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Study Proves The FCC's Core Justification for Killing Net Neutrality Was False

The biggest study yet finds Ajit Pai’s repeated claims that net neutrality hurt broadband investment have never been true.

by Karl Bode
Sep 27 2019, 1:25pm

Image: Chip Somodevilla/Getty Images

A new study has found the FCC’s primary justification for repealing net neutrality was indisputably false.

For years, big ISPs and Trump FCC boss Ajit Pai have told anyone who’d listen that the FCC’s net neutrality rules, passed in 2015 and repealed last year in a flurry of controversy and alleged fraud, dramatically stifled broadband investment across the United States. Repeal the rules, Pai declared, and US broadband investment would explode.

“Under the heavy-handed regulations adopted by the prior Commission in 2015, network investment declined for two straight years, the first time that had happened outside of a recession in the broadband era,” Pai told Congress last year at an oversight hearing.

“We now have a regulatory framework in place that is encouraging the private sector to make the investments necessary to bring better, faster, and cheaper broadband to more Americans,” Pai proclaimed.

But a new study from George Washington University indicates that Pai’s claims were patently false. The study took a closer look at the earnings reports and SEC filings of 8,577 unique companies from Q1 2009 through Q3 2018 to conclude that the passage and repeal of the rules had no meaningful impact on broadband investment. Several hundred of these were telecom companies.

“The results of the paper are clear and should be both unsurprising and uncontroversial,” The researchers said. “The key finding is there were no impacts on telecommunication industry investment from the net neutrality policy changes. Neither the 2010 or 2015 US net neutrality rule changes had any causal impact on telecommunications investment.”

While the study is the biggest yet to do so, it’s not the first to reach this conclusion.

Last year a deep analysis of industry financial data from consumer group Free Press found some ISPs actually invested more heavily in their broadband networks while net neutrality rules were active. Journalists had similarly found no meaningful impact on network investment from net neutrality, something confirmed by the public statements of numerous ISP CEOs.

While this latest study took a more detailed look at ISP capital expenditures than previous efforts, all have been quick to note there’s a universe of factors that can impact broadband investment that have nothing to do with net neutrality, from natural disasters to a lack of competition in broadband markets.

Many phone companies, for example, have refused to upgrade or even repair their aging DSL lines because they’re now focused on more profitable ventures like wireless advertising. Given huge swaths of America only have the choice of one ISP to choose from, there’s often little organic pressure for ISPs to put soaring profits back into the network or customer service.

Despite clear evidence disproving the “net neutrality killed broadband investment” theory, both Pai and the telecom industry have repeatedly made the claim the cornerstone of public relations efforts for years, apparently hoping that repetition would forge reality.

Last year, telecom lobbying group US Telecom released a study it claimed showed that broadband investment had spiked dramatically in 2017 thanks to “positive consumer and innovation policies” and a “pro-growth regulatory approach” at the FCC.

The problem? The FCC’s net neutrality rules weren’t formally repealed until June of 2018.

Gigi Sohn, a former FCC lawyer who helped craft the FCC’s 2015 rules, told Motherboard she hoped the comprehensive study would finally put an end to the debate.

"This paper once again validates what the FCC found in 2015 and what net neutrality advocates have said for years—that neither the net neutrality rules nor Title II classification had any impact on ISP investment,” Sohn said.

“Not surprisingly, the ISPs and their friends at the FCC and the Hill keep saying the opposite, despite overwhelming evidence to the contrary,” she added. “Hopefully this comprehensive study, which studies ISP investment over nearly a decade, will put this matter to rest.”

Derek Turner, research director for consumer group Free Press, told Motherboard he doubted that would actually happen.

“We don’t expect this study to kill the ISPs' zombie lies about net neutrality and investment,” he said. “The telecom companies and their defenders in Congress have long operated unmoored from reality, and no smoking gun is going to change that, certainly not one they’ll never bother to read and consider fairly.”

The problem for the Pai FCC is that while industry may be ok with the agency playing fast and loose with the facts to the benefit of telecom giants, the courts have not been. The FCC has had three different major policy efforts reversed by the courts in as many months for being factually unsound, something that looms large over the net neutrality debate.

23 state attorneys general sued the FCC last year, claiming the agency ignored the public and hard data during its repeal of net neutrality. If the courts find the FCC justified its decision using falsified data (a violation of the Administrative Procedure Act) the repeal could be reversed and net neutrality restored. A ruling in that case is expected any day now.

Correction: An earlier version of this article noted that the study analyzed 8,577 telecom companies. It studied 8,577 companies total; more than 200 of those were telecom companies.