Pai Is No Jedi
The latest news for free-market Jedi Ajit Pai isn’t good.
The FCC chairman's rationale for ending Net Neutrality in 2017 was that existing Title II rules had supposedly shackled the forces of the marketplace, “deter[ing] the massive infrastructure investment that we need.” If the rules were allowed to stand, he said, we’d “pay the price in terms of less innovation.”
In an ill-advised effort to make his point, Pai starred in a video dressed as a Star Wars Jedi, brandishing a lightsaber against evil internet-user safeguards.
But his wizardry isn’t working, and none of his claims from 2017 have turned out to be true.
A fool’s errand
At the time of Pai’s rulemaking, Free Press analysis showed ISPs’ capital expenditures were up under Title II protections. We also reported that broadband providers and wireless carriers were continuing to innovate, dropping data caps from plans and investing in better delivery of streaming video.
We've also shown that following the FCC's restoration of Title II in 2015, ISPs rolled out faster services, with the phone companies finally upping their game to compete with the cable industry's swifter speeds.
At the end of 2014, AT&T offered what the FCC considers to be the minimum speed for broadband in only 5 percent of its territory. But one year after the Net Neutrality rules were adopted, AT&T offered this level of service in nearly 40 percent of its territory
One year has passed since Pai stripped away these rules, and not only have these ISPs begun interfering with our ability to connect with sites and services available across the web (see Public Knowledge's report documenting all of that), the glowing investment numbers Pai forecast with a wave of his saber just aren't there.
Some news from the past week:
Verizon reported its total company capex investment was down $0.5B, or about 3.4 percent in 2018.
AT&T reports that its 2018 capital expenditures dropped 1.4 percent compared to 2017.
Comcast’s latest earnings report indicates that the cable giant’s capex for 2018 actually decreased 3 percent.
Wall Street analysts report capital spending among the nation’s four largest cable providers (Altice, Comcast, Charter Spectrum, CableONE) is expected to decline by 5.8 percent in 2019.
As we’ve said repeatedly in the past, equating causation with correlation is a fool’s errand, especially with regard to market fluctuations and corporate investment. And it becomes even more foolish when you try to aggregate investment by multiple ISPs and draw conclusions from the resulting sum.
In reality, investment cycles in tech rarely if ever swing on any single FCC policy. Trump’s giant corporate tax cuts didn’t even move the needle. And companies’ investments rarely move in lockstep with one another. (For example: While AT&T, Verizon and Comcast were down, both Sprint’s and Charter’s capex numbers were up in 2018 — though Charter expects to significantly reduce its investment this year.)
There are so many other factors that come into play — including new technologies, interest rates and the economy, and competitive pressures. It’s all about economics on the ground, and what’s in the ground and where.
But that hasn't stopped Jedi Pai from repeatedly boasting that his decision to gut Net Neutrality has magically transformed the broadband industry into an investment-and-innovation fantasyland.
Today’s numbers tell a different, less simplistic story.
As Obi Wan likely said at some point: "The Force is weak with this one."