AT&T's anti-competitive use of usage caps is a huge boon to the state's minority populations (err, false). AT&T then got state lawmakers to approve of a list of major amendments Tuesday evening that would cripple the most important parts of the bill.

Specifically, AT&T (and likely Comcast and Verizon) convinced Santiago to strip away all rules governing zero rating, all guidance preventing interconnection shenanigans, as well as a rule that would have prevented ISPs from charging other companies "access fees" if they want to reach AT&T customers. Santiago's office refused any and all contact from reporters (myself included) on Tuesday night, then quickly rushed those amendments through the voting process before they could even be debated. Disgusted by the railroading, Weiner ultimately pulled his bill entirely, arguing that it no longer adequately protected consumers:

"It is no longer a net neutrality bill,” a visibly frustrated Wiener said after the vote. In an unusual move, the committee voted on the bill before Wiener was given a chance to testify. “I will state for the record ... I think it was fundamentally unfair,” he said.

Net neutrality activism groups like Fight for the Future were notably less subtle in their own statements:

"The level of corruption we just witnessed literally makes me sick to my stomach,” said Evan Greer, deputy director of Fight for the Future, a digital rights group with more than 350,000 members in California. "These California democrats will go down in history as among the worst corporate shills that have ever held elected office.Californians should rise up and demand that at their Assembly members represent them. The actions of this committee today are an attack not just on net neutrality, but on our democracy."

If you've watched AT&T do business, the fact that it was able to scuttle this bill in such a "progressive" state shouldn't be surprising. AT&T's political power over many state legislatures is often downright comical, to the point where AT&T lawyers are quite literally the ones writing terrible state law. That's particularly true in states like Tennessee, though in ignoring the undeniable will of the public on this subject, California has proven itself no better.

All told it has been a great year and a greater few weeks if your name is AT&T. Net neutrality formally died on June 11, the company's latest megamerger was approved thanks to a comically narrow understanding of the markets by a Federal Judge, and it managed to scuttle state-level net neutrality in California, purportedly a stronghold for net neutrality activism. This on the heels of successful efforts to neuter FCC oversight of historically unpopular and anti-competitive incumbent ISPs. What could possibly go wrong?

Filed Under: california, miguel santiago, net neutrality, scott weiner, zero rating
Companies: at&t

ISPs Lobbying California Lawmakers In Bid To Weaken State's Looming Net Neutrality Law

from the if-at-first-you-don't-succeed... dept

More than half the states in the nation now pursuing individual net neutrality rules, either in the form of executive orders (banning state contracts with net-neutrality violating ISPs) or new state laws. And while ISPs have been whining about the unfairness of having to adhere to independent requirements in each state, that's probably something their lobbyists should have thought more deeply about when they worked to kill what, despite all the prattle about heavy-handed regulation, were probably some of the more modest net neutrality rules worldwide.

ISPs first tried to stop states from protecting consumers by lobbying the FCC to include language in its "Restoring Internet Freedom" repeal attempting to ban states from doing so. But in the process of gutting their authority over ISPs Ajit Pai's FCC may have also, amusingly, completely neutered its ability to tell states what to do.

As such, ISP lobbyists have been forced to run, state to state, trying to convince state lawmakers that giving consumers, small businesses and internet competition a giant middle finger is the smart political play here with midterms looming. Verizon, AT&T and Comcast are working extra hard to weaken a bill in California, that is actually a bit tougher than the FCC rules it's intended to replace. As the EFF notes, ISPs are particularly worried that California will ban "zero rating," or the practice of using usage caps and overage fees anti-competitively:

"California’s legislature has so far opted to ban discriminatory users of zero rating and prevent the major wireless players from picking winners and losers online. But new and increased resistance by the ISP lobby (led by AT&T and their representative organization CALinnovates) unfortunately has legislators contemplating whether discriminatory zero rating practices should remain lawful despite their harms for low-income Internet users. In fact, AT&T and their representatives are even going so far as to argue that their discriminatory self-dealing practices that violate net neutrality are actually good for low income Internet users.

AT&T (and even Facebook) have been pushing this idea that zero rating "helps poor people" for a while. Basically, they're trying to argue that because some users get content that doesn't count against the cap, they're somehow providing added value to low-income Americans. Of course that ignores the fact that it's only an incumbent ISP's own content (or content from the biggest, wealthiest partners) that's usually exempt, raising all kinds of anti-competitive questions.

