The New FCC Chairman's Plan to Undermine Net Neutrality

The current net neutrality rules, FCC chairman Ajit Pai seems ready to argue, will hold back a faster internet for everyone.
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Ajit Pai, the new chairman of the FCC, doesn't like the net neutrality rules enforced by the agency President Trump named him to lead. He voted against them as a commissioner in 2015, and in a speech after Trump's election said their days are numbered. But until this week, Pai hasn't explained how he would go about reversing the rules. Now he appears to be staking his strategy to how much---or how little---broadband providers are spending to improve their networks. Current net neutrality rules, he seems ready to argue, will hold back a faster internet.

Net neutrality holds that internet providers shouldn't have the freedom to discriminate against particular sites or apps. Activists have worried for years that companies might create internet "slow lanes" that throttle particular content, as Comcast did with BitTorrent traffic in 2007. The FCC banned such behavior with the Open Internet Order in 2015. But doing so required reclassifying internet providers as "common carriers"—the same classification that allows the FCC to regulate telephone companies like utilities.

At the Mobile World Congress in Barcelona this week, Pai suggested that the reclassification and resulting restrictions have hindered telecoms from investing in improved infrastructure. It's a tricky game—advocates on both sides can make the numbers say what they want. But Pai's gambit appears in part to hinge on convincing people that net neutrality, at least as currently enforced, will slow the spread of 5G, the next iteration of ultra-high speed wireless.

In 2014, in response to a suit Verizon brought against the FCC, a federal court determined that because they weren't common carriers at the time, the FCC couldn't stop internet providers from building slow lanes. Eliminate the common carrier classification and you eliminate today's legally enforceable net neutrality rules as well. But the agency can't just vote to throw out the common carrier classification. Under previous chairman Tom Wheeler, the agency successfully defended the reclassification in federal court. The law requires the FCC to explain just what has changed in the past two years to justify revoking its previous decision. Pai looks ready to argue that the decline in infrastructure spending justifies the reversal.

"After the FCC embraced utility-style regulation, the United States experienced the first-ever decline in broadband investment outside of a recession," Pai said. "In fact, broadband investment remains lower today than it was when the FCC changed course in 2015."

According to a report by the industry group US Telecom, broadband infrastructure investment dipped from about $77 billion in 2014 to $76 billion in 2015. The group has not yet released estimates for 2016 spending. But a 1.3 percent drop might not sway the court. Wheeler has noted that although investment dropped in 2015, it remained higher than in previous years.

"No side can point to a set of data and argue credibly that there’s clear evidence that net neutrality either did or didn’t hurt investment," says Jan Dawson, an analyst at Jackdaw Research.

Dawson points out that wireless providers would likely slow spending anyway as they finish deploying LTE, the current standard for high-speed wireless. At the same time, some home broadband providers, such as AT&T and CenturyLink, have shelled out for fiber-optic connections in some communities in recent years. Others, such as Verizon, meanwhile, have done little to upgrade their aging copper-based infrastructure. "No investment decisions are made in a vacuum, and so any analysis that looks simply at total dollars spent is going to be making a lot of assumptions about what else might be affecting investment," he says.

Even the telcos are split on the issue. As Ars Technica notes, AT&T CEO Randall Stephenson recently blamed the Open Internet Order for suppressing investment, while Verizon CFO Matt Ellis said the company's investment strategy doesn't depend on changes in the regulatory regime.

Pai says his deregulatory strategy will help prepare the US for 5G. "It’s not a forgone conclusion that we will fully realize this technological potential," he said in Barcelona. "After all, building, maintaining, and upgrading broadband networks is expensive." In other words, he's worried that if he doesn't get rid of the Open Internet Order, carriers won't upgrade their infrastructure to 5G.

The wrinkle in that argument is that the big carriers will continue competing with each other, and any upstarts, regardless of whether the net neutrality rules are repealed. There's little reason to think they won't continue investing in their networks so long as the field remains competitive. It looks like Pai is positioning himself to take credit for a big increase in infrastructure spending that would happen with or without him.

Ultimately, the bigger threat to the Open Internet Order may come from Congress, where Republicans have been trying to kill it since before the FCC passed it. Pai doesn't seem likely to wait around for them, even if that means making his case in court.