Reality distortion —

Comcast accuses net neutrality advocates of not “living in the real world”

Anyone who denies harm from Title II rules is denying reality, Comcast says.

A Comcast/NBC logo.

Comcast yesterday claimed that "the threat of Title II regulation" started harming broadband network investment in 2011—years before the US government decided to apply Title II regulations to broadband.

Moreover, Comcast said that net neutrality proponents who claim that investment wasn't hurt by the Title II rules "aren't living in the real world." This comes less than a week after Comcast accused net neutrality supporters of "creat[ing] hysteria."

Comcast's new statements came in comments filed yesterday with the Federal Communications Commission and in a blog post by Senior Executive VP David Cohen, who urged the FCC to stop classifying ISPs as common carriers. Comcast's claims about network investment clash with what ISPs have told their own investors; even Comcast’s chief financial officer downplayed Title II's effect on investment in December 2016.

Comcast's arguments about network investment this week also go beyond what even FCC Chairman Ajit Pai has claimed. Pai has continually cited research purporting to show that broadband network investment started declining after the FCC's February 2015 decision to impose net neutrality rules backed by the commission's Title II authority over common carriers.

Time travel

Here's what Comcast told the FCC yesterday about Title II harming network investment starting in 2011:

[A] study by Dr. George S. Ford found that even the threat of Title II reclassification between 2011 and 2015 “reduced telecommunications investment by 20 percent (or more), or about $32 to $40 billion annually.” That reduction amounts to “about $150-$200 billion in total over the five-year period,” or the equivalent of “an entire year’s worth of telecommunications investment.” As Chairman Pai has noted, such a decline is “extremely unusual” and represents “the first time that such investment has declined outside of a recession in the Internet era.”

Comcast seems to be indicating that Pai was talking about an investment decline beginning in 2011. In reality, the Pai statement Comcast pointed to in a footnote was referring to an alleged decline after the 2015 net neutrality decision. "The Internet wasn’t broken in 2015," Pai said, making the point that the 2015 decision changed things for the worse. "We were not living in a digital dystopia." The numbers Pai called "extremely unusual" were investment declines after 2014.

The Ford study that Comcast is touting was written by the chief economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies, a think tank that has consistently opposed broadband regulations such as the net neutrality rules. Ford claims that the harmful effects from the threat of Title II reclassification of broadband began in 2010 under then-FCC Chairman Julius Genachowski. But while Genachowski considered a limited Title II reclassification in May 2010, he later abandoned that approach. Instead, the FCC issued net neutrality rules in December 2010 that relied on other sources of FCC authority.

For as long as those rules remained in place, the FCC made no threats to reclassify broadband providers. Far from proposing new rules based on Title II, the FCC was defending the 2010 non-Title II rules in court against a lawsuit filed by Verizon. Verizon won in court in January 2014, resulting in the rules being thrown out.

Even then, the FCC initially resisted using its Title II authority. Then-Chairman Tom Wheeler's first net neutrality proposal in May 2014 would have replaced the vacated net neutrality rules with weakened net neutrality regulations. The Title II threat starting picking up steam in November 2014 when President Obama urged the FCC to use its strongest authority to impose net neutrality rules.

Despite that, Ford claims the broadband "industry was on constant alert that reclassification was on the table" during the entire period from May 2010 to 2015, harming investment, and Comcast promoted his view in its comments to the FCC. Ford did not claim that telecommunications spending went down; rather, he compared telecommunications to other industries and argued that telecom spending would have gone up more than it did if not for the threat of Title II reclassification. Additionally, his investment estimate for telecommunications combines both telecommunications and broadcasting numbers into one figure.

Comcast talks about “living in the real world”

Comcast's capital expenditures are rising. Despite that, Cohen wrote that because of Title II reclassification, Comcast's capital spending "will decline over $2.5 billion over a three-year period compared to what it would have been otherwise. Groups that claim that broadband investment hasn’t been affected by Title II aren’t living in the real world."

In December 2016, Comcast CFO Mike Cavanaugh provided a different story when talking to investors. When asked if reversing the Title II classification would have any meaningful benefit for Comcast, Cavanaugh indicated that Title II hadn't turned out to be that bad for ISPs.

"I think in terms of what actually happens... it's the fear of what Title II could have meant, more than what it actually did mean," Cavanaugh said. The possibilities of where Title II could go in the future "had a chilling effect" that is now apparently gone. "Hopefully that chilling effect is gone, both from how investors look at the space and businesses look at the space," he said.

The numbers seem to bear that out. Comcast's first quarter earnings statement said that "capital expenditures increased 10.2 percent to $2.1 billion."

Broadband lobby group USTelecom—whose research has been favorably cited by Pai—found that broadband providers' capital expenditures increased in the years after the 2010 net neutrality rules. While US broadband providers' annual capital spending dropped from $70 billion in 2006 to $68 billion in 2010, the expenditures started increasing in 2012 and went up to $77 billion by 2014, USTelecom found in 2016. Newer USTelecom research suggests that spending was $2.5 billion to $3 billion lower in 2016 than it was in 2014.

The question of whether broadband network investment declined after the Title II decision is a hotly contested one. Pai has cited investment data from USTelecom, the conservative Free State Foundation, and economist Hal Singer, who found a 5.6-percent decline in capital expenditures by 12 big ISPs.

Advocacy group Free Press criticized the methodologies of studies finding that investment declined. The pro-net neutrality group's own report said that "[t]he total capital investment by publicly traded ISPs was 5 percent higher during the two-year period following the FCC’s Open Internet vote than it was in the two years prior to the vote." While much of the US lacks fast broadband, average US speeds have soared since the FCC's Title II vote in 2015.

But even as Comcast increases its own capital spending, it insists that the FCC's Title II rules have harmed "the economy and consumers." For example, Cohen wrote, Comcast slowed down the rollout of its new Stream TV service because of an FCC investigation into the cable service's exemption from Comcast data caps.

"The ill-advised and politically motivated decision to reclassify broadband Internet access service under Title II represented an unnecessary and unwise turn for the economy and consumers," Cohen wrote. "Comcast strongly agrees with the FCC’s decision to move forward with a proceeding to reverse that harmful ruling."

The FCC's deadline for initial comments on its plan to eliminate Title II rules passed yesterday. The commission will take reply comments (in which you can respond to Comcast or other parties' comments) until August 16. Here's the link for filing comments and a guide on writing an effective comment.

Channel Ars Technica