Black Friday

Net Neutrality in Danger with New FCC Chairman

Stan Ward

Stan Ward

March 7, 2017

Net neutrality. Regardless of whether one supports the FCC rules as they now exist, or opposes them, one thing is clear – net neutrality in its current form is on life-support. If you favor the current rules, don’t despair, the future may not be as dark as you would think. This is so, if you buy into the mantra of the new FCC Chairman appointed by President Trump, Ajit Pai.

Pai claims, contrary to prevailing wisdom, that the rules as currently configured stifle investment and infrastructure, and, therefore, innovation. This, of course, runs counter to the arguments of those who favor the rules that reclassified the broadband providers as utilities. So what is the real story? Does net neutrality stifle or enhance innovation prospects?

History will surely judge the outcome, but it may be encouraging for us, the everyday end-users of the internet, to consider the following. The existence or absence of net neutrality may be not have any great impact on the future of internet services. The debate over it may be nothing more than the continuance of the perennial philosophical battles between so-called “big government” loving liberals, and “small government” loving conservatives. If that is the case, the marketplace (not politicians) will demand and spur innovation, regardless of which philosophy holds sway in Washington.

Not long after the November election, I penned an article suggesting that net neutrality may be in trouble under a Trump presidency. In the article I mentioned that Republicans are wary of things like net neutrality and the reclassification of common carriers, because it smacked of regulation. Regulation is inherently evil to Republicans, regardless of the good that can sometimes come from it.

I also expressed hope that Trump, who was all over the map policy-wise during the campaign, and ran as much as a populist as a Republican, would not follow through on his rhetoric against the net neutrality rules. While it doesn’t look good for net neutrality right now, with Pai being appointed as FCC Chairman, there is hope of some sort of compromise – that it may not be scrapped in its entirety.  Let’s dig a little deeper.

The devil, as they say, is in the detail. FCC Chairman Pai contends that current net neutrality rules will hold back a faster internet – namely 5G. To bolster this argument, he trots out numbers that show a decline, albeit minuscule, in telecom broadband infrastructure spending. He cites a report by the industry group US Telecom that broadband infrastructure investment dipped from about $77 billion in 2014 to $76 billion in 2015. The group has not yet released estimates for 2016 spending. He expanded:

After the FCC embraced utility-style regulation, the United States experienced the first-ever decline in broadband investment outside of a recession. In fact, broadband investment remains lower today than it was when the FCC changed course in 2015.

It should be noted that this is a small sample size in a very narrow time frame, and Pai may be cherry-picking numbers to bolster his case. There could be many reasonable explanations for the minuscule investment decline. For example, companies may have been at the end of a spending binge, and simply taking a breather.

Indeed, it is likely that wireless providers would slow spending when they finished deploying LTE, the current standard for high-speed wireless. Wired cites other possible explanations.

But Pai seems to focus on the decline in infrastructure spending because he needs a bona fide reason to press for dismantling net neutrality. The FCC can’t just toss out the common carrier reclassification without solid evidence, as it has been sustained in court. The law requires the FCC to explain just what changes in the past two years justify revoking its previous decision.

Hence, Pai points to the dearth of infrastructure spending to justify the reversal.  Not everyone is convinced that Pai’s position has merit.

“No side can point to a set of data and argue credibly that there’s clear evidence that net neutrality either did or didn’t hurt investment,” says Jan Dawson, an analyst at Jackdaw Research.

As mentioned, at issue is the introduction of 5G. Pai insists that the current net neutrality climate impedes its advance, as it eliminates the incentive to invest, because it stymies competition. He states:

“After all, building, maintaining, and upgrading broadband networks is expensive.”

Proponents of the current net neutrality rules push back, and argue that the big carriers will continue to compete with each other as always. Surely startups will also add to the competition, they posit, without the net neutrality rules having to be repealed or significantly altered. Anyway, isn’t a competitive marketplace historically an appealing proposition for the anti-regulation Republicans?

Of course, a Republican-controlled Congress, hell-bent on dismantling net neutrality rules, may make the whole argument above moot. And Trump, ever the horse-trading dealmaker, could sacrifice net neutrality to congressional whim in order to strike other deals that Republicans usually deem too expensive, such as massive infrastructure spending.

One thing I’ve learned over the years is that, whatever the result of the net neutrality wars, the sky isn’t going to fall, and the world isn’t going to end. There was ample internet availability, and at a reasonable price, along with steady innovation, before net neutrality became an issue in 2014. There will continue to be affordable service and innovation if net neutrality is killed or altered. Welcome to the world of business and politics in the 21st Century.

Image credit: Viggy prabhu, FSMK’s walkathon in support of NetNeutrality Banner, CC BY-SA 4.0.
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