CenturyLink Pushed For Net Neutrality Repeal, Now Adorably Calls For FCC To Police Interconnection

from the good-luck-with--that dept

You'll probably recall that a few years ago, Netflix streams began mysteriously slowing down for users nationwide. Eventually, Netflix, Level3 and Cogent stated that the problem wasn't on Netflix's end, but was occurring at peering points, where they claimed incumbent ISPs had begun intentionally letting their networks congest by refusing to upgrade capacity. Why? The goal was to kill settlement-free peering and extract steep new troll tolls from content companies that wanted their traffic to reach incumbent ISP customers without, you know, being kneecapped.

These interconnection issues were just a creative evolution of a longstanding efforts by ISPs to abuse their monopoly over the last mile. Level3 made a pretty compelling case that this was little more than glorified extortion. So too did New York Attorney General Eric Schneiderman, whose lawsuit against Charter/Spectrum (pdf) argued that ISPs were not only using manufactured congestion to drive up rates for transit and content companies, but had admitted to manipulating this congestion to trick regulatory efforts to measure real-world speeds (starting on page 62, if you're interested).

Regardless, in 2015 the FCC's net neutrality rules gave the FCC the authority to police these interconnection points for anti-competitive behavior, and act if necessary. With the passage of the rules, all of this interconnection shenanigans magically and coincidentally stopped without the FCC having to lift a finger.

Fast forward to last week, when the FCC voted to kill net neutrality rules -- including these interconnection protections. Ironically CenturyLink, one of the ISPs that lobbied for net neutrality repeal, had been urging the FCC to police interconnection squabbles anyway. Why? As the new owner of Level3, the company now has a vested interest in its traffic actually arriving at its destination. In a recent filing with the FCC (pdf), CenturyLink argued that the FCC should try and use its Title I authority to police interconnection:

"Should the Commission adopt an Order reclassifying broadband internet access service as a Title I information service and assert Title I jurisdiction over internet traffic, the Commission should also clearly state that it can and will be available to resolve significant issues related to the associated policies and rules that give rise to such Title I jurisdiction."

CenturyLink proceeds to argue that should the company run into a problem where Verizon suddenly starts letting peering points congest to force it to pay more money, the FCC would step in to police negotiations:

"For example, should the issue arise, the Commission alone is able to determine whether terminating access charges for internet traffic would be consistent with the public interest for the underlying telecommunications and associated voice communications, its obligation to encourage the deployment of advanced telecommunications capability, and to ensure that other jurisdictions do not adopt conflicting policies."

That's adorable for several reasons. One, the FCC has repeatedly made it very clear that it has no intention of policing interconnection shenanigans, and has repeatedly denied that this was ever a real problem. Two, the FCC's "Restoring Internet Freedom" proposal guts FCC, FTC, and states' abilities to police behavior by bad actors. Full stop. The FCC couldn't make it any clearer that they expect the market itself to magically work all of this stuff out. Which, as we already saw, won't actually happen in the uncompetitive broadband market, and certainly not without consumers and competitors getting slapped around for a while.

CenturyLink helped sell the FCC's facts-optional assault on the rules, happy to join the chorus of large ISPs deriding the rules as "draconian," "heavy handed," or "extreme." But the reality is they were some of the most modest net neutrality protections in the world. Rules that were far weaker than those passed in India, The Netherlands, or Canada. And while they really didn't go far enough on some fronts, they provided a base line level of protection to hamper anti-competitive behavior to the benefit of competitors and consumers alike.

Now they're on the way out the door. And Netflix isn't blameless either. Once it could afford to pay these troll tolls, it stepped back from the debate and argued that this was all now the problem of smaller companies. Should the FCC's repeal survive a court challenge in the new year, there's going to be a lot of executives on both sides of the fight that will get to spend ample time laying around in the bed they helped make.

