No one could accuse Ajit Pai, President Trump’s appointee as chairman of the Federal Communications Commission, of concealing his intention to kill network neutrality. For nearly five years as a Republican FCC commissioner, and most recently in a speech in April, Pai depicted rules guaranteeing net neutrality as heavy-handed and unnecessary regulation.
Now he’s putting thought into action. On Tuesday, Pai unveiled a proposal for the FCC to cease regulating this core principle of the open internet. The FCC will vote on the proposal on Dec. 14. Since the commission currently has a GOP majority, it’s a safe bet that Pai will prevail.
Pai presented his proposal as a means for getting government off the backs of internet providers. What he didn’t say is that his real goal is to allow big business to saddle up. You, the consumer, will be the victim. Internet service will be more expensive in the future, and will offer you less choice. It will be dominated by a few incumbent content providers, with smaller and potentially more innovative providers shouldered out of the way.
How can we know this? We can look at the performance record of big internet service providers whenever they’re left to pursue their business without regulation. Their instincts are to raise prices and favor their own entertainment and information offerings over those of their rivals, even when their offerings are inferior. Pai regards this development approvingly as the triumph of the free market over government “micromanaging,” as he put it in a Wall Street Journal op-ed published Tuesday.
Under his plan, Pai wrote, “the FCC simply would require internet service providers to be transparent so that consumers can buy the plan that’s best for them.”
Before we get deeper into the shallowness of Pai’s arguments and the consequences of his action, a few words of definition and a look at recent history.
Net neutrality is the principle that Internet service providers can't discriminate among content providers trying to reach you online — they can't block websites or services, or degrade their signal, slow their traffic or, conversely, provide a better traffic lane for some rather than others. The principle is important because control over traffic flow gives ISPs tremendous power. That’s especially true of those that control the last mile of access to end-users — cable operators such as Comcast/NBCUniversal and telecommunications firms such as Verizon and AT&T. Without regulation, they'd have the ability to force content providers to pay up for unrestricted transmission to their customers.
It’s even more true of those that offer their own services and content such as Comcast, which owns NBC and a raft of cable channels and a video streaming service. AT&T is in the process of going Comcast one better by acquiring Time Warner and its panoply of cable channels (though the Trump administration is suing to block the merger).
Under President Obama, the FCC tried to uphold network neutrality via regulations. Its efforts were regularly rebuffed by federal courts in lawsuits brought by big internet providers such as Verizon and Comcast. The courts said the FCC didn’t have the necessary authority, thanks to a historic mistake the FCC committed in 2002, under Bush-era Chairman Michael Powell, to classify ISPs as providers of "information" rather than telecommunications.
Because the commission’s authority over the former was more limited than over the latter, its regulatory hands instantly were tied behind its back. Judges in the Verizon and Comcast lawsuits hinted strongly that only a return to the old classification would give the FCC the necessary authority. That’s what the commission did in 2015, under Chairman Tom Wheeler, an Obama appointee.
Pai describes this process entirely in partisan political terms, stating in his op-ed that “just days after a poor midterm election result, President Obama publicly pressured” the FCC to reclassify. “A few months later, the FCC followed President Obama’s instructions on a party-line vote,” he writes. “I voted ‘no,’ but the agency’s majority chose micromanagement over markets.”
Pai’s faith in the efficiency of free markets in telecommunications is adorable in its way, but the facts he employs to support it are thin at best and, to be fair, mostly nonexistent. He asserts that investment in broadband has plummeted in the two years since reclassification, by 5.6%. This calculation, which comes from a lobbying group closely associated with AT&T and Verizon, among other ISPs, is highly questionable and appears to be the product of assiduous cherry-picking.
There’s no evidence of a widespread slowdown in broadband capital expenditure, much less a slowdown tied to the 2015 reclassification. Examinations of telecommunications company disclosures and executive statements made since the reclassification indicate that the big companies are either continuing to increase investment, or pausing on a schedule they set well in advance of 2015.
The consumer advocacy group Free Press calculated in May that “total capital investment by publicly traded ISPs was 5% higher during the two-year period following the FCC’s Open Internet vote than it was in the two years prior to the vote.” One factor that may account for the supposed slowdown is that the estimates on which Pai relies ignore a major spending initiative by Sprint, for no discernible reason.
In any event, decisions on corporate capital spending, especially in a technologically volatile industry like telecommunications, are complex and multifaceted. They depend on technology cycles and internal finances, as well as the competitive landscape. To judge the impact of a regulatory initiative by one or two years of corporate behavior, as Pai tries to do, is the height of irresponsibility. Pai undoubtedly knows this. The only possible explanation for his claim doesn’t lie in hard facts, but ideology.
That brings us back to the consequences of an ostensibly free market in broadband telecommunications. The best place to look is at the behavior of Comcast, which combines ownership of broadband distribution and content creation in a way that reflects the world Pai advocates.
The big cable operator long has shown little compunction about using its market power against even tiny rivals. Start with the BitTorrent Affair. In 2007, Comcast was caught degrading traffic from the file-sharing service, which had contracts to distribute licensed content from Hollywood studios and other sources, which could compete directly with Comcast's pay-TV business.
Comcast denied that it deliberately was blocking or targeting BitTorrent or anyone else. The Electronic Frontier Foundation and Associated Press later demonstrated that this was a lie. The FCC agreed, but barely slapped Comcast on the wrist — ordering the company to cease its ways but not even imposing a fine. In 2010, the Santa Monica-based Tennis Channel filed a complaint with the FCC alleging that Comcast kept it isolated on a little-watched sports tier while giving much better placement to the Golf Channel and Versus, two channels that compete with it for advertising — and which Comcast happens to own. The FCC sided with the Tennis Channel, but was overruled in federal court.
What should concern consumers most are invisible consequences to the exercise of this sort of market power—content and services they may never get to experience, because the ISPs empowered by Pai’s regime will be stifled at birth. Content providers such as Netflix and Google (the owner of YouTube) have lined up in favor of network neutrality, but they’re likely to be unreliable warriors for the public interest. That’s because they have more than enough money to meet any demands the big ISPs might place on their desire to reach subscribers.
Indeed, they may even secretly favor an end to network neutrality, because their ability to cozy up to the Comcasts and AT&Ts of the new world will help to exclude their own competitors from the marketplace.
Pai’s assertion that consumers will be served by ISPs’ “transparently” offering them “the plan that’s best for them” is fatuous in the extreme. The more likely outcome is that consumer options will shrink. They’ll “transparently” know that they’re being offered fewer choices, none of which will genuinely encompass an open internet.
The truth is that competition among ISPs is shrinking, and their power already is enormous. You may think you have free choice among YouTube, Netflix, Hulu, Amazon Prime, and other services; but they all reach your home via the same digital pipeline. Without network neutrality, the owner of that pipeline effectively can dictate which of these services gets to you faster and clearer. Make no mistake: In vast swaths of the United States, there’s no competition among pipeline providers — it’s your local cable operator or no one.