Net Neutrality Conflatus – Senator Al Franken

by Mike Wendy on July 14, 2017

Wednesday was the so-called Day of Action – a fake news event staged by professional community activists to raise awareness about the “importance” of government-regulated Net Neutrality. At one such event on Capitol Hill, Senator Al Franken addressed adoring millennials, harping on industry contentions that Title II Net Neutrality could tamp down investment and innovation.

Exclaimed Franken:

“The idea that somehow we’re not going to have innovation, and we’re not going to have investment because we have Net Neutrality is completely bogus because that has been, all the investment we’ve had, all the innovation we’ve had has been with [the] open Internet, with Net Neutrality. It’s so bogus, it’s just insulting.” (Emphasis added)

With all due respect, the Senator is wrong. He’s pulled a sleight of hand, conflating today’s “Open Internet / Net Neutrality” – which is built on heavy-handed, FDR-era government utility regulation of ISPs – with the halcyon days of Net Neutrality and growth – which saw “light touch,” mainly market-policed “regulation” instead.

The Internet’s growth is a success story alright, one that happened because of the absence of old-fashioned telephone laws, not because of them. Until Title II Net Neutrality gets changed, however, the entire ‘Net is in jeopardy because of the rule’s broad confiscatory pedigree.

Yes, companies still invest. They have to in order to serve the marketplace. In 2015, US Telecom estimates that broadband investment was approximately $76 billion. No doubt that’s a lot, but it hides a more troubling picture. Recent research shows significant drops in capex since Title II Net Neutrality became law, with one study revealing a 5.6% drop in investment (or $3.6 billion) among eight of the top 12 ISPs after 2014. Letters to the FCC show small companies are concerned, too, with 22 such ISPs jointly noting that Title II Net Neutrality has “slowed, if not halted, the development and deployment of innovative new offerings which would benefit our customers.” On top of this, many industry observers remain concerned about a number of multi-billion dollar forays into entertainment and content markets by some of the largest ISPs, seeing in them the pernicious effects of Title II Net Neutrality as these companies defensively look for better, more profitable investments instead of placing their bets in traditional, pure play infrastructure, which now are perceived to be more risky.

Quite frankly, no one ever said, as the Senator glibly posits, that investment and innovation simply ends with Title II Net Neutrality. It does not. But what the Title II Net Neutrality rule does do is introduce greater uncertainty and risk into the business models of (now heavily regulated) ISPs versus where they were before. Consequently, they reasonably believe this will lead to taking fewer risks, resulting in less investment and innovation, especially at the margins.

As one ISP’s annual report notes:

Traditionally, the FCC recognized that broadband Internet access services as “information services” subject to a “light touch” regulatory approach rather than to the traditional, utilities-style regulations. In 2015, the FCC reversed course and declared that broadband Internet access services are “telecommunications services” subject to common carriage regulation under Title II of the Communications Act. This decision created uncertainty concerning the level of regulation that will apply to broadband services. It created a risk that such regulation would limit the ways that broadband Internet access service providers structure their business arrangements and manage their networks and could spur additional restrictions, including rate regulation, that could adversely affect broadband investment and innovation. (Emphasis added)

This is how companies run – i.e., they watch and prepare for circumstances which can bring about risk and negatively affect ROI. Title II Net Neutrality is one such circumstance.

This is hardly bogus or insulting.  What is, however, is the Senator’s conflation of “light touch” Net Neutrality with heavy-handed Title II Net Neutrality. “Light touch” was the spark the spawned the Internet’s explosive growth.  Title II Net Neutrality may put that fire out.

Call the FCC, your Congressional Representative and Senators and tell them to get rid of Title II Net Neutrality. It’s bogus.

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