You'd also have to ignore than American consumers pay more money for LTE mobile data than a laundry list of developed nations, and that usage caps and overage fees on these lines are arbitrary, unnecessary and meaningless constructs in the first place. Still, AT&T has spent a few years now trying to falsely conflate arbitrary caps and penalties with things like "1-800" numbers or "free shipping," successfully convincing many consumers they're getting something for free.

You'll recall that initially, the FCC didn't want to act on usage caps, overage fees and zero rating for fear of being accused of stifling carrier innovation and creativity. As a result, the 2015 rules were crafted with pretty ambiguous guidance on zero rating, something we warned would be a problem. Only at the tail end of its tenure did the Wheeler FCC start to realize caps and overage fees were being used anti-competitively to favor an ISPs' content over smaller competitors, at which point Donald Trump and Ajit Pai had already come to power--and quickly set to purging the rules entirely. You know, for freedom.

California's net neutrality law doesn't ban zero rating if an ISP wants to exempt an entire class of content (say, video) from usage caps and overage fees. But it does prohibit ISPs from striking deals that give specific companies cap-exempt status, preventing companies from buying an unfair advantage for themselves or a competitor. Given AT&T just gobbled up Time Warner and HBO with zero rating specifically in mind (HBO is free on our network but costs money if you use a competitor), you can understand why AT&T's so opposed to these rules.

This all comes to a head this Wednesday with a vote and hearing before the California Assembly’s Communications and Conveyance Committee. And while the majority of that committee say they support net neutrality, net neutrality activists say that major ISP lobbyists have succeeded in getting some lawmakers (like Committee head Miguel Santiago) to waffle on the whole zero rating part of the equation. After all, nothing quite says "restoring freedom" like letting AT&T give its own horse a half-mile lead in the streaming video wars to come.

Filed Under: broadband, california, competition, lobbying, net neutrality
Companies: at&t, comcast, verizon

Ajit Pai Now Trying To Pretend That Everybody Supported Net Neutrality Repeal

from the allergic-to-the-truth dept

By now it's abundantly clear that the Trump FCC's repeal of net neutrality was based largely on fluff and nonsense. From easily disproved claims that net neutrality protections stifled broadband investment, to claims that the rules would embolden dictators in North Korea and Iran, truth was an early and frequent casualty of the FCC's blatant effort to pander to some of the least competitive, least-liked companies in America (oh hi Comcast, didn't see you standing there). In fact throughout the repeal, the FCC's media relations office frequently just directed reporters to telecom lobbyists should they have any pesky questions.

With the rules now passed and a court battle looming, FCC boss Ajit Pai has been making the rounds continuing his postmortem assault on stubborn facts. Like over at CNET, for example, where Ajit Pai informs readers in an editorial that he really adores a "free and open internet" despite having just killed rules supporting that very concept:

"I support a free and open internet. The internet should be an open platform where you are free to go where you want, and say and do what you want, without having to ask anyone's permission. And under the Federal Communications Commission's Restoring Internet Freedom Order, which takes effect Monday, the internet will be just such an open platform. Our framework will protect consumers and promote better, faster internet access and more competition."

'Course if you've paid attention, you know the FCC's remaining oversight framework does nothing of the sort, and is effectively little more than flimsy, voluntary commitments and pinky swears by ISPs that they promise to play nice with competitors. With limited competition, FCC regulatory oversight neutered, the FTC an ill-suited replacement, and ISPs threatening to sue states that try to stand up for consumers, there's not much left intact that can keep incumbent monopoly providers on their best behavior (barring the looming lawsuits and potential reversal of the rules).

Over in an interview with Marketplace, Pai again doubles down on repeated falsehoods, including a new claim that the repeal somehow had broad public support:

Marketplace....this is not a popular decision. Millions of people have written in opposition to it. Public opinion polling shows most Americans favor net neutrality, not your open internet rule. And I wonder why you're doing this then? If public opinion is against you, what are you doing?

Pai: First of all, public opinion is not against us. If you look at some of the polls —

Marketplace: No, it is, sir, come on.

Pai: If you look at some of the polling, if you dig down and see how these polls were constructed, it was clearly designed to reach a particular result. But even beyond that —

Marketplace: It's not just one, there are many surveys, sir.

