Broadband Investment Argument Seen Key to Pai FCC Plan on Title II Net Neutrality

FARMINGTON, Pa. -- Critics of an FCC plan to roll back Title II net neutrality regulation believe the agency will struggle to justify reversing its 2015 broadband reclassification so soon after it was upheld in court. They believe little has changed since 2015 to explain a reversal other than pure politics.

Gigi Sohn believes Chairman Ajit Pai "will hang his hat" on an argument that Title II common-carrier regulation depressed broadband investment. Although she considers the argument "nonsense," ISPs and Pai cite reduced network investment as a justification for undoing Title II reclassification. Pai said returning to a less-regulatory Title I framework would re-ignite depressed broadband investment (see 1704260054), and his draft NPRM is peppered with dozens of such references (see 1704270044). The investment argument was a focus at an FCBA panel Saturday with Sohn, former adviser to previous FCC Chairman Tom Wheeler, and three officials from industry rivals (see 1705080045). Some audience members raved about the panel.

Comcast Executive Vice President Kathy Zachem said the core problem is the FCC is going to keep playing "regulatory ping-pong" -- changing course with each leadership shift -- until Congress mandates clear agency authority for open internet protections. Incompas General Counsel Angie Kronenberg said the "ping-pong" argument assumes a Title I "re-reclassification" would be upheld after the 2015 order was affirmed twice by an appellate court, most recently May 1 (see 1705010038). She questioned whether the Pai FCC would be able to cite market changes since 2015 to justify the reversal, particularly given four appellate court rulings that she said point to Title II as the only basis for meaningful net neutrality rules.

The Pai FCC will try to rely on "that nonsense investment issue," said Sohn. "I can cite other numbers. Everybody's got numbers," she said, suggesting it's better to listen to others, including MoffettNathanson analyst Craig Moffett, who said: "It’s impossible to tell whether the open internet rules have affected investment. There’s no way to provide a serious answer that rises above simply trying to reverse engineer the answer you want to find.” Moffett confirmed the quote Tuesday. "No publicly traded ISP has told their investors or the SEC that Title II has caused a decrease in investment," Sohn added.

"I do agree we can all find numbers," responded Zachem, who said Comcast would continue to invest in its network to innovate and serve customers. "The question is what would we have done, and what I can tell you is ... regulatory risk is a significant component" of investment decisions, she said. "It is discussed with respect to every major business initiative; it’s discussed with respect to our five-year plan, always; it’s a constant discussion with our investors; and it is big. ... There is a whole list of things that we did not pursue" since the 2014-2015 FCC proceeding, she said, calling it "absurd" to think otherwise. "The unknown is what we didn't do as a result of the regulatory overhang."

"What you didn’t do was charge tolls, block, throttle," said Kronenberg. "The rules here that we’re talking about allow for this platform to be open so that you can connect to others, no matter what, and Comcast and AT&T can’t tell you, ‘Nope, sorry, if you want to connect to that new service; that new service is going to have to pay us a lot more because we really don't want to compete with them.”

It's a "complete myth that AT&T or Comcast" is going to edit or filter internet content, said AT&T Senior Vice President Joan Marsh, who noted earlier Kronenberg comments about consumers needing internet access to get various services. “The biggest threat to that is not that our companies are going to prevent that content from traveling over the internet, but that broadband facilities are not built. ... And that is about one thing: investment," Marsh said. "We're the ones putting tens of billions of dollars in the ground on a yearly basis; AT&T invests more in this country than any other company. And when we face those decisions, without a doubt we are looking at the regulatory environment ... And if anybody doesn’t think Title II is an impediment, you can just look at the yearlong, painful dialogue we had with the FCC about our sponsored-data platform." The Pai FCC ended that investigation.

Internet edge providers also invest, and back net neutrality rules, said Sohn. "It’s not just about whether you guys invest. And thank you, Joan, for making my case, you invest more than any other company in the country," she said. "But when Snap went to IPO, Snapchat, they said, if these rules are repealed, it will have a deleterious effect on our business. Netflix has said that in their SEC filings. So this is about whether edge providers benefit, to the benefit of consumers, to the benefit of your networks. Your networks do much better if Snap and Netflix and Hulu do well.”