Pai's Destroying Internet Adoption, Not Just Net Neutrality

The agency just released the final order, so this explainer recaps that Twitter thread and the Free Press research it came from.

During tumultuous times it can be hard to focus on internet and media policy issues like these. But understanding them isn’t just our job at Free Press: It’s essential for grappling with how and why this dysfunctional, hate-filled administration came into and kept power.

It’s a disgrace that nearly 80 million people lack adequate home broadband in the middle of a pandemic and economic downturn. Trump’s unwillingness to take that crisis seriously is unsurprising, considering that low-income communities and people of color — constituencies he disdains — are hardest hit by it.

Yet during a new COVID surge and amid trauma from environmental disasters and police violence, the Trump FCC is continuing to give away its power to get and keep people connected.

It’s no accident that the wildly unpopular FCC Chairman Ajit Pai is doing his best to do his worst right now, sneaking in as many bad decisions as he can before the year ends — and before a potential administration change strips him of his chairmanship and majority at the FCC.

When not engaging in embarrassing hypocrisy about his newfound readiness to “regulate the internet” under Section 230 — all to defend Trump’s disinformation — Pai is busy repeating the mistakes and lies behind his Net Neutrality repeal and related abdication of FCC authority.

Free Press filed a letter with the FCC last week, following up on comments we filed in the spring (and dozens of earlier filings too) detailing Pai’s mistakes, misstatements and misleading claims.

Here’s the what, why and how of this latest bad decision, as the agency refuses either to revisit its repeal of the Obama-era FCC’s strong Net Neutrality rules, or fix Pai’s wrongful rejection of the legal authority Congress gave the agency to protect broadband users.

What’s Pai doing? Rejecting the opportunity to correct his mistakes in the FCC’s Net Neutrality repeal and broadband-reclassification decision

A federal court upheld the FCC’s egregiously misnamed Restoring Internet Freedom Order last year, but the judges said that the agency’s Republican majority had “drifted far beyond the statutory design” of the laws Congress wrote for it.

In fact, while the court said it had to follow Supreme Court guidance giving the FCC some deference to interpret these statutes, even the judges who voted to uphold the agency’s decision called it “unhinged from the realities of modern broadband service.”

That kind of faint praise was the high point for the FCC. The court upheld parts of the decision despite these flaws, but rejected outright the agency’s attempt to preempt all state and federal laws designed to fill the vacuum created by the Net Neutrality repeal.

The appellate court also found that Pai had utterly failed to explain or even explore other impacts of the repeal and the decision to classify broadband as an “information service” rather than a Title II telecommunications service more fully subject to FCC oversight.

The court zeroed in on the impacts of repeal and reclassification on three crucial areas: public safety, competitive broadband providers’ ability to deploy their networks, and the Lifeline program’s broadband support for low-income people.

Given a chance for a do-over on these topics, the Pai FCC decided to repeat its mistakes with a series of staggeringly wrong conclusions, as indefensible in terms of their public-policy impacts as they are in terms of their analytical framework.

The order the FCC voted to adopt defied the court’s instruction to take a more serious look at these three topics, and essentially said that the reasons found wanting in the original repeal were good enough all along.

Worse yet, the FCC’s fallback for its brilliant “told you so” defense is that any harms to public safety, competition and Lifeline are worth it on balance — just collateral damage to achieve the supposed tremendous investment and innovation benefits unleashed by Pai’s repeal.

This abdication of authority over the nation’s essential broadband telecommunications networks would be wrong under any circumstances. It’s especially abhorrent during a pandemic that has highlighted the searing importance of universal, affordable and open internet connectivity.

That backdrop is crucial to understanding the depth of the FCC’s failings here: The agency has put forth all sorts of magical claims about broadband investment and performance improvements that are either false or falsely credited to the repeal.

Why’s Pai doing this again? Because he’s staked his entire tenure on the lie that Title II hurt investment and his repeal helped it

Aggregate broadband investment increased under Title II, and has been in decline since its repeal. Unlike Pai, Free Press doesn’t claim those regulatory changes caused the investment changes. But unless you cherry-pick data like ISPs often do, the facts are clear.

Of course, Free Press has repeatedly stated that aggregate-industry capital-investment figures are pretty meaningless, as is pretending they are due to a single regulatory classification. But this is the metric Pai chose, and if he wants to use it he has a lot of explaining to do.

Investment is down significantly at many large ISPs. The aggregate is down nearly 5 percent from the last year Title II was in effect. On an inflation-adjusted basis, investment in every year of Pai’s tenure is below what it was in 2015, when the Obama FCC adopted the open-internet rules.