Filed Under: ajit pai, fcc, interconnection, title ii
Companies: centurylink, level3, verizon

Right On Cue, Marsha Blackburn Introduces A Fake Net Neutrality Bill To Make The FCC's Idiotic Decision Permanent

from the the-best-laws-money-can-buy dept

As we just got done saying, giant ISPs are well aware that last week's unpopular FCC vote to repeal net neutrality rests on very shaky legal ground. The agency will be facing all manner of lawsuits in the new year from competitors and consumer groups that quite correctly highlight the blatant fraud and bizarre missteps that occurred during the proceeding. Those lawsuits will also argue that the FCC is violating the Administrative Procedure Act by passing a law without proving that the broadband market had changed enough in just two years to warrant such a severe, unpopular reversal (tip: it didn't).

As such, ISPs are already pushing hard to codify the FCC's idiotic and unpopular repeal into law. ISPs like Comcast are claiming they're just so interested in protecting the open internet (after spending millions to dismantle real net neutrality rules) that a law their lobbyists likely wrote is the only path forward now. But these bills have one purpose: to prevent any future FCCs or Congressional lawmakers from passing meaningful rules down the road.

Enter Tennessee Representative Marsha Blackburn, who has for years been a glorified rubber stamp for AT&T and Comcast, going so far as to support state-level laws that hamstring competition and erode local rights. Today Blackburn unveiled the "Open Internet Preservation Act" (pdf), which, as we predicted, bans things like outright throttling, but ignores numerous other possible avenues of abuse by ISPs, including zero rating, paid prioritzation, and interconnection shenanigans. The bill also tries to ban states from trying to protect net neutrality in the wake of federal apathy, another gem ISPs like Comcast have been coincidentally lobbying for the last few months.

Blackburn made sure to leak first looks at her bill to news outlets she knew would be sure to parrot any number of net neutrality falsehoods that were debunked years ago:

"Rep. Blackburn told Breitbart News why she decided to unveil her legislation to codify the laws of a free and open Internet. She said, “When you talk to innovators in the online space, one of the things that is frustrating to them is that the rules of the internet continue to change over the last few years. What we want to do is codify the rules of an open internet."

“What we saw with the Wheeler order in 2015 was really control of the Internet. We are going to put rules in place that will stop the ping-ponging depending on who’s in charge of the FCC. This is an issue that should be decided by Congress,” Blackburn added.

Of course Blackburn would have you ignore the fact that her rhetoric almost exactly mirrors a blog post Comcast posted just a few days ago, or the fact that her bill was likely written by Comcast and AT&T lawyers and lobbyists. She'd also have you ignore that the "innovators" she pays lip service to strongly oppose the repeal of the current rules, as nearly 1000 startups made very clear back in April. Blackburn also took to Twitter to regurgitate numerous debunked industry canards, like the entirely bogus claim that net neutrality rules hurt sector investment:

Again, these folks couldn't give less of a damn about "protecting the open internet." They're solely looking out for the interests of AT&T, Verizon, Comcast and Charter. And what these ISPs want (and are in the process of getting) is a complete dismantling of both federal and state oversight of telecom duopolies so they can continue abusing the lack of competition in the sector for the foreseeable future. They know the FCC's repeal is in jeopardy of being overturned by the courts, so they're trying to rush through shitty legislation that effectively makes violating net neutrality legal.

It's likely this will be the first of several bills of this type, and the inclination on some fronts will be to suggest that "a bad bill is better than no protections at all." But that's a naive interpretation of what ISPs are attempting here. As we just noted, any ISP-supported net neutrality legislation will ban things ISPs never intended to do (like outright blocking of Netflix), but won't cover any of the more nuanced areas where net neutrality violations are now occurring (usage caps, zero rating, interconnection). Why rush to support a bill that simply acts to make most violations legal?

A better solution is to find away to keep the current rules intact. It's unlikely, but that could occur via use of the Congressional Review Act. Much more likely is the repeal being overturned by the courts, thanks to the FCC's apathy toward fraud and the public interest. Even if ISPs win in the courts, net neutrality fans are better off riding the looming backlash and using it to drive ISP-loyal sycophants out of public office at the polls, then attempting a real net neutrality law later -- when Congress is a little less mindlessly loyal to the desires of some of the least-liked, least-competitive companies in America.

