FCC Boss Calls Net Neutrality A 'Mistake,' Repeats Debunked Claim It Stifled Broadband Investment

from the truth-is-whatever-I-say-it-is dept

So for several years now, the broadband industry (and the politicians, think tankers, and policy folk paid to love them) has desperately tried to claim that the FCC's net neutrality rules killed investment in broadband networks, clouding the entire telecom market in a dark shroud of "regulatory uncertainty." And it doesn't matter how many times we (and others) debunk this claim, it just keeps popping up like an undead groundhog. The reality is this: net neutrality had zero negative impact on the CAPEX, growth, or financials of major broadband providers. It simply isn't true.

And yet this narrative was front and center in a speech given this week by FCC boss Ajit Pai at the Mobile World Congress in Barcelona. At the event, Pai reiterated his disdain for net neutrality, claiming the rules were a "mistake" that caused, you guessed it, a massive network investment decline:

"Two years later, it has become evident that the FCC made a mistake. Our new approach injected tremendous uncertainty into the broadband market. And uncertainty is the enemy of growth. 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. And we have seen much concern about whether the FCC would permit or ban service plans."

It's nonsense. And repetition doesn't magically forge reality. Pai has made this claim numerous times, but based his claims on broadband industry-tied think tank data from the likes of Hal Singer, who cherry picked and massaged data. If you look at actual SEC filings, earnings reports, stock trajectories and other public data, it's painfully obvious this dead duck of a talking point still isn't true. Consumerist's Chris Morran did a phenomenal job doing just that this week, first noting that this lack of growth due to "uncertainty" is a bogus canard:

"Since Feb. 26, 2015, the day that the FCC voted to approve the neutrality rules, AT&T’s share price has increased by more than 20%, Comcast’s is up 26%. Verizon’s stock price is at the same level as it was, though it has fluctuated as much as 15% in either direction since then. Charter’s share price is up 40%, after the FCC allowed it to acquire Time Warner Cable and Bright House in 2016. The only major broadband provider whose stock has fallen dramatically in the last two years is CenturyLink, whose share price has sunk around 50% in that time."

So yes, if you're going to claim that "uncertainty is the enemy of growth," and there's a hell of a lot of growth, you should be able to do the rest of the logical math. Morran also looked at CAPEX at most of these ISPs, and found that too is soaring (in large part due to ongoing investment in business services and wireless broadband):

"Likewise, AT&T said it its most recent earnings that it spent $22.9 billion on capital investment in 2016, up from $20.7 billion in 2015. Granted, the 2015 number was slightly down from the $21.4 billion spent in 2014, but it’s higher than the $19.7 billion or $20.2 billion spent in 2012 or 2011, respectively, seeming to undercut Pai’s claims of historic low levels of investment. Because of the massive merger with Time Warner Cable, there’s no apples-to-apples comparison to be made. However, Charter did spend $7.5 billion on capital expenditures in 2016, 85% of that on expanding and building out its network. That appears to more than the combined investment by Charter and TWC in capital expenditures during the pre-merger years. Even Verizon, which has not seen the same growth as the other companies is spending more on capital expenditures than it did before the neutrality rules were put in place. In 2015, the year where Pai contends investment sunk to levels unseen outside of a recession, Verizon spent $17.8 billion on capital investments, more than in any other year since the U.S. came out of the recession ."

In other words growth is up, CAPEX is up, and these companies are all hugely profitable. It's not a debate. So where is Pai getting his contradictory data from? ISP lobbyists, of course:

"So what is Pai’s justification for this claim? According to a rep at the FCC, the Chairman’s comment was based on data provided by USTelecom, the industry’s lobbying arm that is actively pushing for the FCC and Congress to roll back net neutrality and privacy regulations on broadband providers. The FCC has not responded to our query as to why Chairman Pai would use data provided by industry lobbyists over the actual numbers these companies are providing publicly ."

I'd recommend not holding your breath while you wait. Of course, Morran's takedown of Pai's bogus claim is just one of countless similar stories published every few months eviscerating this idea that net neutrality was an innovation, investment and growth killer. Yet this being the post-truth era, where truth is apparently defined not by hard data but by bluster and bullshit, there's apparently zero repercussions for repeatedly lying.

And it's probably about to get worse. Pai and the FCC know that rolling back net neutrality via FCC process is difficult if not impossible. It would require convincing the courts that things have changed substantially since the recent FCC court win, and involve another lengthy public comment period. Given a record 4 million consumers spoke out the last go round (largely in favor of the rules), that's not something the GOP, Pai and Trump want to repeat. As such, their plan will be to pass new legislation (possibly a Communications Act rewrite) that kills FCC authority generally and the rules specifically.

At the heart of the sales pitch for this "modernization" of the FCC and killing of net neutrality rules? An ocean of farmed industry data insisting that net neutrality protections stifle broadband investment, damage the self-esteem of children, harm puppies, and threaten to rip the Earth off of its orbital axis. All magically fixed, of course, if we free some of the least-liked and most anti-competitive companies in America from regulatory oversight and public accountability.

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