Internet Association Disputes Claims of Broadband ISP Investment Drop Under Title II

"We're obviously very much opposed," said IA President Michael Beckerman. "The current rules are working for consumers, and protections need to be kept intact." He said the rules prevent ISPs from playing broadband gatekeeper to the internet. Any rollback of the rules or FCC authority is unjustified because "nothing's changed" since 2015, he said. A less-regulatory Title I framework that relies on FTC enforcement targeting "post-incident harm" is no substitute for the FCC public-interest mandate and rules, said General Counsel Abigail Slater.

Keep what the FCC Chairman Ajit Pai is proposing in perspective, industry lawyers said on a Phoenix Center call Wednesday. The draft proposed rules seek only to repeal the general conduct rule, said Mayer Brown's Angela Giancarlo. “Everything else is staying the same,” she said. “Even the paid prioritization [rule] is still there. Perhaps more importantly, the formal complaint procedures are staying.” The Phoenix Center Tuesday said Title II regulation reduced annual broadband investment in fixed assets by $30 billion and in property and equipment by $20 billion (see 1705160056).

Claims of depressed investment under Title II "don't hold up" to scrutiny, said Hooton, citing the group's preliminary findings of various industry data.

Cable and broadband infrastructure investment increased yearly, and 56 percent 2009-16, based on SNL Kagan data cited by NCTA, said Hooton: "That's not our data. That's their data." An estimate by economist Hal Singer that broadband investment dropped 5.6 percent in 2014-16 (see 1703010057) was flawed because it was based on data from 12 ISPs and didn't account for "exogenous" factors, Hooton said. Broader data shows ISP expenditures rose 5 percent in recent years, and online data and content production rose 1,000 percent 2009-16, he said.

The FCC is focused on ISP incentives to invest and innovate, but not on internet edge providers' ability to do likewise nor on net neutrality benefits, Slater said. The burden is on those who want to replace the Title II regime, she said, and even if they can show "some drag" on investment, that number will be "swamped" by the loss of edge investment if net neutrality is scrapped.

Beckerman recognized net neutrality advocates have an uphill FCC battle because critics "have the votes." But "this is incredibly important for consumers and the ecosystem," he said, noting "other pieces to the puzzle" in Congress and the courts. "It's worth fighting for." Noting litigation over previous FCC orders, Slater said, "It's fair to say past is prologue." An FCC spokesman didn't comment.

USTelecom called the IA findings "a mish-mash of time periods and sources" lacking backup. "Our annual report on broadband investment (see methodology here) showed investment dropped by $1 billion in 2015 and our preliminary look at 2016 capital expenditures suggests that slide continued,” emailed a spokeswoman.

IA "cannot rebut the gold standard -- USTelecom," emailed Singer, referring us to his Forbes piece that said the telco group's historical collection of broadband data "is considered by many" to be the best in industry. "It has been cited repeatedly by the FCC in its annual Broadband Progress Report," said the piece, which noted CTIA last week reported "an investment decline of 17.4 percent among its members in 2016, following ... impressive growth of 18.9 and 10.1 percent in 2012 and 2013, respectively." CTIA's survey "sinks" IA's case, Singer's email added.

Giancarlo meanwhile was “thrilled” by the tone of the net neutrality draft. It’s a “return to what a government rulemaking should look like,” she said. “It doesn’t read like an advocacy pronouncement and it’s also very thorough,” she said. “We’re soliciting a cost-benefit analysis. We’re discussing section 222 [of the Communications Act]. We’re discussing Lifeline. I really believe that the Pai FCC is focused on facts and data, which will serve them well” on appeal, Giancarlo said.

Case law likely points to the FCC having some freedom to change net neutrality rules now, said Russell Hanser, lawyer at Wilkinson Barker. He cited the Supreme Court's Chevron doctrine, the key case on judicial deference to agency decisions. “There’s no piece of that analysis that says, ‘Well, if it’s too close, then you don’t get the same deference,’” Hanser said. “Chevron acknowledges, among other things, different political administrations will take different positions and will come to a statute with different regulatory philosophies.”

The effect of the general conduct rule is easy to see, Hanser said. It took "dollars out of investment budgets and put them into law firm expenditures,” he said. “At the margins,” ISPs decided not to roll out some new service plans or offerings that might have benefited consumers, he said. The previous FCC made clear it was going to be aggressive in enforcement of the rule, and “companies that didn’t want to face large enforcement penalties, and frankly didn’t want to have to defend their practices” didn’t roll out some products. “I always joke that’s great for my daughter’s college fund but it’s bad for America,” Hanser said.

The NPRM, “when you get rid of the political hyperbole, raises a lot of complex issues,” said Phoenix President Larry Spiwak. The FCC and industry are 12 years into discussion, he said. Spiwak called for a “dispassionate” debate.