Filed Under: congress, data caps, interconnection, marsha blackburn, net neutrality, open internet, paid prioritization, zero rating
Companies: at&t, comcast, verizon

NAACP Fought Net Neutrality Until Last Week, Now Suddenly Supports The Idea

from the shifting-winds dept

For years now we've pointed out how one of the telecom industry's sleazier lobbying tricks involves paying minority groups to parrot awful tech policy positions. That's why you'll often see groups like the "Hispanic Technology & Telecommunications Partnership" support competition-killing mergers or oppose consumer-centric policies like more cable box competition or increased wireless competition. This quid pro quo is never put into writing, so when these groups are asked why they're supporting policies that undermine their constituents, they can deny it with a wave of breathless indignation.

But this tactic remains very real, and very harmful all the same. It played a huge role in ginning up bogus support for the attack on net neutrality. AT&T and Comcast have co-opted countless minority groups in this fashion, with a lot of it coordinated through a telecom-funded organization dubbed the Multicultural Media, Telecom & Internet Council (MMTC). In short: if you want to keep the funding flowing, it's expected that you'll parrot telecom industry policies, even if they harm your constituents. This has been a problem for years that nobody much likes to talk about.

The NAACP has consistently been part of this problem, opposing real net neutrality protections after receiving funding from AT&T, Comcast and Verizon. The group signed off on letters opposing tough FCC rules both (pdf) times (pdf) they were proposed, often mirroring the incumbent ISP claim that tougher net neutrality rules would hamstring ISP efforts to expand broadband availability into poor communities (utterly false). In other FCC filings (pdf), both the MMTC and NAACP claimed that real neutrality would damage the "fragile state of minority engagement in the digital ecosystem."

But now that the FCC's attack on net neutrality is getting media attention due to a massive public backlash, the NAACP has issued a statement proclaiming that the group is "deeply disappointed" with the FCC's decision to repeal rules. Now that the battle is making headlines, the NAACP is claiming that the removal of rules it fought against strips away "critical safeguards for ensuring an accessible internet":

“The internet fuels economic opportunity, civic engagement, and social action. It allows us to communicate instantly and effectively, and, in recent years, it has facilitated innovative, impactful social justice action,” said Derrick Johnson, NAACP president and CEO. "Throughout our 108-year history, the NAACP has continually opposed discrimination and fought for justice and equal opportunity for all. We see the fight for net neutrality as an extension of that mission. The NAACP is staunchly opposed to any attempt to censor or manipulate information on the internet, especially if it creates a barrier to entry for people of color."

That's...not what you've been saying in FCC filings for the last several years. The NAACP apparently hoped that nobody would notice it had been fighting against real net neutrality -- right up until the subject began making headlines in the wake of the repeal. Those familiar with the NAACP's...inconsistency on this subject noticed anyway:

Again, this is all incredibly harmful to the individuals these organizations are supposed to be protecting. "Broadband redlining" has become a bigger problem than ever as the one-two punch of lax regulatory oversight and limited competition results in large ISPs ignoring low income and minority areas for next-gen broadband upgrades. It should go without saying by now that the net neutrality rules the NAACP didn't want protected everyone from uncompetitive market abuses and the stifling of independent and diversity-oriented media outlets by deep-pocketed incumbents.

It seems like at some point, NAACP constituents and donors not named AT&T, Verizon and Comcast would notice that the group has been selling them out for years on the subject of net neutrality.

Filed Under: fcc, net neutrality
Companies: naacp

FCC Boss Claims Net Neutrality Supporters Were Clearly Wrong Because Twitter Still Works The Day After Repeal

from the that's-not-how-any-of-this-works dept

By now you've probably noticed that FCC boss Ajit Pai isn't particularly popular online after he voted last week to kill popular net neutrality protections. A big reason for that unpopularity is Pai's tendency to simply make things up as he rushes to coddle broadband duopolists, whether we're talking about his bogus claims that net neutrality killed broadband investment, his claims that net neutrality only emboldens tyrants in Iran and North Korea, or his claims that the broadband market is amazingly competitive.

