The Truth About Net Neutrality and Infrastructure InvestmentMay 8, 2017
The Federal Communications Commission’s Open Internet Order of 2015 finally put net neutrality rules on a firm legal basis, protecting consumers from the anti-competitive, anti-consumer schemes that monopolistic Internet Service Providers would otherwise subject them to.
Consumers made it clear in 2015 that they supported the Open Internet Order’s successful adoption of net neutrality principles that prevents ISPs from blocking websites, throttling speeds, and engaging in paid prioritization of content. With the Order in place, ISPs could no longer engage in these practices, but they weren’t done trying. They claim that they need to be released from the rules because more rules mean ISPs were disincentivized from upgrading and expanding their networks. But these investment arguments simply don’t hold up.
Unfortunately, the new FCC Chairman, Ajit Pai, is buying these arguments. At a recent event, Chairman Pai announced his plan to undo the 2015 Open Internet Order and remove all the consumer protections that are currently the law of the land. While opponents point to company financial statements for their proof, Chairman Pai and his “economists” continue to use abstract hypotheticals. It’s essential to the future of net neutrality that we shed some light (and truth) on the baseless arguments being made.
Fact: ISPs have no plans to decrease investment in their infrastructure. ISPs have been reporting to investors that investment is up, up, up! Verizon’s CFO, Fancis Shammo, told investors that reclassification to Title II “does not influence the way we invest.” Similarly, Sprint stated that it would “continue to invest in data networks regardless of whether they are regulated by Title II, Section 706, or some other light touch regulatory regime.” Just last year, AT&T reassured their investors that they would “remain one of the largest investors in the United States.” As technologies change and reliance on the internet only continues to strengthen, ISPs know the value in continued investment.
Fact: Investment has actually increased since the adoption of the Open Internet Order. In the last two years, the largest ISPs have continued to grow and invest in the infrastructure needed to ensure continued dominance in the marketplace. Capital expenditures (money that a company invests to acquire or maintain things like buildings and equipment) have steadily increased since the adoption of the rules – they have increased by more than 5 percent for ISPs since the rules have been put in place. In fact, investment is on the rise for Comcast, AT&T, CenturyLink, and Verizon, and there is nothing in their financial statements that indicates a slowdown. Additionally, stock prices are up for AT&T, Comcast, and Charter, while Verizon’s stock prices have remained at a similar level.
Fact: Investment, by nature, does not necessarily continuously increase. A trend of increased investment in infrastructure is often followed by a decrease. For example, AT&T experienced a decline in wireline capital expenditures in 2015 logically following the completion of its 4G LTE upgrade, which had increased its investment in infrastructure. As existing technologies are updated and new technologies emerge, investment in such technologies will continue to fuel the industry, but investment will ebb and flow with such developments.
Fact: Investment does not rise or fall purely because of regulatory changes. Investment decisions are influenced by a long list of factors, not just one in isolation. This includes things like the level of market competition, the success of prior investment deployments, tax incentives and interest rates, the company’s existing financial position, and the general health of the economy. Pinning a change in investment on any one regulatory decision is not in step with the reality of the way business decisions are made.
Fact: Investment decisions are made far in advance. Before a company invests millions or even billions of dollars and countless hours of labor, they plan. ISPs plan their investment projects years in advance, after considering all the variables at play and taking the time to fully weigh their options.
Fact: ISPs are not investing for consumers, they’re investing for profits. Commissioner Pai claims that an override of net neutrality protections would lead to increased profits for ISPs, which leads to increased infrastructure investments, which in turn leads to an increase in American jobs and broadband access for all. But in the past, increased profits have not meant increased investment for ISPs. Instead, ISPs have shown that they are taking their profits and using them to buy up other companies – which further consolidates the market and eliminates consumer choice – instead of deploying new networks.
Fact: There has been an increase in investment in the internet as a whole. ISPs focus on the investments that they make in “last mile” access. But this ignores a much bigger picture that also includes backbone providers, middle mile providers, cloud service providers like IBM, Microsoft, and Amazon, internet companies like Snapchat and Twitter, and the independent online creators that run their own websites or take advantage of existing distribution platforms. But for net neutrality and an open internet, we wouldn’t have innovative new services online.
When a new player wants to enter the marketplace, it already faces a laundry list of challenges when up against a field of incumbents. It’s because of a truly open internet that new entrants at least have an opportunity and a fighting chance at getting their voices out to consumers. Without protections, newcomers to the market would be discouraged from the get-go, knowing that their content might only be accessible at a slower rate than its incumbent competitors. This is the same plight that minority communities face in getting their content to consumers, and it is the same open internet that gives them the opportunity to connect with others.
The FCC’s adoption of the Open Internet Order took strides to protect consumers and remind ISPs that the internet should stay just that, open. A claim of decreased investment in infrastructure is simply unfounded and incorrect. What can be proven is that the Open Internet has actually fueled increased investment in every aspect of infrastructure and has opened the door to innovation online, and it is the FCC’s job to ensure its continuance.
Image credit: Flickr user thinkpanama