Pai: The FCC’s job is not to put a finger in the wind and decide which way the winds are blowing, it's to look at the facts and make a sober judgment based on what the law is. And that is exactly what we've done here. Moreover, the long-term interest is in building better, faster, cheaper internet access. That is what consumers say when I travel around the country, and I’ve have spoken to consumers in Los Angeles to the reservation in South Dakota, places like Dahlonega, Georgia. That is what is on consumers’ minds. That is what this regulatory framework is going to deliver.

First Pai tries to claim that the public supported his repeal, then when pressed tries to claim that the polls that were conducted were somehow flawed. Neither is true. In fact, one recent survey out of the University of Maryland found that 82% of Republicans and 90% of Democrats opposed the FCC's obnoxiously-named "restoring internet freedom" repeal. And those numbers are higher than they were just a few years ago. That the public is overwhelmingly opposed to Pai's repeal is simply not debatable.

When discrediting the polls doesn't work, Pai then implies consumers aren't smart enough to realize that gutting oversight of indisputably terrible ISPs like Comcast will be secretly good for them. He then tries to insist that public opinion doesn't matter and that he's simply basing his policy decisions on cold, hard facts. Which, for a guy that claimed during the repeal that net neutrality aids fascist dictators, made up a DDOS attack, ignored countless widelesly respected internet experts and based his repeal entirely on debunked lobbyist data--is pretty amusing.

Whether Pai's repeated lies result in anything vaguely resembling accountability remains to be seen. But based on the volume of time Pai spends touring flyover country, it's pretty clear he's harboring some significant post-FCC political aspirations. Those ambitions are likely to run face first into very real voters (especially of the Millennial variety) harboring some very real annoyance at his gutting of a healthy and open internet.

Filed Under: ajit pai, fcc, net neutrality, public support

Charter Spectrum Claims The Death Of Net Neutrality Will Magically Provide Better, Faster Broadband

from the nobody-believes-you dept

Large ISPs like Comcast, Charter, Verizon and AT&T this week uniformly proclaimed that the death of net neutrality is going to be a really wonderful thing for American consumers. Charter Spectrum, for example, took to the company's policy blog to insist that the neutering of historically popular consumer protections on this front will somehow result in everybody getting better broadband. The ISP's argument, as it has throughout this entire little dog and pony show, focused on the repeatedly debunked claim that the FCC's pretty modest net neutrality rules demolished telecom industry investment:

"Without the regulatory overhang of these rules however, businesses like ours will have the certainty they need to make infrastructure investments over the long-term, helping more people get online and enabling even faster broadband. This includes bringing high speed broadband to more hard to serve areas, including rural communities."

Which is something you might be inclined to actually believe if Charter's own executives weren't on record publicly stating that the rules had absolutely no meaningful impact on Charter's bottom line:

"Title II, it didn't really hurt us; it hasn't hurt us," Charter CEO Tom Rutledge said at an investor event in December 2016, according to a report by advocacy group Free Press. Publicly traded companies like Charter are required to give investors accurate financial information, including a description of risk factors involved in investing in the company."

In fact, dozens of industry CEOs have publicly admitted to investors and media outlets that the whole "net neutrality hurt broadband investment" is completely baseless, something proven by anybody willing to spend five minutes with industry SEC filings and earnings reports. And while industry-hired economists tried to cherry pick very specific windows of investment to try and claim the exact opposite, the data here is pretty clear. In fact, an analysis by consumer groups (pdf) found that Charter's overall CAPEX actually went up in the wake of the FCC's 2015 net neutrality rule creation:

"Charter’s capital investments went up 15 percent after the FCC’s Open Internet vote (when we include the pre-merger investments made by Charter, Time Warner Cable and Bright House Networks). And not only are Charter’s investments up, they’re 12 percent higher than the estimates Charter gave to investors prior to closing that merger.

This being post-truth America however, facts don't appear to carry quite the same weight as they used to, and it's abundantly clear that some of the least-liked companies in America are confident in their belief that repetition forges reality. Apparently, said companies hope that if they repeat this nonsense often enough, people won't notice the government sold them, and the health of the internet, down river without a second thought (and in some instances, that's pretty clearly working).