Aggregate Capital Expenditures Made by Publicly Traded U.S. ISPs 
(2012–2019, inflation-adjusted value, in billions)

And getting hung up on the aggregate data is doubly silly, considering that changes to the total are normal and easily explained. Individual ISPs invest more in years when they are upgrading, then less the year after those upgrades have been completed. ISPs explain this to their investors, on penalty of jail time for lying, telling shareholders exactly what they plan to invest and why.

As we painstakingly detailed in 2017, no cable or phone company said they had scaled back because of Title II. Just the opposite. They were either silent on it, or else told Wall Street the classification decision had no impact on their expenditures. These facts fly in the face of ISPs’ frequent lobbying laments, but track perfectly with the companies’ legally binding statements to investors.

More of the big, publicly traded ISPs increased their spending with Title II in place than the relatively few that scaled back. And those that did scale back did so not because of FCC rule changes, but because they were in a lull in their natural upgrade cycles.

This wouldn’t be a Free Press Net Neutrality investment debunker if I didn’t cite our favorite quote from AT&T, which told the FCC a decade ago: “Capital expenditures tend to be ‘lumpy’” and — get this, Chairman Pai — “Minor variations from year to year thus should not be surprising.”

So that’s the real reason ISPs’ spending shifts slightly over time. More of these companies were investing in new technologies in 2015 and 2016. Some of those same companies have ramped down for now. Investment levels stay pretty steady, and the investments accumulate over time, but they cycle up and down along a predictable trajectory.

That’s why Comcast investment was up 23 percent in the last two years of the Obama administration, under Title II, but down 14 percent in 2019 when compared to 2016. Charter’s 2019 investments were down 10 percent from 2016. CenturyLink’s were down 21%. We haven’t heard Pai bragging about any of that.

A long but necessary digression on the realities of ISP investment before and during Pai’s time as chairman 

Like Comcast and Charter, AT&T invested less in 2019 than it did in 2016 — when Title II was still in place, and the chances of a Trump win and Pai repeal seemed remote at best. AT&T’s 2019 capital expenditures were 17 percent below its 2016 level. (And AT&T spending through the first nine months of 2020 continues to free-fall too.) Why is AT&T spending so “lumpy”?

It was actually a dip in AT&T spending in 2015 in the first place that helped fuel Pai’s lies about Title II supposedly depressing investment. AT&T spent less in 2015 than it had in the two years prior, and the company is big enough that its drop had a pretty noticeable impact on the aggregate.

But this was hardly AT&T scaling back in terror over Title II. As we copiously documented at the time, AT&T bragged to investors about finishing a “monster” upgrade ahead of schedule in 2014, then bragged about saving a bunch of money from the upgraded technology.

The transcript from former AT&T CEO Randall Stephenson is there for all to see, as he crowed to Wall Street about how AT&T’s spectrum holdings saved the company money, and how fiber, ethernet and then-new 4G wireless technologies were all 30 or 40 percent cheaper to operate.

Only inside the Beltway could we find politicians, like Ajit Pai, calling it a bad thing when a company like AT&T provides better service while saving itself money. But that’s what Pai’s ideology demanded, facts be damned.

Before he left the top spot at AT&T, Stephenson himself had started to change his tune — complaining in vague lobbying and press pitches about how deregulation and Trump’s tax cuts would spur investment.

Stephenson said, “Take regulation down, you get investment up” and “Lower taxes drive[ ] more investment [and] hiring” of “jobs wearing hard hats.” Yet we see just the opposite at AT&T, and that’s bad news not just for Pai’s tale but for taxpayers and workers too.

As Jon Brodkin at Ars Technica chronicles, AT&T promised to create 7,000 jobs in exchange for those Trump tax cuts. It slashed 23,000 jobs instead. AT&T kept cutting jobs and cutting spending in 2018 and 2019 too, with its regulatory breaks and tax breaks in hand. And it hasn’t looked back.

As Brodkin also reports, even before continuing to “rationalize” jobs (that’s corporate-speak for firing people) during the pandemic, AT&T was slashing billions in investment, and planning to continue these investment cuts in 2020.

So with a wallet fattened by Trump tax breaks and bolstered by Pai doing its bidding, AT&T is still cutting investment and jobs (as other major wireless companies downsize too) by closing stores and replacing people with drones and chatbots.

But as Iain Morris at Light Reading noted, some people at AT&T still do pretty well despite these cuts. New CEO John Stankey “collected $22.5 million in total compensation last year,” while the CFO’s haul grew to $16.7 million. Before stepping down, Stephenson enjoyed a 10-percent compensation increase himself, with a $32-million haul.

