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FCC to dismantle Net Neutrality in the US

Maximilian Holm, about Online Privacy

In a recent 2-1 vote, Chairman Ajit Pai and the FCC begin their process to dismantle Net Neutrality, leaving millions of customers and thousands of companies at the mercy of a select few Internet Service Providers. The FCC will now begin a new 90 day process where they will accept opinions from U.S citizens regarding Net Neutrality. Like last time, we urge you to visit and make your voice heard. They will convene again on August 16 for a new discussion about the future of the Open Internet Order, making this perhaps our last chance to save one of the cornerstones for net neutrality in the U.S.

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We regret to inform that on Thursday, May 18th, the FCC voted 2-1 in favor of Chairman Pai's Restoring Internet Freedom proposal. Unlike what the name suggest, it does not restore internet freedom to anyone but ISP:s. In fact, politicians, private citizens, and companies have all spoken out against Chairman Pai's proposal to overturn the 2015 Open Internet Act.

“[The FCC plan] contains a hollow theory of trickle-down internet economics, suggesting that if we just remove enough regulations from your broadband provider, they will automatically improve your service, pass along discounts from those speculative savings, deploy more infrastructure with haste, and treat edge providers fairly.” - Mignon Clyburn, the lone FCC commissioner who voted against the proposal.

While Ajit Pai and ISP:s want you to believe that the reclassification to Title II stifles ISP investments, the picture they paint to their investors to whom they are legally bound to tell the truth is far less gloom. As a matter of fact, AT&T, Charter, Comcast, Time Warner Cable, and Verizon all told their investors that they intend to continue their investments in infrastructure. Out of 24 publically traded broadband service providers, only 8 decreased their capital expenses after the FCC vote in 2015, and in all cases, they attributed the decrease to the completion of prior cyclical upgrades.

“We remain committed to consistently investing in our networks for the future. Our 2015 investments have positioned us for growth and allow us to maintain our network leadership position as consistently acknowledged by third parties.” - Verizon in their 2015 earnings call.

In addition to continued investments from ISPs after the Open Internet Order of 2015, other services such as subscription video on demand (SVOD) services like Netflix, Hulu, and Amazon Prime have experienced rapid growth. In fact, Netflix alone more than doubled their expenditure from $6,8 billion dollars to $14,4 billion dollars after Open Internet Order, in addition to almost doubling their employees from 2450 to 4700.

Even if Ajit Pai's statement were true, one can't look at ISP:s alone to declare the Open Internet Order a failure. You have to look at how it affected the Internet as a whole in the U.S.A. Indeed, considering several different factors, the Open Internet Order was — and continues to be — a smashing success. Contrary to Ajit Pai's claims that the Title II reassignment lead to decreased investments, capital expenditures of publically traded ISP:s increased by 5.3% from $137,881,061,000 to $145,177,165,000 the years directly following the vote[1]. It is worthwhile to note that capital growth alone is not an accurate measure of how Title II influenced various companies. It is, however, the measure that Ajit Pai chose to use in his scathing report of the Open Internet Order.

“We are the “small, independent businesses and entrepreneurs” that Commissioner Pai referenced in his February 6, 2015 press release about the FCC’s impending net neutrality rulemaking, and we write to say unequivocally that his release does not represent our views on net neutrality. Quite the opposite, entrepreneurs and startups throughout the country have consistently supported Chairman Wheeler’s call for strong net neutrality rules enacted through Title II.” - A letter submitted by various small companies sent to the FCC in 2015.

Wireless carriers and cable companies have a continued healthy subscriber growth even after the Title II reclassification. However, their pay-TV services continue to lose customers, likely as a direct result of the vast amount of online nondiscriminatory TV replacement options that boomed after the Open Internet Order. All of these services (and more) would be at risk of being blocked or ransomed if the Open Internet Order were to be revoked, which is something we recently wrote about.

“I mean, Title II, it didn't really hurt us; it hasn't hurt us” - Tom Rutledge, Chairman & CEO Charter Communications

Perhaps one of the most immediate results of the FCC 2015 vote is the emergence of live-streaming multichannel TV providers such as Sling TV, PlayStation Vue, and YipTV, whom all emerged within months of the FCC vote passing. Even Google and AT&T joined the fray with their own versions (Youtube Video and DirecTV Now, respectively). In DirectTV Now's case, it is likely more a direct result of having to adapt in order to compete in an ever-evolving technological business. This is exactly the kind of ingenuity that is needed — the kind of ingenuity that would only be possible without ISP:s stifling competitors and dictating what their customers are allowed to access. It does not encourage a healthy market, nor a healthy Internet environment.

“I think in terms of what actually happens – I’ve been asked this – it’s the fear of what Title II could have meant, more than what it actually did mean. And, as you know, we very much believe in the principles behind what policy was trying to get at, but the overhang of where it could go in the future was something that I think had a chilling effect. Hopefully that chilling effect is gone; both from how investors look at the space and businesses look at the space.” - Mike Cavanagh, Comcast executive, when asked how Title II affected Comcast.

The Internet's true nature is the myriad of information and the ease of which you can access it. All of mankind's knowledge and work is quite literally at your fingertips. Subscribers pay to access this information and communicate with other people, whereas companies pay to make this information available to their customers or visitors. If Ajit Pai's plans are allowed to pass, it would — contrary to what he claims — stifle competitors and ingenuity, just as it has in the past.

With capital expenditure and revenue increasing the years following the FCC vote and several Internet Service Providers admitting that the Open Internet Order did not negatively affect their capital spendings, why then does Ajit Pai and several ISP:s lie and outright claim that the Title II reassignment is a horrible thing? A statement made by Ed Whitacre in 2005 about wanting to violate Net Neutrality may shed some light:

We and the cable companies have made an investment and for Google or Yahoo! or Vonage or anybody to expect to use these pipes for free is nuts!

  1. p.19, Figure 1: Capital Expenditures by Publicly Traded Broadband Providers (2013–2016) ↩︎

Maximilian Holm