Republican senators yesterday claimed that net neutrality rules are hurting broadband network investment and urged Federal Communications Commission Chairman Ajit Pai to overturn them.
“Chairman Pai, I would encourage you and the commission to revisit that order and to rescind it in its entirety,” Sen. Ted Cruz (R-Texas) said during an FCC oversight hearing held by the Senate Commerce Committee yesterday. “I believe you would have the support of a majority of this committee and substantial support in Congress.”
Sen. Ron Johnson (R-Wisc.) agreed that net neutrality rules harm ISP investment and offered a lengthy analogy to explain why.
Johnson said he wants to cut through the “rhetoric, slogans, and buzzwords,” before saying that enforcing net neutrality rules is like letting too many people use a bridge and ruin people’s lawns. Net neutrality rules, he said, also give pornography the same level of network access as remote medical services.
“I know net neutrality sounds great, and in trying to convey why that harms investment, innovation, I’ve come up with an analogy. I kind of want to run this by you to see if this is pretty accurate,” Johnson told Pai. He continued:
Let’s say a group of neighbors want to build a bridge over a creek so they can cross over and talk to each other a lot, so it’s really for a neighborhood, maybe a dozen people. But then they find out that the local government is going to require that that bridge is open to the entire community of a million people, no prioritization whatsoever. They don’t get to cross first to go see their neighbor. A million people can come onto their property, ruin their lawns, and walk over that bridge.
Isn’t that kind of a similar analogy, is that a pretty good analogy in terms of what net neutrality is all about, not allowing for example a company that is going to invest billions of dollars in the pipeline, not allow them to sell a prioritized lane, for, I don’t know, doctors who want to prioritize distant diagnostics? They’re going to have to share that same pipeline, no prioritization, with for example people streaming illegal content or pornography? Tell me where that analogy is maybe not accurate.
Pai responded, “Senator, I think you’ve put your finger on one of the core concerns.” Everyone favors “an open Internet where consumers can access lawful content of their choice,” he said. “We also want to incentivize the construction of these networks, which requires massive capital expenditures… how to balance those concerns is something people of good will can disagree on. But our goal, to use your analogy, is to make sure that those bridges continue to be built, that they continue to be maintained and upgraded, as traffic modernizes over time.”
Johnson finished the exchange by saying, “in my example, I don’t think too many neighbors would chip in the money to build that bridge when they realize we’re not ever going to be able to use it or certainly not get priority on it.”
Does that make sense?
The net neutrality rules passed in 2015 when the FCC was controlled by Democrats prevent fixed and mobile ISPs from blocking or throttling lawful Internet traffic or giving priority to Web services in exchange for payment. Johnson seems to be mostly concerned about an alleged inability of doctors and healthcare organizations to pay for priority over illegal content and pornography.
Johnson’s analogy came at the end of a hearing that lasted nearly three hours and wasn’t disputed by other senators. But we can provide some additional context.
Net neutrality protections apply only to lawful Internet content, so the FCC rules do not prevent ISPs from blocking the illegal content that Johnson is worried about. ISPs can still block copyright-infringing materials and child pornography, for example. And if paid prioritization was legal, it wouldn’t necessarily be used only for healthcare and other things that Johnson wants prioritized—pornography businesses could presumably pay for faster network access as well. Net neutrality proponents argue that the potential existence of paid fast lanes would necessarily put everything else in a slower lane.
Perhaps more importantly, there is a way for telemedicine offerings to get paid prioritization under the FCC’s existing rules. The FCC distinguishes between “Broadband Internet Access Service (BIAS),” the usual type in which all Internet content shares the same network capacity and “Non-BIAS data services,” which are given isolated capacity to ensure greater speed and reliability. VoIP phone offerings, heart monitors, and energy consumption sensors qualify for this category, which is exempt from net neutrality rules. Telemedicine (another word for remote medical diagnosis) can also be exempt if it’s delivered over the network in the same way.
