FCC's Pai Desperately Tries To Pretend He Was Right About Net Neutrality Rules Killing Broadband Investment

Broadband

from the revolving-door-chicken-littles dept

Before the FCC passed new net neutrality rules, countless ISP consultants, think tankers, and various other sockpuppets desperately proclaimed that the rules would totally destroy the Internet and stifle all network investment. Now months after the rules took effect, everything seems to be operating as it was before — if not better. Google Fiber continues to deploy to a growing number of underserved cities, municipal broadband providers and smaller ISPs continue to push gigabit upgrades, and even Comcast has announced it’s deploying two gigabit service to around 18 million subscribers before the end of the year.

While the broadband industry still suffers from a lack of overall competition, it appears completely unbothered by what many claimed was “draconian regulation for a bygone era” that we were repeatedly told would “utterly crush innovation” and “stifle network investment.” In fact, we’ve seen several instances where the rules already have put big ISPs on their best behavior, most notably on the interconnection front. Granted, numerous ISP execs predicted there’d be no issues, not that anybody heard them under the din of AT&T and Verizon fear mongering.

Of course, these folks can’t just admit they were wrong and were motivated to make shit up to scare people away from net neutrality, so they’re now trying to retroactively claim they were right — despite the total absence of any real evidence. Case in point is FCC Commissioner (and former Verizon regulatory lawyer) Ajit Pai, who this week proclaimed that net neutrality chicken littles were right all along, and the FCC’s use of Title II net neutrality rules has utterly depressed broadband investment:

“As evidence, Pai pointed to research that showed a decline in capital expenditures by the major wireless companies of 12% in the first half of 2015 compared to the same time period in 2014?when the FCC was still expected to restore open Internet rules without reclassifying broadband.

“In my statement dissenting from the Commission?s Title II decision, I warned that ‘[b]roadband networks don?t have to be built. Capital doesn?t have to be invested here,'” Pai said. “‘Risks don?t have to be taken. The more difficult the FCC makes the business case for deployment?and micromanaging everything from interconnection to service plans makes it difficult indeed?the less likely it is that broadband providers big and small will connect Americans with digital opportunities.’ And that I fear is what we are now witnessing.”

Right, except we’re not witnessing that at all. Pai can’t be bothered to show his math, but it appears he pulled the 12% number from a recent editorial by industry-linked think tanker Hal Singer, whose work has been the backbone of a decidedly pointed attempt to mislead the public over the last few weeks. Singer’s the same guy who was widely criticized for manipulating statistics for the broadband industry to help them claim that net neutrality would result in $15 billion in new taxes. You’ll be shocked to learn that most of his worst-case-scenario predictions supporting these numbers show no indication of being true.

In his Forbes editorial, Singer makes these specific claims:

“They said it wouldn?t happen. They offered assurances from three Wall Street analysts, who insisted that Internet service providers (ISPs) would continue to invest at the same levels regardless of the regulatory climate…AT&T?s capital expenditure (capex) was down 29 percent in the first half of 2015 compared to the first half of 2014. Charter?s capex was down by the same percentage. Cablevision?s and Verizon?s capex were down ten and four percent, respectively. CenturyLink?s capex was down nine percent. (Update: The average decline across all wireline ISPs was 12 percent. Including wireless ISPs Sprint and T-Mobile in the sample reduces the average decline to eight percent.)

Except, causality does not equal correlation. If you bother to look at AT&T SEC filings, you’ll note that AT&T already planned to scale back capex because it was already winding up an upgrade initiative dubbed “Project VIP,” which had nothing to do with net neutrality. Indeed, Verizon and AT&T (which comprise the lion’s share of the capex cuts) were already dramatically scaling back their fixed-line network investments, which also had absolutely nothing to do with net neutrality. Charter, meanwhile, just finished up its all-digital network upgrade, and its declines too have nothing to do with net neutrality.

On the wireless side, AT&T and Verizon have acknowledged winding down massive LTE network upgrades, and all of the wireless carriers have been engaged in a little belt-tightening as they deal with the disruptive behavior of T-Mobile. There are about a million reasons for capex cycles, including a lack of competition resulting in muted network upgrades, completed projects, to numerous ISPs in holding patterns as they wait for mergers and acquisitions. But there’s absolutely no data that directly links these capex reductions to net neutrality or the FCC’s implementation of Title II to govern ISPs. And, meanwhile, just a few days before Pai claimed that companies like Verizon were no longer investing in wireless… Verizon announced that it was ramping up its schedule for 5G deployment (the next big upgrade after LTE), which will lead to the next big round of capital expenditure in wireless. So, apparently the new rules did not scare off Verizon — arguably the biggest opponent of net neutrality in the United States.

So basically you’ve got a revolving-door regulator who used to work for the broadband industry, citing statistics from a think tanker with ties to the broadband industry, both hoping that a wish, a dream, some out-of-context data and a little make believe will fool people into thinking these guys weren’t utterly full of crap all along.

Filed Under: ajit pai, broadband, capital expenditure, fcc, hal singer, investment, net neutrality, title ii, wireless
Companies: at&t, verizon