Study Says Title II Broadband Regulation Will Harm Investment
FCC broadband reclassification "will likely have significant adverse effects" on Internet investment, according to a study by Kevin Hassett, a resident scholar at the American Enterprise Institute, and Robert Shapiro, a senior policy fellow at the Georgetown Center for Business…
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and Public Policy, which circulated the paper Tuesday. The authors acknowledged research support from Washington think tank NDN but said the views were their own. The data show broadband service spread more rapidly than computers or dial-up service "and with virtually no regulatory intervention," the study said, but applying Title II of the Communications Act to broadband Internet access service will "likely increase costs and regulatory hurdles for providers" and could lead to "substantial price increases and consumer costs," with a negative impact on investment. The authors cited a 2015 Progressive Policy Institute policy memo by Hal Singer that suggested Title II regulation reduced telecom company investment by 5.5 percent per year in past years compared with what it otherwise would have been. Hassett and Shapiro also cited their own 2014 AT&T-backed study that suggested Title II regulation could reduce future telecom investment by 12.8 to 20.8 percent. The authors noted the FCC net neutrality order questioned the assumptions of that study, but they rejected commission criticisms and called some of them irrelevant. The authors also cited a University of Pennsylvania paper by Christopher Yoo that compared certain broadband metrics of the U.S., when broadband was more lightly regulated, with those of Europe, which was more heavily regulated, and found that America had higher access and investment levels, and lower consumer costs at speed tiers below 12 Mbps (with higher U.S. costs for higher speed levels justified by higher bandwidth use). "This suggests that it is reasonable to expect large negative effects on investment from Title II regulation," Hassett and Shapiro said. "Substantial" uncertainties arising from Title II litigation and FCC forbearance decisions would likely further depress investment, the authors said. "We should expect that ISPs will reduce some of their planned capital investments, at least until the FCC establishes how, to what extent and toward whom the new regulations will be applied, and the legal challenges to those decisions have been resolved." FCC enforcement of specific complaints -- including over IP interconnection, a vast new area of jurisdiction -- and the 2016 election and likely FCC leadership changes will prolong the uncertainties, they added. "Sorting this out could take years or even decades, not unlike the more than 70 years it has taken to give effect to Title II," they said. "These multiple sources of uncertainty extend beyond the enduring and compounding negative effects of the regulation, such as the increased costs, prohibited practices, and delayed innovation." FCC Chairman Tom Wheeler has disputed that the net neutrality and the Title II broadband order is discouraging investment (see 1506260024 and 1505200033).