Granted Charter then gets to the real point of the company's blog post; to push for a new net neutrality law the company knows that in this political climate, they'll be the ones writing:

""Charter’s commitment to our customers is our top priority. We urge Congress to pass new legislation that preserves an open internet and ensures a regulatory framework made for the 21st century, so we can continue to improve and invest in our networks and provide more people access to a fast, reliable, and open internet."

We've noted how ISPs are worried about losing the looming court case over net neutrality, as well as the dozens of states that are now imposing state-level net neutrality protections. As such, the hope is that they can push forth a loophole-filled net neutrality law in name only; one with so many loopholes as to effectively be useless, but which will pre-empt any tougher state or federal rules (including the restoration of the FCC's 2015 rules). It's a gambit that's not really working, in large part because these companies have obliterated any last vestiges of public trust they may have had with this latest lobbying assault.

Filed Under: ajit pai, competition, fcc, investment, net neutrality
Companies: charter spectrum

Net Neutrality Rules Die Today, But The Backlash Is Just Getting Started

from the ill-communication dept

As you probably already knew, federal net neutrality rules finally die today after the FCC's unpopular repeal vote last December. And as you might expect, FCC boss Ajit Pai is making the rounds doing what he's done throughout this entire process: bullshitting the public about what his historically unpopular (and misleadingly-named) "Restoring Internet Freedom" order actually does. Over in a CNET editorial for example, Pai goes so far as to proclaim that gutting these extremely popular open internet protections will somehow make everything much, much, better:

"I support a free and open internet. The internet should be an open platform where you are free to go where you want, and say and do what you want, without having to ask anyone's permission. And under the Federal Communications Commission's Restoring Internet Freedom Order, which takes effect Monday, the internet will be just such an open platform. Our framework will protect consumers and promote better, faster internet access and more competition."

If you've spent any time reading Techdirt, we probably don't need to repeat why none of this is actually true. The entire piece is a "greatest hits" of Pai's misleading claims to date, including his insistence that the FTC will be better able to police ISP abuses (false), small ISPs were unfairly burdened by the rules (the FCC's own data disputes this), gutting net neutrality somehow will force ISPs to be more transparent (false), and that the repeal will result in faster and cheaper broadband service (complete nonsense).

Moving forward, the ISP lobbyist narrative du jour is going to shift to claims that because the internet didn't immediately grind to a halt after June 11, that the repeal must have been a wonderful idea. That was already something Pai and friends were claiming weeks ago despite the fact the rules hadn't even been repealed yet. And it's a claim you're going to see repeated ad nauseum over the weeks and months to come by the telecom industry's vast army of hired academics, think tankers, consultants, and other policy mouthpieces.

But despite the cocksure behavior by Pai and pals, the repeal remains on pretty shaky footing. ISPs know that, which is why they will likely try to be on their best behavior for the foreseeable future to avoid adding any fuel to the fire. After all, the repeal was based almost entirely on bogus data, was plagued with an endless array of scandals (from the FCC making up DDOS attacks to dead people's names being hijacked to support the repeal), and the overwhelming public opposition to it makes the SOPA/PIPA backlash look like a toddler tantrum.

As such, the looming lawsuits against the FCC have a fairly decent chance of success. Those suits will likely focus on the fact that under the Administrative Procedures Act, the FCC can't just arbitrarily reverse policy without highlighting that the market changed dramatically enough to warrant it (which is why you'll often see the FCC falsely claiming that net neutrality devastated sector investment). With any luck, this could result in a judge overturning the repeal for being "arbitrary and capricious" (never were those words more true than here).

Meanwhile on the state level, more than half the states in the union are now pursuing some flavor of their own net neutrality protections, whether that's via executive order (like in Montana), or new net neutrality state law (as in Oregon, Washington, and California). And while ISPs successfully lobbied the FCC to include language in the repeal "pre-empting" (read: banning) states from protecting consumers in this fashion, the FCC's legal authority to tell states what to do on this subject is resting on some pretty sketchy legal assumptions.

And while these federal and state legal battles play out, the political backlash to this giant middle finger tech policy already isn't likely to be subtle. Net neutrality has massive bipartisan support, and the lion's share of the public sees this decision as what it is: a giant middle finger to free speech, healthy competition, and american consumers and small businesses. Our collective disdain for Comcast frequently bridges partisan divides, and while broadband traditionally hasn't been an issue that sees much traction at the polls, it's hard to think there won't be some political price to pay for being on the wrong side of history here.

