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Pai claims report findings validate net neutrality repeal

Broadband providers are investing in their networks again thanks to the FCC's repeal of net neutrality, says FCC Chairman Ajit Pai. Critics say otherwise.

FCC Chairman Ajit Pai said a new report from an industry trade group shows his policy to repeal Obama-era net neutrality regulations is working to spur investment in broadband. But net neutrality activists beg to differ.

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FCC Chairman Ajit Pai says a new report showing an increase in broadband investment between 2016 and 2017 justifies his agency's repeal of popular Obama-era net neutrality regulations.

Mark Wilson/Getty Images

Pai said the findings, published Thursday by broadband trade group USTelecom, show that broadband spending increased by $1.5 billion from 2016 to 2017, validating his policies, which focus on cutting regulatory red tape.

"Today's report confirms that the FCC's policies to promote broadband deployment are working," Pai said in a statement.

Under President Barack Obama, the FCC prohibited broadband companies, such as AT&T and Comcast, from slowing down or blocking access to websites. It also prevented these companies from charging internet services, such as Netflix, a fee to access their customers faster.

The Democrat-led FCC also reclassified broadband as a Title II service, a move defenders of the 2015 rules say was necessary to ensure the regulation could withstand legal challenges. Title II regulated broadband in a manner similar to the way phone service is regulated.

But the Trump-era FCC has agreed with ISPs, who say the stricter regulations have hurt investment in broadband networks. The FCC, led by Pai, a Republican appointed by President Donald Trump, voted to repeal the rules in 2017.

USTelecom is a trade association representing the US broadband industry. Its members include large publicly traded companies, like AT&T and Verizon, as well as smaller rural regional players, such as Blackfoot, a Montana-based broadband provider. USTelecom was one of the groups that unsuccessfully sued the FCC in federal court over its original 2015 net neutrality rules. It has also joined the Department of Justice in suing the state of California over its net neutrality law, which was signed in September by Gov. Jerry Brown.

USTelecom's report comes as the FCC prepares to defend itself in court against claims from 22 states and a number of tech companies that the agency's repeal of the popular 2015 rules was arbitrary and capricious. Pai has often pointed to a previous USTelecom study that showed a $1 billion decline in total spending in 2015 compared to 2014. Last week, the FCC used this same argument of a decline in broadband in a legal brief filed in a federal appeals court.

Net neutrality supporters have long argued that the FCC's financial analysis is wrong. Former FCC Chairman Tom Wheeler, who led the agency when it adopted the net neutrality regulation in 2015, pointed to that same previous USTelecom study and said that though broadband spending dropped in 2014, overall it increased by $1 billion from 2013, when he took office, through 2015, when the rules went into effect.

As for the latest report, Gigi Sohn, who worked for Wheeler at the FCC, said it's no surprise that the broadband industry is now offering up a report that "fits the exact narrative they want to tell."

She also notes that USTelecom's conclusion actually undercuts its argument, since the net neutrality rules Pai and the industry claim hurt investment were still in place until December of 2017, when the FCC voted to repeal them. What's more, the regulation didn't officially come off the books until June of 2018.

"If anything, this proves that investment went up under Title II," she said.

Sohn adds that an aggregate increase or decrease in investment is not dependent on the existence of or lack of regulation. Tim Karr, a spokesman for Free Press, a pro net neutrality activist group, agrees.

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"I would hope people see through this nonsense, and realize what financial analysts that cover this industry know: light-touch regulation is simply not a factor in ISPs' investment decisions," he said. "Other factors like technology cycles, changes in expectations about consumer demand, tax policy, and a host of other factors are far more important than the mere presence of one type of regulation and regulatory authority."

A USTelecom spokesman emphasized that its report doesn't suggest that the repeal of net neutrality was the only factor that contributed to the rebound in spending among broadband companies. The blog post summarizing the report cites a "series of pro-investment steps taken by the FCC and Congress, including the Restoring Internet Freedom Order, the tech transition order and tax reform."

As for Sohn's point that the 2015 net neutrality rules were actually still in effect during the period in which USTelecom says investment grew, a spokesman for the association suggests that the industry began investing again based on the promise that the FCC would roll back the rules. He highlights a speech given by Pai in April 2017 "where he indicated the commission's intention to repeal the Title II order." 

First published Oct. 18, 1:42 p.m. PT
Update, 3:16 p.m.:
Adds responses from USTelecom.

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