So in the wake of the repeal (which of course still needs to survive legal challenge) it's not too surprising to see Pai engaging in more blatantly false nonsense as he tries to frame net neutrality supporters as hysterical hyperbolists. For example, Pai tried to argue last week on Fox and Friends that net neutrality supporters were clearly wrong to worry about the repeal because Twitter and Facebook still worked the day after the repeal:

To try and gather support for his extremely unpopular plan, Pai's been throwing some red meat to the base by framing net neutrality concerns as the domain of out of touch Hollywood elites, despite the fact the rules have broad, bipartisan support. As such, Pai took particular aim at comments made by comedian Jimmy Kimmel, claiming he was foolish to worry about the repeal since social media websites still worked the day after the FCC voted 3-2 to kill the rules:

"He's getting everything wrong about it," Pai said of Kimmel. "The free and open internet we had prior to 2015 is the one we're going to have going forward. And that kind of name-calling and hysteria is disappointing, but it's not surprising."

Pai went on to say that Kimmel and others were "proven wrong" by the fact that internet service providers (ISP) had not rolled out immediate changes Friday morning.

"Those who have said the internet as we know it is about to end have been proven wrong starting this morning," Pai said, "as people send emails, check on their Twitter accounts, post on Facebook, and the like."

But this is either an outright lie, or Pai honestly doesn't know how his own agency even works. While the FCC voted to repeal the rules last week, the repeal itself doesn't take effect until sixty days after the repeal hits the federal register, which doesn't even happen until January. Even then, we've made it abundantly clear that ISPs will likely remain on their best behavior for a year or so. Why? They'll want to portray net neutrality advocates as hysterical chicken littles. They also won't want to provide any ammunition for the looming lawsuits against the FCC's repeal.

It's only once ISPs secure a court victory that you'll see their true colors emerge. And even then, if they're too heavy handed they risk future FCCs simply passing new rules down the road. That's why you're going to see a concerted ISP push for a new net neutrality law starting in the new year. One that professes to "fix" the problem, but is so loophole-filled as to be effectively useless. Its one real purpose? To prevent any future FCCs from re-passing tough net neutrality protections. It will be an attempt to codify regulatory apathy into law.

Even then ISPs aren't likely to block websites outright. In large part because there's a universe of more subtle ways that they can abuse the lack of adult regulatory oversight and limited competition to minimize press and public backlash, whether that's fiddling with interconnection points to drive up costs for transit and content companies, or expanding arbitrary and unnecessary usage caps and overage fees to drive up the cost of cutting the cord.

And there's a universe of "creative" bad behavior these ISPs haven't even thought of yet. Remember, the Trump administration's plan (which is really just Comcast, AT&T and Verizon's plan) is to gut FCC, FTC and state oversight of some of the least-competitive companies in America almost entirely. With neither competition nor adult regulatory federal or state supervision in place to protect consumers and competition, the resulting damage -- once ISPs feel comfortable enough to begin testing the limits of their newfound freedom -- won't be particularly subtle.

Filed Under: ajit pai, fcc, net neutrality, open internet

Comcast's Push For A Shitty New Net Neutrality Law Begins In Earnest

from the regulatory-trojan-horse dept

As we've been noting for a while, the FCC's 3-2 vote to kill net neutrality is really only the beginning of a new chapter in the fight for a healthy, competitive internet. The rules won't truly be repealed until 60 days after they hit the federal register in January. And even then, the repeal will have to survive a multi-pronged legal assault against the FCC, accusing it of ignoring the public interest, ignoring feedback from countless experts, and turning a blind eye to all of the procedural oddities that occurred during its proceeding (like, oh, the fact that only dead and artificial people appear to support what the FCC is up to).