This is all part of an essential fact check on this FCC’s oft-repeated claim that Title II hurt investment, and somehow the repeal order healed that hurt. Because none of it is true.

Pai’s other boasts on broadband metrics and markets improving are unjustified too

Before we get back to Tuesday’s order, remember that the other broadband-performance improvements Pai tries to take credit for are either not real, not his doing or not that impressive.

For example, there have been more fiber deployments in the past few years, but fiber deployment under Pai is exactly what we’d expect based solely on the deployment trends from the prior eight years accelerating at the predicted rate.

92 percent of these Pai-era fiber deployments came from projects announced during 2015–2016, and AT&T’s DIRECTV merger-buildout commitment (that Pai opposed) accounted for two-thirds of all new household-fiber deployments during his tenure. Then AT&T’s fiber deployments all but ceased upon completion of these Obama-era commitments. Similarly, increases in availability of very-high-speed cable-broadband services were planned, publicly announced or begun before Pai’s reign as chairman ever started.

Plus, despite Pai’s empty claims about increased competition and decreased prices, his chairmanship has seen the cable industry increase its share of the home-internet market to 68 percent, with home-internet and wireless prices rising again.

Pai even brags about growth in average broadband speeds — but if you use the same speed-test data he does, you see that the rate of speed increases has been slower in the Trump era than it was in the last three-plus years of the Obama FCC.

So that’s the list of supposed achievements that make the whole Net Neutrality repeal worth it, in Pai’s narrow mind. Those are the underwhelming “benefits” Tuesday’s order sets against the loss of FCC authority and certainty for public-safety applications, Lifeline and competitive broadband-only providers.

How is Pai harming public safety, competition and Lifeline? By trading them for illusory broadband-investment benefits

The FCC’s just-released order holds to the conclusion that tossing away Title II’s superior legal authority for the three issues on remand is all justified by the supposed investment gains — even as the FCC acknowledges that its investment claims are subject to “dispute.”

More accurate than “disputed” would be “debunked,” both when Pai made these claims in 2017 and for the years since. There have been almost three years of contrary evidence since the initial repeal decision, all showing broadband investment has not in fact gone up as a result of that repeal.

Yet the FCC’s Republican majority bizarrely insists that assessing the truth of its own investment assertions is “outside the scope” of the remand, all while using these same assertions to excuse its abdication on public safety, competition and Lifeline.

This FCC relies in almost every particular on a calculus that prioritizes these debunked investment claims over every other concern raised by public-interest commenters, public-safety officials and even the court itself.

Perhaps if the Commission had found some actual legal or evidentiary support for its conclusions, then the correction of its faulty investment claims would not be needed on remand — but it did not, and they are.

Among its many missteps, the agency admits it would trade away a program that provides critical life-and-death support for poor people trying to afford a broadband connection, all to further its baseless fabrications on how deregulation drives investment.

These kinds of grave errors are a mishandling of the court’s remand and an abandonment of the FCC’s public-interest obligations to promote competition, public safety and universal service.

Public safety

Given not just the chance but the responsibility for a redo, the FCC still rejects the public-safety arguments raised by emergency responders and public-safety officials — instead prioritizing the plainly less-expert analysis of internet service providers.

Pai pins all hopes for resolution of any public-safety harms on transparency and PR pressure to make internet providers behave better. This is as ridiculous as it sounds for these widely hated, highly profitable companies that are subject to so little competition and market discipline. People so often have nowhere to go when ISPs treat them badly, so transparency and public pressure alone just don’t cut it.

First responders themselves are better placed than we are to explain the harms stemming from the FCC’s cavalier approach. Yet from a legal standpoint, the Commission cannot satisfy the remand by merely doubling down on the arguments the court rejected.

Like a trio of broken records, Pai and his two GOP colleagues at the agency rely solely on evidence-free speculation and self-serving industry comments about the improved broadband deployment and performance that they falsely claim arose from the repeal.

Competition from broadband-only providers

Unlike the phone and cable incumbents, some ISPs might offer broadband over a network that doesn’t also offer legacy telephone or pay-TV service. But they’d need the right to build their networks in rights of way that are often controlled by the same incumbents.

The court directed the FCC to “grapple with the lapse in legal safeguards” from reclassification, and specifically the consequent elimination of rights (in Section 224 of the Communications Act) for broadband providers that don’t offer a legacy telephone or cable-TV service.

