Last week, Harold Feld published a blog on the Public Knowledge website called “NCTA Proves Virtuous Cycle Works.” Since it isn’t every day that Feld (or PK) agrees we’ve proven anything, I decided to check it out.
Let me start by commending Feld for acknowledging what many other advocates willfully ignore: broadband in America has continuously gotten better and faster over the past two decades while providing consumers more bang for their buck. Feld even cites with approval an NCTA blog post quantifying the ever-increasing U.S. broadband speeds and the fact that consumer prices have fallen about 90 percent over the past ten years on a per-bit basis. These increasingly capable networks, in turn, have fostered the incredible growth of edge providers like Google, Facebook and Amazon and enabled Netflix and scores of other video streaming services to thrive. If ISPs had the overwhelming incentive and ability to sabotage the development of online competition that some claim, we’ve been doing a pretty bad job of it.
Feld assigns credit for this positive state of affairs to the “virtuous cycle” of investment and innovation caused by the FCC’s 2005 net neutrality policy statement, the Comcast-BitTorrent Order in 2008 and ultimately FCC net neutrality rules in 2009 and 2015. Those who didn’t believe that net neutrality rules would lead to such positive outcomes, according to Feld, “were utterly wrong and owe those of us who got it right a big fat apology.”
Well, ok then. But before anyone starts searching for a mea culpa emoji to email to Feld, let’s unpack this a bit.
As an initial matter, the idea of a “virtuous cycle” is nothing new. It simply means that advances in one part of a service or product ecosystem can drive advances in other parts, which in turn can drive further changes to the first part, and so on. This is particularly true in the media/technology space, where content and distribution are both necessary and self-reinforcing factors in driving consumer adoption, investment and innovation. During the digital television transition, for instance, the chicken-and-egg question was whether to incentivize the development of HD content in order to increase the deployment of HD sets, or whether to incentivize the deployment of HD sets in order to increase the production of HD content. The right answer, of course, was both.
We think that’s the right answer here, too. The physical networks and edge provider content are both vital parts of the internet ecosystem. Both should be encouraged and incented to invest and innovate in order to drive a truly virtuous cycle.
The Wheeler FCC/Feld see things very differently. To them, only edge providers should be encouraged to freely invest and innovate. ISPs either will invest in the network anyway or can’t be trusted – Feld asserts that given the opportunity ISPs would prefer to profit by degrading service and forcing pay-for-play distribution – so they will need to be forced to do the right thing through strict regulatory oversight. That’s why Feld likes Title II. It’s the public utility-style regulatory framework designed to substitute for marketplace incentives when the market isn’t working.
The problem with this view is obvious once you look at Feld’s own evidence. Feld cites data going back to the FCC’s non-binding Internet Policy statement in 2004 and argues it proves that net neutrality oversight didn’t slow down investment and innovation in the network. But until 2015 all that investment took place under Title I when broadband was treated as an information service, not Title II. So what Feld’s evidence really shows is how powerful a Title I framework was in creating a virtuous cycle of broadband investment and innovation that co-existed with various levels of net neutrality oversight.
Ok, that covers 2004-2015, but how about the past two years? Feld points out that broadband speeds have continued to rise and therefore posits that Title II has not interfered with the virtuous cycle. First, as Feld acknowledges, there are some studies showing that Title II has already had a negative impact. But I’d also argue that we never really saw the full impact of Title II. Chairman Wheeler seemed to be deterred from imposing even more aggressive Title II mandates while the reclassification decision was subject to judicial review. The DC Circuit did not issue a decision until May 2016 and then the election intervened. But you can see from the staff-level documents Wheeler issued as he was walking out the door that the intrusiveness of FCC Title II regulation would have ramped up significantly had the prior leadership remained in place.
Moreover, two years is too short a time to fully evaluate the impact of a Title II regime because investment horizons are typically much longer than two years. Many of the investments made in 2015 and 2016 were set in motion several years before and may not have accounted for the prospect of Title II regulation.
Perhaps the best evidence of the likely long-term impact of Title II is to look to the chronic underinvestment and lack of innovation in Europe, which has taken a more public-utility style approach to broadband regulation. Compared to the EU, the U.S. has double the per capita broadband investment, more competition (84 percent of US households have a choice of two or more providers compared to only 43 percent in Europe), and more next-generation broadband, both wired and wireless.
This really comes down to a simple policy choice: Do we want to return to the light-touch Title I regulation that applied for most of the internet’s existence or continue the recent move to a public utility-style framework under Title II? The Clinton FCC under Chairman Kennard faced that exact choice twenty years ago and made a conscious decision that the light-touch regulatory approach was preferable. That policy judgment has been proven correct over time. The light-touch approach has produced unprecedented levels of investment and innovation in the network and the fastest consumer adoption of any technology in history. The burden should be on those who want to change course to prove that utility-style regulation will produce superior results. You look at broadband in Europe, or you look at the crumbling public infrastructure in this country, and you realize it’s a risk this country can’t afford.
It’s time to get the virtuous cycle really humming again for consumers by letting all parts of the internet ecosystem invest and innovate. That means adopting consensus net neutrality principles without the unnecessary collateral damage of Title II. And ideally Congress would enact that framework in legislation to provide long-term regulatory certainty to all sides.
It’s a win-win outcome that could finally put this seemingly endless net neutrality debate to rest and allow us to turn our full attention to the myriad of important broadband issues that face our nation, like rural deployment, adoption and closing the digital divide.
It’d be great to have Feld and others engage in that constructive effort. No apologies required.