FCC Commissioner McDowell Wrong on Net Neutrality and Investment

Washington, D.C., is often referred to as a “bubble,” and for good reason. On any given day there will be some kind of panel at an industry-funded “think tank” that includes regulators or other government officials speaking about the ills of government — and the virtues of unrestrained monopoly. This week we got two of these bubble moments courtesy of the Federal Communications Commission.

On Thursday, Commissioner Robert McDowell told an audience at the industry-funded Free State Foundation that the FCC’s Net Neutrality rules were burdensome and suggested that they had harmed investment. These remarks were music to the ears of the telecom lobbyists gathered in the room, but have no basis in reality. 

Let's look at the facts: After the FCC adopted its Open Internet rules in December 2010, broadband providers continued to slowly increase network capacity by using more efficient and less capital-intensive technologies. Cable providers continued their deployment of next-generation broadband technology across the majority of their service territories. Verizon upgraded most of its wireless network to 4G LTE, and AT&T carried out its LTE upgrades according to the plans it had in place before the FCC adopted its rules.

Meanwhile, after the Justice Department and the FCC freed it from AT&T's grasp, a rejuvenated T-Mobile increased its capital spending in the first half of 2012. Sprint nearly doubled its investments in 2011, a trend that has continued throughout 2012. On the wireline side, both Verizon and AT&T maintained next-generation broadband-deployment activities consistent with their long-stated plans, while CenturyLink continued upgrading targeted areas with advanced DSL. 

These facts are not remarkable. The major providers simply stuck to the plans they had in place before the FCC adopted its Net Neutrality rules, plans that involved reaping cost savings through better technologies. And when these companies brag on quarterly investor calls about the success of this strategy, not a single one refers to the FCC's rules — precisely because these rules aren’t relevant to their investment decisions. In fact, the only providers complaining about FCC policies harming investment are the small rural phone companies, which are upset that the agency has increased oversight of the billions in subsidies they receive each year. This is a reform, by the way, that Commissioner McDowell supported.

Mr. McDowell would be wise to remember that other factors — like economic health and competition — greatly influence investment decisions. All of the major wired and wireless broadband providers increased their prices in 2011 and 2012, even though unemployment remained high and household incomes were still stagnant.

But Mr. McDowell isn't the only FCC commissioner out there slamming the notion that we might need a little oversight of important markets that lack adequate competition. Earlier this week, fellow Commissioner Ajit Pai suggested that those calling for some base level of common-carriage rules on broadband networks were pursuing a "hopelessly outdated" approach.

But the principles that undergird common carriage are not outdated. They, along with the open Internet protections, are directly responsible for producing the Internet revolution. These protections allow all of us to speak freely online, and they give competitors and entrepreneurs a chance to introduce new products and services without the need for permission from the dominant phone and cable companies controlling broadband access.

Without these policies, we never would have seen the innovations and economic growth the Internet has sparked. We need interconnection, non-discrimination and universal service policies — the crux of common carriage — if we want the Internet to continue to grow as an economic and social force.

The data show that when competition is healthy, investment is high, innovation flourishes and consumers reap the rewards. If Commissioners McDowell and Pai are really interested in boosting telecom investment, they should promote the kinds of policies that bolster competition and lower prices. Instead they seem stuck on strengthening the market power of our nation's telecom giants.

Original photo by Flickr user Wiredbike