ISPs know that this legal fight faces a steep uphill battle with all of the procedural missteps at the FCC. That's why we've been warning for a while that ISPs (and their army of think tankers, sock puppets, consultants, and other allies) will soon begin pushing hard for a new net neutrality law. One that professes to "put this whole debate to bed," but contains so many loopholes as to be useless. The real purpose of such a law? To codify federal net neutrality apathy into law, and to prevent the FCC from simply passing tougher rules down the road.

Just like clockwork, Comcast responded to last week's net neutrality killing vote with a blog post by top Comcast lobbyist David Cohen (the company, for the record, hates it when you call Cohen a lobbyist) calling for a new, Comcast-approved law. Cohen declares that it's "time for Congress to act and permanently preserve the internet," while repeatedly and comically trying to downplay Comcast's own role in the chaos we're currently witnessing:

"Unfortunately, there are others who want to continue engaging in a never ending game of back and forth, creating unnecessary anxiety and contributing to an unneeded level of hysteria. Some will undoubtedly continue threatening litigation that does nothing to protect consumers or freedom of the Internet."

Funny, since the one doing the litigating is Comcast, which sued to overturn both the FCC's 2010 and 2015 net neutrality protections. Regardless, Cohen would have you believe that the only path forward at this point is the creation of a new net neutrality law. One, Cohen knows very well would be quite literally written by Comcast thanks to our campaign-cash-slathered Congress. Such a law would, Comcast argues, end the "regulatory ping pong" that Comcast itself is perpetuating:

"It’s now time for all of us to take advantage of this moment in time and end the cycle of regulatory ping pong we’ve been trapped in for over a decade and put this issue to rest once and for all. And there’s a simple way to do this -- we really must have bipartisan congressional legislation to permanently preserve and solidify net neutrality protections for consumers and to provide ongoing certainty to ISPs and edge providers alike."

So what would a Comcast-approved net neutrality law look like? Comcast has repeatedly made it clear that it supports a ban on the blatant throttling or blocking of websites and services by ISPs, since that's not something ISPs were interested in doing anyway. ISPs long ago realized there's an ocean of more subtle ways to abuse a lack of competition in the broadband market. For example. why block Netflix outright (and risk a massive PR backlash) when you can impose arbitrary and unnecessary usage caps and overage fees that only apply to Netflix, not Comcast's own content?

So, expect any Comcast-approved law to outlaw all of the things large ISPs never intended to do, while ignoring all of the more subtle areas that the net neutrality fight has evolved to cover. For example, a Comcast-approved law won't even mention caps or zero rating. Nor will it address the shenanigans we've seen on the interconnection front. But any Comcast-approved law will include ample loopholes allowing Comcast to do pretty much whatever it likes provided it ambiguously suggests it's for the health of the network (a major problem in the FCC's flimsy 2010 rules).

Since he played a starring role the last time ISPs tried this, expect Senator John Thune to play a starring role in this effort. You should also expect an ocean of editorials from ISP-funded policy folk (where financial conflicts of interest aren't disclosed) to start popping up on websites and newspapers nationwide insisting a net neutrality law is the only path forward and that anybody that opposes this push simply isn't being reasonable.

And while many lawmakers and media folk will be tempted to support this push arguing it's better than no rules at all that's not really true. If flimsy and poorly-written, this new Comcast-approved legislation could simply codify federal net neutrality apathy into law, while banning any future FCCs' or Congress' (say, a theoretical one not quite so beholden to ISP cash) from passing real protections down the line. The best bet at stopping this net neutrality repeal currently rests with the courts. Should that fail we can revisit this conversation, but only if voters are able to drive ISP-loyal marionettes out of office.

Filed Under: ajit pai, congress, fcc, john thune, laws, net neutrality
Companies: comcast

Two Separate Studies Show That The Vast Majority Of People Who Said They Support Ajit Pai's Plan... Were Fake

from the fake-news dept

The fact that the FCC comments for Ajit Pai's net neutrality repeal were stuffed with fake comments is nothing new at all. We first reported on it back in May, and reports of comments from totally fake people or long dead people continue to pop up. Even worse are multiple stories of people having their own identities used to file comments, often opposed to their own views. The FCC has consistently responded that it doesn't care. New York's Attorney General has been investigating this as fraud, and asked the FCC to delay its net neutrality repeal until after the investigation was complete -- a request the FCC completely ignored. And, as we just noted a little while ago, Schneiderman recently announced that he's found over 2 million fake comments.