“We note that telemedicine services might alternatively be structured as ‘non-BIAS data services,’ which are beyond the reach of the open Internet rules,” the FCC’s net neutrality order said. The FCC reserved the right to scrutinize non-BIAS services to ensure that they don't harm competition, but the specific reference to telemedicine indicates that the FCC would not oppose isolated network capacity for remote medical diagnosis. The FCC did not provide any similar allowance for pornography.
Net neutrality rules don't apply to all Internet services
Net neutrality rules also don’t automatically impose restrictions on the Internet service purchased by businesses. The rules apply to “mass-market retail services,” such as the Internet plans purchased by households, small businesses, schools, and libraries.
“The term ‘mass market’ does not include enterprise service offerings, which are typically offered to larger organizations through customized or individually negotiated arrangements, or special access services,” the FCC’s net neutrality order said.
Enterprise service offerings can be sold to healthcare organizations, and so-called special access provides dedicated point-to-point connections to organizations including healthcare facilities. Each of these categories offers a higher level of reliability than regular home Internet offerings and is exempt from net neutrality rules. While a small doctor’s office might use a mass-market offering, special access service is marketed even to businesses with just one employee, according to the FCC.
Patients obviously use Internet services that are subject to net neutrality rules in their homes, and Internet service purchased with the FCC’s rural healthcare broadband subsidies are also subject to the net neutrality rules. But the biggest problem in rural areas isn't whether one type of Internet content gets priority over another, it's getting fast and reliable Internet access at all.
About 39 percent of America's rural population lacks access to fixed Internet services at broadband speeds of 25Mbps downstream and 3Mbps upstream, the FCC reported last year. Even in rural and urban areas that have broadband, there's often just one provider. At the FCC's 25Mbps/3Mbps broadband standard, there are no ISPs at all in 30 percent of developed census blocks and only one offering service that fast in 48 percent of the blocks, the FCC also reported.
Ars writer Peter Bright argued in 2014 that "We don’t need net neutrality; we need competition." If numerous ISPs competed for each customer's business, they'd be less likely to provide slow speeds or restrict access to Internet content. But when there's no competition, prices are higher, and Americans who don't like their ISPs' net neutrality policies can't switch to another one.
Net neutrality impact on network investment
Earlier in the hearing, Democrats and Republicans disagreed over whether net neutrality rules have harmed network investment. Cruz cited research by economist Hal Singer, who surveyed 12 major ISPs and found a broadband capital expenditure decline of 5.6 percent from $64.6 billion in 2014 to $61 billion in 2016. (Singer put 2015 investment at $62.4 billion.)
"In my view the biggest regulatory threat to economic growth on the Internet is posed by the FCC's Open Internet order," Cruz said. "I believe that regulating the Internet as a Title II public utility is contrary to the text of the law and was an illegal power grab."
While Cruz is an attorney, the legality of the FCC's net neutrality order was upheld last year by the US Court of Appeals for the District of Columbia Circuit.
Sen. Edward Markey (D-Mass.) pointed to the latest US Census figures that include data on more ISPs than the Singer study. The Census tallied up investments by wired, mobile, and satellite telecommunications carriers, finding $87.2 billion of investment in 2015, up from $86.6 in 2014. Census figures for 2016 aren't available yet.
"The Census Bureau reported that the US broadband and telecommunications industry spent $87 billion in capital expenditures in 2015," Markey said. "Meanwhile, last year almost half of all venture capital funds in this country went toward Internet-specific and software companies... There is no problem that needs fixing."
FCC Commissioner Mignon Clyburn, a Democrat, agreed.
"All of the reputable figures that I've seen say that investment is occurring. Venture capital money is flowing," Clyburn said. "According to SEC filings, where [ISPs] are to identify if there are any issues or barriers... there was no identification of the Open Internet [rules] being a negative when it comes to investment opportunities."
But Pai, who leads a Republican majority and can spearhead a repeal of net neutrality rules, is not convinced. "We have a number of declarations under penalty of perjury that have been submitted by wireless ISPs, for example, that they’re holding back on investment precisely because of these rules," he said.
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