AT&T, Verizon and Comcast executives know they've pushed their luck with this repeal. That's why ISP lobbyists have been pushing a bogus, loophole filled net neutrality law. A law with one real purpose: to pre-empt tougher state or federal rules, or the restoration of the 2015 rules. But because playing kissy face with Comcast is likely to be politically toxic ahead of the looming midterms, support for this head fake has been unsurprisingly hard to come by. As such, passing new rules down the road remains a very real possibility, especially with a dramatic shake up in the House or Senate.

So while many are understandably frustrated today, the elimination of the FCC's 2015 rules shouldn't be seen the end of net neutrality, or the end of the road. It's more like another chapter in a story that has neither a beginning nor an end. Net neutrality isn't something that simply "ends" with the creation or elimination of government guidelines. Net neutrality violations are only a symptom of a lack of competition in broadband and decades of regulatory capture. Were we to finally wake up to this problem and stand up to these anti-competitive duopolists, we wouldn't need net neutrality rules in the first place.

Filed Under: ajit pai, backlash, fcc, net neutrality

What Ajit Pai Should Have Said About Killing Net Neutrality... And Why It Still Would Have Been Wrong

from the but-he-didn't,-which-says-it-all dept

As you've probably heard, today's the day that the fairly straightforward and non-onerous net neutrality rules put in place in place by Tom Wheeler back in 2015 are officially taken off the books. We've posted a ton about net neutrality and will post a lot more, but I've been thinking about a few things related to how all of this went down that seem worth discussing. As background reading, it might help to first read why I changed my mind about net neutrality -- from originally being against the FCC setting any rules to eventually being for a fairly limited set of rules. However, what really inspired this post was the podcast conversation I had with Barry Eisler back in December about the lost art of productive debate. One of the points that Barry made was that it's especially easy in these crazy social media-driven times to argue against someone by taking the absolute worst or most extreme version of their argument and then destroying that. As he notes, as a former practicing lawyer, it's the kind of thing he was trained to do. However, he suggested that the more intellectually honest way of holding a debate is to actually reframe the argument and present back to the person what their best argument appears to be, and then debate that.

That can be difficult to do -- but let's take a shot. Because the arguments that Pai and his supporters have given so far for wiping net neutrality off the books really don't make any sense.

The core of Pai's argument to date has been that the net neutrality rules that were put in place in 2015 created a massive regulatory burden on broadband access providers, leading them to decrease their investment. In a new interview he suggests that decreasing the regulatory burden on broadband access providers will have some sort of trickle down effect on everyone else: "I think ultimately it’s going to mean better, faster, cheaper Internet access and more competition."

But if that's actually the case, it seems that Pai should back up that statement with a further explanation. The broadband market is about infrastructure, and if you understand the economics of infrastructure there are a number of different factors at play. For example, it seems quite reasonable to point out that both the net neutrality rules and the lack of net neutrality rules create some winners and losers. And it would be reasonable to point out that the FCC shouldn't be the ones picking those winners and losers (though, that would be a tough sell, given the FCC's entire charter is basically to be doing that). An intellectually honest description of the net neutrality rules would note that there are multiple competing interests at play: the interests of broadband infrastructure players (big telcos/cablecos), the interests of upstart competitors (smaller ISPs), the interests of big services on the internet, the interests of small services on the internet, and the interests of the public. And you could (and perhaps should) look at the impact on each of those and note who is likely to benefit and who is not.

And then, if we were having an honest debate, Pai could note that he believes, strongly, that empowering the biggest broadband infrastructure players with leverage to create differentiated services on their network would provide benefits that outweigh the damage that might do to others. Pai sort of tries to make that argument with his statement about "better, faster, cheaper Internet access and more competition", but he fails to describe any real mechanism for that to actually happen -- other than suggesting that merely removing the regulations will magically lead to it. So, let's try to create the mechanism by which this might happen. You could say that... due to a lack of regulations, it will allow the big broadband providers more leeway to experiment with alternative business models and new technologies, which will create a faster and better internet, including different types of access and different levels of service for different users. And maybe you could then argue that this would also somehow allow for new entrants, because they could attack the market in disruptive ways.

