White House Report Is 'Pure Propaganda' for AT&T, Verizon, and Comcast

Experts tell Motherboard that no, rubber stamping the whims of AT&T, Verizon, and Comcast did not result in untold riches for American consumers.
February 21, 2020, 7:38pm
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Donald Trump and Ajit Pai. Image: Getty Images

In 2017, big telecom lobbyists convinced Congress to eliminate broadband privacy protections that could have reined in the wireless industry’s abuse of consumer location data. Later that same year, telecom lobbyists convinced the Trump administration to not only eliminate popular net neutrality rules—but much of the FCC’s consumer protection authority.

Three years later and a new White House report claims that both actions generated up to $50 billion in consumer benefits. There’s just one problem: none of the claims are actually true.

The central thrust of the White House’s Latest "Economic Report of the President" is that taking an axe to industry oversight created untold benefits for consumers. When it comes to eliminating oversight of the telecom sector (pages 120-123), the report is particularly creative.

The FCC’s broadband privacy rules, killed in 2017 by a 50-48 vote in the GOP-controlled Senate, would have forced ISPs to clearly disclose what consumer data is being collected and who it’s being sold to. The rules also required that consumers opt in to the collection and sale of repeatedly abused location and financial data.

“We estimate the effect of overturning the opt-in rule to be a net savings of about $11 billion per year,” the report claims, adding that added “competition in online advertising” would generate up to $22 billion in additional consumer benefits.

The study also promised that killing net neutrality rules (like restrictions that prohibited ISPs from throttling or price gouging streaming competitors like Netflix) would deliver tens of billions in additional ambiguous benefits to the American consumer.

“We find that, by removing vertical pricing regulations, the Trump Administration’s ‘Restoring Internet Freedom’ order will increase real incomes by more than $50 billion per year and consumer welfare by almost $40 billion per year,” the report said.

But consumer groups, telecom lawyers, and antitrust experts consulted by Motherboard say the White House claims are largely nonsense. Several were quick to note that the study is one of the most misleading government tech policy reports they’d ever seen.

“The White House’s claims are not borne from the work of honest analysts,” Derek Turner, Research Director at consumer group Free Press told Motherboard. “This is pure propaganda produced by hacks.”

Turner said the report cherry picked and massaged data to reach its desired conclusion, adding that several of the wireless pricing improvements the White House takes credit for were underway before Trump came to office, like the industry’s 2016 return to “unlimited” data plans.

Repealing net neutrality also actually had the opposite impact the White House Report claims, Turner said. He said his own review of ISP data showed that wired broadband prices dipped 3.6 percent while net neutrality was active, rising 3.8 percent once repealed. Either way, US fixed and wireless broadband prices remain some of the highest in the developed world.

The FCC and White House have repeatedly claimed that the FCC net neutrality rules crushed broadband sector investment, another claim that’s been repeatedly disproven by ISP earnings reports, SEC filings, and even the public statements of numerous telecom executives.

“I think I speak for weary telecom analysts around the nation in longing for a return to fact-based policy debates,” Turner said.

Ernesto Falcon, lawyer and resident telecom expert at the Electronic Frontier Foundation, was similarly unimpressed by the White House report.

“The White House baseline premise that deregulation in the broadband market has enhanced competition and lowered prices is a work of fiction,” Falcon said. He added that the US doesn’t even collect broadband pricing data, something the telecom sector has long lobbied against.

“Every other country on planet Earth that is moving ahead of the United States on lower prices, gigabit speeds, universality, and fiber infrastructure got there because an expert regulator promoted competition, access, and prevented monopolization,” he said.

Instead, the Trump administration has largely been a rubber stamp for one of the least liked and least competitive sectors in American industry. Experts note the administration’s net neutrality repeal didn’t just kill net neutrality—it neutered much of the FCC’s consumer protection authority, leaving consumers more vulnerable than ever to abuse by telecom monopolies.

For example with the FCC’s oversight now restricted, the agency has done nothing to police a rotating array of bogus fees and surcharges ISPs use to jack up the cost of your bill. Nor has it stopped ISPs from charging you extra to rent a modem you already own, and has done even less to rein in rampant consumer privacy scandals that continue to plague the sector.

Telecom policy expert Harold Feld said that cherry picking and massaging economic data has been a telecom sector pastime for years. The use of such pseudoscience lets industry—and the politicians paid to love them—justify policies that routinely harm American consumers.

"One of the fun things about how folks use pseudo-economics in public policy is that you can use it to justify all kinds of price gouging and other consumer harms as ‘efficiencies’ and then make up a model that produces some suitably impressive number of ‘consumer surplus’ that makes it all seem OK,” Feld said. “This report is like a master class in the genre.”

Feld also noted that many of the “efficiencies” the White House brags about were achieved by letting telecom monopolies exploit both their market power—and their ever-expanding access to consumers’ private personal information.

“To put this in economic terms, the supposed efficiency gains and consequent consumer surplus is entirely captured by the oligopoly,” Feld said. “To translate to English, you're getting ripped off and being told to love it."