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 That was already something Pai and friends were claiming weeks ago despite the fact the rules hadn't even been repealed yet.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