Yet the FCC refuses to grapple at all and simply taps out of the ring. The order gives up, and admits the court was right about this loss of safeguards for competitive providers’ deployment plans. So much for this agency’s supposed pro-deployment stance.

Perhaps the most glib and condescending conclusion here, in an order rife with them, is the FCC’s smug proclamation that the loss of protections is actually good for competitive providers facing bottlenecks and the incumbents’ stalling. That’s because, in the absence of applicable law, broadband-only providers “have the regulatory flexibility to enter into innovative and solution-oriented pole attachment agreements with pole owners.” Yes, it really says that.

It may be easy for the FCC to conclude that stripping away parties’ rights and legal recourse is good, but the competitive providers who’ve lost these rights tend to take a different view. Unfortunately, the Commission’s gambling with other people’s rights doesn’t stop with this surrender on competition.

Lifeline

The FCC’s order adopts the same backwards legal framework for Lifeline, by tying it to legacy services too. Providing voice service is the only way a provider can get Lifeline support for broadband. And that condition amounts to an outright attack on a modernized Lifeline program.

Even if the FCC’s legal reasoning for Title I classification were sound, and its arguments about the investment benefits from that classification were true, the choice to exclude broadband-only providers would be a significant drawback. Wrongly labeling broadband as something other than a “telecommunications service” that’s eligible for support means Lifeline subscribers can get standalone broadband only if the carrier providing it provides telephone service too. This type of convoluted nonsense is exactly as ridiculous as it sounds, and it’s completely unnecessary too.

This classification choice is designed solely to avoid supposed broadband-investment harms from Title II that simply do not exist.

In 2016, the FCC sought to increase competition by expanding the number of eligible Lifeline providers and services by directly supporting broadband and inviting broadband-only providers into the program. But Pai’s legal theory locks broadband-only providers out of the Lifeline program — severely limiting its potential for expansion, competition and modernization.

And the legal Jenga tower this Commission has constructed to continue offering Lifeline support for broadband service (for now) — while explicitly removing broadband as a supported service — simply is not workable. To direct broadband subsidies to users through the Lifeline program, which aims to make critical communications services more affordable for low-income households, the agency cannot rely on a legal fiction. The universal-service statute makes plain that Congress anticipated a need to support a world beyond voice service, where multiple facilities such as cable and wireless infrastructure would compete to carry an “evolving level” of communications services.

What Congress didn’t anticipate was an FCC like this one, intent on playing word games that would shackle a modernized broadband subsidy to support for voice services that the FCC has decided to transition away from supporting at all.

In sum, making broadband support the centerpiece of a modernized Lifeline program requires including broadband-internet access as a supported service under Section 254(c) of the Communications Act — and that requires correctly reclassifying broadband as a Title II telecom service.

The mess that results from taking a contrary tack is unconscionable. Tuesday’s order openly admits that if the agency’s legal contortions fail to convince the courts, this FCC would rather see broadband removed from the Lifeline program entirely than consider properly reclassifying.

These are not the words of an agency that believes it has found a workable legal framework to support critical modernization of a universal service program, but one trying to cover its tracks and retcon its justifications for scrapping the legal authority Congress gave it.

There is no reason for the FCC to back itself into this corner. It could have pursued (and did, for two years under Title II) light-touch regulation not by misclassification but under the law in Title II and the Section 10 forbearance it offers.

Instead, by cynically defining away its authority, in order to gift regulatory relief to internet service providers, the Commission has boxed itself into a position where it is prohibiting — not promoting — competition in the Lifeline program from innovative providers.

Worse, the FCC’s Republican commissioners are shrugging their collective shoulders at the possibility of cutting broadband support entirely while miring Lifeline in the past instead of modernizing it.

The final tally for a failed FCC chairman

This flagrant indifference fits with this Commission’s history of attacks on the Lifeline program. And during a global pandemic when families are more reliant than ever on broadband connectivity, this is even more despicably cruel.

Nearly 80 million people in the United States lack an adequate home-broadband connection. Economic and racial gaps in broadband adoption persist. Only 48 percent of low-income households have a fixed broadband connection. 13 million Black people, 18 million Latinx people and 13 million Indigenous people lack the adequate home connectivity they need to fully participate in today’s economy and education systems. Lack of good and affordable broadband options is the biggest problem they all face.

Yet this FCC openly admits that, if put to the test, it would rather completely eliminate Lifeline for broadband than simply reconsider its suspect decision to strip broadband of its classification as a telecommunications service.

Nothing coming out of Washington and this White House should shock anyone anymore, yet this is another example of a Trump appointee putting ideology ahead of sound process, policy impacts and the law he should be following.