But it's easy to say "well, all these fake comments mean all the comments can be ignored." But it's important to look at the source of these fake comments and on which side they ended up. And just this week two new studies have come out, both taking a really deep dive into the fake comments. The Wall Street Journal did an investigation and reached out to 2,757 people who had supposedly commented. 72% of them said they had not posted the comments.

But even more thorough and more interesting is a new report that just came out this morning, from Startup Policy Lab's "Truth in Public Comments" project. Its methodology was even more thorough than the Wall Street Journal's. It took a random sample of 450,000 public commenters, and asked them "did you submit the comment quoted below to the FCC, yes or no?" The results are astounding:

88% of survey respondents whose emails were used to submit pro-repeal comments replied, “no,” that they did not submit the comment . Conversely, only 4% of pro-net neutrality respondents said that they did not submit the comment attributed to them.

Let's unpack that again to make it clear. Out of a fairly massive sample of FCC commenters nearly all of the ones supporting Pai's plan were fake. And nearly all of the ones supporting the existing rules were real. Here, see it in graphical form:

And this happened across multiple samples that the TiPC project ran. Each time, it showed that nearly all of the support for Pai's plan was fake. And nearly all the support for existing rules was real.

Also, quite telling: in sending out these emails asking people whether or not they filed, most of the responses they got came from people who supported net neutrality. The response rate among those who supported Pai? Tiny. Because most of them appear to be fake.

This is not to say that there weren't fake comments in support of the old rules. They did exist. But as the TiPC report notes, the "fakes" in support of the old rule were fairly obvious -- using obviously fake emails and names. The comments in support of Pai, while fake, used real emails and names that tried to appear real:

The FCC received spam comments that supported both the pro-net neutrality and pro-repeal. The difference, however, is that the majority of spam comments associated with email addresses supporting pro-net neutrality were ignored by the FCC because they were obviously fake. Conversely, we must conclude that the spam comments associated with email addresses that supported pro-repeal email addresses were a deliberate campaign to evade the eyes of regulators and influence the rulemaking process.

The discrepancy rests in the nature of the bounceback of emails. The survey resulted in a high bounce rate for emails associated with pro-net neutrality using unsophisticated approaches. Examples of an unsophisticated spam comment are those the FCC acknowledged are, “[o] bviously, fake comments [...] by the Flash, Batman, Wonder Woman, Aquaman, and Superman are not going to dramatically impact our deliberations on this issue. ”

By contrast, it appears that the spam comments for emails associated with pro-repeal comments reflect deliberate action to use stolen identities. In these instances, millions of Americans may have had their identity harvested for the political objectives of supporting the repeal of net neutrality laws, regardless of whether that individual agreed with the position or even had a position on the proposal. Accordingly, unlike the submission from Batman, which the FCC was correct to ignore, millions of Americans had their voice taken and repurposed without their consent.

No matter where you stand on the question of net neutrality, this should be a major concern. Public commenting is important, but when the system is totally hijacked in a way that appears designed to deliberately skew or merely taint the results, it does no one any good at all.

Filed Under: ajit pai, fake comments, fcc, net neutrality

Why Must The FCC Insult Everyone's Intelligence By Misrepresenting Broadband Investment?

from the big-question dept

Last month, I wrote a post detailing Ajit Pai's big lie, concerning his totally false claim that the order the FCC voted on today simply brings the internet back to where it was in 2015. As we explained that's not even remotely close to accurate. That same post also mentioned a second, but still important, lie that Pai and Pai's supporters have been telling repeatedly: that the 2015 rules harmed broadband investment.

There are two very important things to discuss regarding this claim. First, it is simply not true. Second, whether or not it is true, broadband investment is an incredibly meaningless proxy for whether or not the rules are good.

