Net Neutrality

Study Backs Title II's Negative Impact

A new study from the Georgetown Center for Business and Public Policy claims to substantiate concerns that the FCC's recent move to re-regulate broadband ISPs will significantly affect investment and innovation in US networks.

The Federal Communications Commission (FCC) decided earlier this year that the best way to ensure net neutrality was to impose Title II regulations -- those applied to telecom services -- to broadband Internet access services as well. (See FCC Adopts Title II Rules .)

According to this study's co-authors, Robert Shapiro, a senior policy scholar at the Georgetown Center who served in the Clinton Commerce department, and Kevin Hassett of the conservative American Enterprise Institute, there is empirical evidence that Title II regulations will negatively affect investment in broadband networks by as much as 20%, based on how regulation has impacted investment in other countries.

The full text of the study can be found here.

For more on Title II, visit the broadband content channel here on Light Reading.

Major telecom network operators including telcos and cablecos argued in advance of the net neutrality decision that re-regulation would stymie their investments, but those arguments were largely dismissed by FCC Chairman Tom Wheeler and those backing the more aggressive move to re-regulate in order to guarantee net neutrality. (See Wheeler to Cable: Suck It Up and Allot Reports Q1 Sales Growth.)

Pat Brogan, industry analyst with the United States Telecom Association (USTelecom) , the national trade association for the telecom network operators, which filed a suit against re-regulation, said today in a blog that this study proves those concerns aren't overblown. Ongoing uncertainty, at the very least, calls into question investments going forward, he notes, especially with an election cycle looming. (See Net Neutrality Suits: Only The Beginning?)

"The authors examined the impact of regulation on investment under different levels of regulatory intensity among industrialized Organization for Economic Cooperation and Development (OECD) countries in the first decade of the 21st century," he wrote in a blog. "They found that regulation had a significantly negative impact and predicted that the US could face a similar outcome as a result of Title II regulation of broadband."

The report could renew the ongoing debate about Title II re-regulation in advance of court appeals that are pending.

— Carol Wilson, Editor-at-Large, Light Reading

sree 7/21/2015 | 10:46:56 AM
Re: Well... well said ... gud one
KBode 7/21/2015 | 8:21:20 AM
Re: Well... I've gotten relatively good at sniffing out farmed "science" and this study does indeed have an air of wishful thinking in the face of the realities on the ground (ie everybody's investing as normal and perhaps even more than normal after the rules were passed). Interesting analysis, and curious you couldn't get a response from the authors, thanks.
mroetter021 7/21/2015 | 7:49:14 AM
Re: Well... The analysis by Drs. Hassett and Shapiro concluding that Title II will lead to a substantial reduction in broadband investment is logically flawed. Moreover it relies on a highly selective set of data while ignoring substantial independently verifiable evidence that contradicts its finding.  I have rebutted the original study by these authors from late 2014 (filed at the FCC by USTelecom) demonstrating these fatal flaws and omissions, and filed my conclusions with the FCC at  http://apps.fcc.gov/ecfs/document/view?id=60001044394 ("Title II and Broadband Investment: Spurious Correlations") and http://apps.fcc.gov/ecfs/document/view?id=60001112190 ("The FCC Got It Right").  The Hassett/Shapiro study was recently referenced in the paper from the same authors published by the McDonough School of Business at Georgetown University that reiterated its finding as an example of a broader thesis of a negative link between regulation and investment. AT&T supported the original study, but the authors state that the finding is theirs. I have contacted the authors on more than one occasion offering to discuss with them our respective findings to determine who is correct, but I have been met with a wall of silence. I note also that the valuation of a significant broadband operator Time Warner Cable (TWC) has increased substantially since February 2014 when Comcast launched its now abandoned acquisition bid, i.e. one year before the FCC's most recent Open Internet Order including Title II reclassification, and May 2015, a few months after this Order was approved, when Charter announced its bid for TWC.  You may draw your own conclusions about the connection between the real world and the validity and quality of the analysis behind the Hassett/Shapiro economic thesis as applied to Title II. 
t.bogataj 7/16/2015 | 3:13:07 AM
Face it-- The US needs its National Broadband Plan. Or we will all be bored for decades with further moaning about bad broadband service in low-density areas.

It's your choice: Either more regulation or lousier service.

brooks7 7/15/2015 | 1:30:06 PM
Re: Well... A lot of what was in there is pretty economics theoretical and 20% is on the high end of the impact.  I agree with the bit that Title II doesn't help invest more.

I think I may have to start a PAC for Gigabit Universal Service.


cnwedit 7/14/2015 | 4:45:08 PM
Re: Well... KBode,

I certainly don't expect USTelecom to be the objective party here. It is interesting that the Georgetown duo came up with this research. 

I have only scanned it, plan to read it more carefully later but thought it was worth throwing out there. 

Yes, the Gigabit rollouts continue, mostly in places where there is already competition, sadly. And to date, I haven't seen any indication that they are producing bigger capex budgets. 

KBode 7/14/2015 | 3:51:24 PM
Well... Well one, USTelecom has a vested interest here in making Title II as theoretically ugly as possible since they're suing to destroy the rules. I think it makes more sense to look at real world deployments. AT&T's not curtailing gigabit deployment, Comcast's planning to deploy two gigabit deployment to 18 million homes by year's end. Google Fiber's busy expanding.

There's not much if any real world indications that any of this argument (Titlle II hurts investment) carries water.
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