Free Press Hammers Pai

Research director says harms are imaginary
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Free Press research director Derek Turner says FCC commissioner Ajit Pai is flat-out wrong when he says investment by larger ISPs has flat-lined since the FCC's decision a year ago to reclassify Internet access as a Title II telecommunications service subject to common carrier regs.

In a speech last week marking the one year (Feb. 26) anniversary of the vote, Pai said the reclassification had decreased investment, discouraged innovation and injected uncertainty in the marketplace, all things he pointed out he had predicted in voting against the regs.

In response, Turner said Monday that "the broadband industry’s apocalyptic predictions about how the adoption of enforceable Net Neutrality rules would destroy the market have failed to materialize in the year since the FCC’s historic vote. Network investment is up. Revenues and profits are higher. And subscriber growth continues at a high level even as prices rise and the market nears saturation."

He called Pai a "dead-ender" peddling a false claim and then blaming the FCC's new rules for that nonexistent result.

“Policymakers like Pai should stop going on about imaginary harms and start tackling real problems. Future threats to the U.S. broadband market come not from regulation," said Turner, "but from the consequences of market-power abuses that are likely to arise as the industry becomes more concentrated and less competitive.”

Pai's office declined comment on characterization, but Georgetown economist Hal Singer says there are problems with Free Press's analysis.

“Free Press overstates Sprint’s 2015 capex by including capitalized leased devices resulting from a change in business strategy (leading to an implausible increase of 42 percent), overstates AT&T’s 2015 capex by including interest on construction, and inappropriately includes CLECs in what is supposed to be a sample of facilities-based ISPs potentially impacted by Title II," said. "Fixing these errors in Free Press’s analysis reveals that capex (among the twelve largest ISPs) actually declined in 2015 relative to 2014 (it fell by 0.4 percent or a loss of $240 million in capital). To put this decline in context, consider that broadband capex increased by 8.7 percent and 4.0 percent in 2013 and 2014, respectively. Proponents of heavy-handed Title II-based regulation must account for the significant change in capital formation that just happens to coincide with common carrier regulation."

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