Let's start with the first point. There is no credible evidence that Title II harmed investment. While the big broadband companies have made claims about this, and telco-funded thinktanks have pushed out studies claiming this, on financial reports (where the consequences can mean jail time if they're lying), they all admit that classifying broadband under Title II has not harmed investment.

Here's Neil Smit, Comcast Cable's President and CEO telling Wall Street that nothing about Title II changes anything (on page 16):

On Title II, it really hasn't affected the way we have been doing our business or will do our business. We believe on Open Internet and while we don't necessarily agree with the Title II implementation, we conduct our business the same we always have...

He immediately follows that up by stating:

We have invested significantly in our capacity and will continue to do so and that includes both the -- we launched a 2 gigabit speed, 2 gigabit symmetrical speed recently. We are rolling that out across 18 million homes by the end of the year...

That doesn't sound like the disaster for broadband investment that Pai and his supporters are claiming.

How about AT&T? AT&T's Randall Stephenson was asked by a UBS analyst "are these net neutrality or Title II rules an impediment..." and Stephenson responded:

No, we don’t think so.

How about Charter (formerly Time Warner Cable)? Well, just last year at a UBS conference, he said:

I mean, Title II, it didn't really hurt us; it hasn't hurt us.

And, that wasn't the first time he said that. A year earlier he made it clear the company changed nothing about its investment plans:

"the commission’s decision to reclassify broadband Internet access under Title II has not altered Charter’s approach of investing significantly in its network to deliver cutting edge services."

Verizon is basically the only big broadband provider that didn't directly contradict its claims with a statement specifically about Title II... but, it did increase its investment spending quite a bit. Verizon's only comments have basically been the company saying that it continues to invest exactly as planned prior to the 2015 rules change. None of this should be surprising. As we've explained there is nothing in the 2015 order that increases compliance costs -- so long as you're not screwing over customers. The only way that the 2015 Open Internet Order should be a burden is if the broadband providers were doing something that broke the rules.

And, of course, just yesterday we noted that contrary to Pai's claims of five smaller ISPs decreasing investment, the actual data showed the opposite -- that they had all expanded. And that says nothing of the over 40 small ISPs which spoke out in favor of keeping the 2015 rules, in part because it allows them to invest more, knowing that the giant incumbents mentioned above can't use certain unfair, anti-competitive practices to keep them out of a market.

Without a legal foundation to address the anticompetitive practices of the largest players in the market, the FCC’s current course threatens the viability of competitive entry and competitive viability. As direct competitors to the biggest cable and telephone companies, we have reservations about any plan at the FCC that seeks to enhance their market power without any meaningful restraints on their ability to monopolize large swaths of the Internet.

It certainly looks like Pai's rules may actually cause some of those ISPs to decrease their investment as they'll have trouble competing with the large incumbents.

That's why it's so ridiculous not just to see Pai make these false claims about investment, but to also see Pai's handpicked "chief economist" ridiculously claim that this FCC "is no longer an 'economics free zone.' This line was parroted a lot leading up to the 2015 rules (which, we must remind you, have been approved by the courts). People claimed that there was no economic basis for the changes in 2015, which ignores the fact that the 2015 rules pretty clearly lay out the economic rationale for reclassifying broadband under Title II. You can see it starting on Page 150 of the order.

And yet, in Pai's new order he insists that it's conclusively proven that the 2015 order hurt investment. He does name multiple studies -- though every single one comes from a group or organization connected to the big broadband players. It's hard to see how that's a neutral, careful analysis. And, of course, some commenters on the proposal pointed to the studies that debunked all those studies -- and rather than actually address those points, Pai's rules hand-wave all of them away as just not credible.

But, of course, if you start to dig into the studies that Pai does rely on... they're terrible. Basically all of them make questionable assumptions -- assumptions that if you start to question them, the entire "economics" claims fall apart. Take, for example, the "study" by the Free State Foundation, which the FCC points to as saying its results are "consistent with other evidence in the record that indicates that Title II adversely affected broadband investment." But read the analysis. It is hardly a rigorous economic look at broadband investment. It's an extrapolation, with a bunch of assumptions.