Another argument Pai could have -- and perhaps should have -- made would be looking into questions about how the market for broadband works. Last year, in posting the free market case for net neutrality, we noted that there are cases where even the staunchest free market economists out there have recognized that government intervention can make some sense, mainly in getting uncompetitive markets unstuck. Pai could have tried to rebut the various assumptions in that piece as well. For example, he could argue that broadband is not, in fact, a natural monopoly, and present some evidence for why the market was increasingly competitive -- and even argue that knocking out net neutrality rules would enable brand new broadband infrastructure investment to occur by enabling brand new competitive forms of internet access.

If he said all of that, then we could be having an honest debate about getting rid of the net neutrality rules. So, now, let's point out why even if he said all of the above, he'd still be incorrect (this may be why he didn't say all of the above, because he understands these arguments don't hold up to much scrutiny, and it's much easier to stick with a voodoo trickle-down "broadband regulation bad!" form of argument -- but that's getting away from the intent of this post). So, first let's tackle the "get rid of regulation to help everyone" argument.

As we've discussed at length, the one argument that Pai has made strongly -- that broadband investment is down because of net neutrality -- is not even remotely close to true. Just looking at broadband companies and their Wall Street statements (in which they face serious penalties for lying), you find that there is no decline in broadband investment due to the net neutrality regulations, at all. So the idea that removing these "barriers" will somehow lead to an increase in investment doesn't make any sense.

Second, even going beyond the pure "less regulation means more investment" argument, if the market is not at all competitive (and it is not), then what incentive do the broadband players really have to invest and innovate here? As we've seen time and time again, the real incentive for innovation is greater competition. But we're actually seeing less and less competition in the broadband market, which means that broadband providers have greater and greater incentive to just protect their own monopolistic position and cheap out on customer service and innovation.

Third, if we look at the various players in the market, it's disturbing that Pai only seems to take into account the interests of the largest broadband providers. The smaller broadband providers have made it clear that net neutrality actually improves competition because, without it, the largest broadband providers are better positioned to cut the necessary deals with Netflix, Amazon, Google, Apple, Facebook and others, while the smaller players won't be able to do so. That means that the bigger players will be able to contractually make smaller broadband companies provide a worse overall experience to their users, again further cementing the lack of competition. And while Pai claims that net neutrality harms smaller ISPs, the FCC's own data shows the opposite.

Fourth, so much of the argument that we have to focus on broadband infrastructure investment of the largest players is a broken windows fallacy. As I pointed out in a post last year, if broadband infrastructure investment is the only metric we're using here, the FCC's best plan would be to physically destroy the internet. After all, that would stimulate an awful lot of new investment. You just have to ignore all the costs it would create for everyone else.

And that's the part that's most disturbing here. Pai seems to be deliberately focusing only on the big broadband players and what this means for them -- without caring about what it means for everyone else. Having clear and simple net neutrality rules in place helps lots and lots of internet services, because it means they get to compete on a level playing field against the Googles, Facebooks, Amazons and Netflixes of the world. Those companies can pay to get preferential treatment. The startups cannot -- and Pai has yet to explain how this state of affairs helps those startups. Just saying, "well you'll have more internet," isn't an answer.

Indeed, a strong argument can be made that harming the ability of smaller companies on the network to compete, in favor of granting much greater discriminatory power to the large networks themselves, does much more harm to competition and a free market than having a set of very limited net neutrality rules in place that give all of the internet companies and entrepreneurs certainty that they can actually build their own businesses.

As for the argument that the market is more and more competitive -- that is clearly not at all true. Pai himself telegraphed this fact by trying to downgrade the definition of broadband to make the market look more competitive.

So, what are we left with? Pai's key argument appears to rest on the broken windows fallacy, by only focusing on broadband infrastructure investment and ignoring all of the investment a layer up on the network and how much that will be harmed by this move. He also is misrepresenting what is happening with infrastructure investment and the level of competition in the market.

In the end, we're left with no real argument at all for why we've just wiped out net neutrality, other than a blind faith that "regulation is bad." That may get some people excited, but hardly seems like a real exploration of the topic. And that's going to matter, because one of the key things that Pai is going to need to defend in court during the various challenges is what material change had happened that required this repeal. And simply falsely claiming that broadband infrastructure spending had dropped is hardly convincing.

Filed Under: ajit pai, broken windows, competition, fcc, investment, net neutrality, regulations