Here is how I calculated that figure.

USTelecom publishes data on broadband capital expenditures (capex) for each year dating back to 1996. Using this historical data, I collected figures on the previous twelve years before the Open Internet Order was adopted in February 2015. I picked 2003 as the first year because the market had just collapsed from the dot-com bubble and total broadband capex was at its lowest point since 1996. I established a trend line from 2003 to 2016, which created a linear pattern over the first 12 years before the Open Internet Order and estimated what we could have expected broadband capex to be in 2015 and 2016 without Title II public utility regulation.

I also collected broadband capex data on sixteen of the largest ISPs for years 2014, 2015, and 2016. My sample found a 2.46% decline from 2014 to 2015 and a 4.69% decline from 2015 to 2016, totaling an overall decline of 7.04% from 2014 to 2016.

Count the assumptions. The date range is an assumption (at least that one's explained). The "trend line" is a total extrapolation, without any research into whether or not there's a reason for such a trend line or even if the timeline is a large enough sample size for a reasonable trend line. As for the capex data -- why on "sixteen of the largest ISPs." Sixteen is a fairly strange number. What happens if you just look at the top 3? Or the top 10? Or all of them? This is not a rigorous analysis.

And, of course, if it's really true that all of these think tanks funded by the telcos magically have more insight into what's happening with broadband investment, then... does that mean all those quotes we mentioned above are examples of these CEOs lying on investor calls? Because, if so, that seems like a pretty big deal. But, I'm generally going to assume that the execs are telling the truth to Wall St. and relying on others to put forth the misleading arguments -- which Pai then parrots, and his "Chief Economists" gets to play make believe and say that the FCC cares about economics again.

But, really, none of this matters. Because my second point is more important: Broadband investment is not a good proxy for whether or not Title II is a good or bad idea. It's a giant broken windows fallacy. I'll use a few extreme examples to prove the point: if "broadband investment" is the sole proxy that we use as economic proof of a good or bad policy, well, then the best policy for the FCC right now is to physically destroy the internet. With all internet infrastructure broken, it will surely boost investment and economic activity around rebuilding the internet, right? Of course, no one would consider that a good policy, but if our metric is purely investment, then that's the kind of crazy result you get. Or, let's say that new technologies are developed that allow people to implement better broadband more cheaply. Indeed, that's what some broadband access providers have been claiming. In that case, investment is likely to drop, even though the speeds/access/value that everyone gets increases.

Especially when you're discussing a technology field, any halfway competent economist knows that you have different forces at play than in static markets. With technology, thanks to innovation, stuff gets cheaper as it gets better. Yet, under the new FCC's sole focus on broadband investment as an economic measure, a more efficient, cheaper roll-out to more people would be "bad" because it would decrease investment. That's not to say either of things have actually happened, but just to demonstrate the pure uselessness of aggregate investment data. It's not "economics," its junk science. It's pretending that the numbers are meaningful because they're numbers.

But the real "economic" test should be about the value to the end user. And broadband access and speeds is one part of that. But only one part. Indeed, a huge part of this discussion is how the real value on the internet comes from the edge providers, the apps and services that people use on the internet. That's why the network is valuable. And the problem with killing net neutrality is it puts that in danger. It can make it more expensive, or limit competition, or make some of those services go away altogether. And that decreases the value of the internet to every user. And that's because the internet works off of network effects for the services on them. That is, with many services, the more people use them, the more valuable they get. Killing net neutrality will interfere with those network effects in many cases, again decreasing value.

So, in short, even ignoring that the FCC's numbers are bogus, so is its entire framing of the net neutrality debate. Perhaps it's not surprising that the framing used here -- broadband investment -- only measures what the giant telco/cable companies do related to the internet. Because, after all, Chairman Pai has made it pretty damn clear that that's all he cares about. But it's economics malpractice to ignore where the actual value is on the network, and what these rules will do to all those service providers and the end users.

Filed Under: ajit pai, broadband, competition, fcc, investment, net neutrality, open internet, value