A U.S. appeals court on Thursday temporarily blocked the Biden administration’s efforts to restore net neutrality rules while a legal case brought by the broadband industry proceeds.
The delay is just the latest in the on-again-off-again decade-long history of the Federal Communications Commission’s attempt to prohibit internet service providers (ISPs) from blocking,slowing down, or otherwise discriminating in the provision of internet service. The rules, which would regulate ISPs (like phone companies) under Title II of the Communications Act, were first put in place by the Obama administration and later repealed by the Trump administration.
In its decision Thursday to block the rules from going into effect, a Sixth Circuit Court of Appeals panel argued that the broadband industry was likely to succeed on the merits in the underlying case, writing, “We cannot assume that Congress granted the Commission this sweeping power.” The court is now set to hear the case against the Biden FCC’s attempt to reinstate the rules this fall.
That case will hinge on legal questions of just how much power the Federal Trade Commission has to impose these rules. But hanging in the balance of that case are other underlying questions about the actual impact the rules have on consumers and businesses—and whether regulation is needed in the first place.
Chilling investment
For decades, the core of the broadband industry’s argument against net neutrality has been that regulation will chill industry investment in broadband networks.
“It shouldn’t take an economist or a PhD to understand heavy regulations, particularly ones that even slightly open the door to price controls, and other monopoly authorities, do not encourage investment. Period. Full stop,” says Jonathan Spalter, president and CEO of the industry lobbying group USTelecom.
USTelecom’s own analysis has suggested that between 2015 and 2016, the year the Obama FCC rules went into effect, broadband providers invested $2 billion less in U.S. network infrastructure. “When that cold, wet blanket of regulation—or its prospect—was a risk,” Spalter says, ISPs invested more cautiously. Regulatory uncertainty, the industry argument goes, spooks companies from investing as much as they otherwise would.
But proponents of net neutrality have accused the industry of skewing its numbers by leaving out publicly announced investments by Sprint and AT&T and including estimates from private companies that don’t have to publicly disclose their investments. Free Press, a leading net neutrality advocacy group, has countered the industry’s figures with its own analysis of Census Bureau data. That analysis found that in 2017, the year that Title II regulations were in place, total annual investment by telecommunications providers in the U.S. actually peaked. In fact, after the rules were repealed in late 2017, investment fell steadily from 2018 onward and didn’t pop again until 2022. Another Free Press analysis looking at just publicly traded ISPs found that, in the two years after the FCC voted to impose Title II regulations, capital investments actually rose 5%.
That’s not to say net neutrality rules caused investment or disinvestment, argues Matt Wood, vice president of policy and general counsel at Free Press; it just means the broadband industry has its own ebbs and flows that are independent of those rules. “Companies invest when there’s demand, when they see a return on investment for it, and when the technology cycles dictate it,” Wood says.
USTelecom has its own issues with Free Press’s numbers, arguing that the organization’s analysis fails to account for the lag time between regulations and investment decisions, as well as other “confounding factors” that may drive an ISP’s investing decisions.
Still, Free Press and others have also frequently pointed to ISP executives’ own statements on earnings calls to back up their argument. In 2017, for example, Tom Rutledge, then-CEO of the telecom giant Charter, said on an investor call that net neutrality rules hadn’t affected business, but nonetheless “had the potential of affecting us.” (Charter declined Fast Company’s request to comment).
To net neutrality advocates, that comment—along with similar ones made by top executives at companies including AT&T and Comcast—was seen as a smoking gun. When the Trump administration did, in fact, repeal the net neutrality rules in late 2017, Rutledge’s remarks were held up as evidence that when the rules were in place, even broadband head honchos said business was unaffected.
“If there was some sort of holy terror of, ‘Oh, no. The FCC is going to act, and therefore, we’re going to turn off the faucet and not invest anymore,’ [ISPs] would be under securities law obligations to tell that to their investors,” Wood said, “and they say just the opposite.” In a recent filing with the FCC, Free Press analyzed investor calls and executive appearances at investor conferences throughout 2023 and found that neither Title II nor net neutrality ever came up.
Blocking and throttling
Then there’s the issue of whether Title II rules are even necessary to protect consumers in the first place. Industry groups have long argued that major violations of net neutrality principles are “exceedingly rare,” and that most differentiation in service that customers experience can be attributed either to the service plans they bought or the routine network management that broadband providers undertake to manage fluctuations in demand.
“The ISPs that are our customers are fully embracing the concept, not only in spirit, but in practice, that we’re not going to block traffic, throttle traffic, or anti-competitively do any paid prioritization,” says USTelecom’s Spalter.
Despite some well-known exceptions—like when Verizon slowed down California firefighters’ service during wildfires in 2018—Wood concedes that examples of problematic behavior have been rare. He notes that’s partly to do with the fact that California passed a net neutrality law shortly after the FCC repealed the federal one, which drove broader changes across the industry among companies that were already complying with the law in California. “A big state swings a lot of people’s behavior,” he says.
But there is some evidence that less overt instances of throttling—or slowing down service—have become almost routine. A group of university researchers has spent years studying what they call “differentiation” of service, using an app called Wehe that crowdsources instances of net neutrality violations across a range of ISPs. Data collected from the app, which has been used by hundreds of thousands of participants, suggests that every ISP throttles, and not just for the sake of network management. Wehe’s data suggests ISPs regularly throttle specific apps like, say, YouTube or Netflix.
That would seem to suggest that Title II regulations are, in fact, needed to prevent this kind of behavior. And yet, the researchers have found that these violations occurred even when the FCC’s rules were in place. That’s because the FCC wasn’t really enforcing the rules once the Trump administration took over in 2017, says David Choffnes, one of the creators of Wehe and an associate professor of computer science at Northeastern University. “Rules without enforcement are about as effective as not having rules at all,” he says.
Spalter, for one, argues Wehe’s findings oversell the actual impact this behavior has on consumers. “The differentiation that this app seems to suggest creates a distortion that’s indistinguishable to the human eye,” he says.
Still, there are others, including former FCC Chair Tom Wheeler, who implemented the Obama-era rules, who argue that focusing on blocking and throttling is an outdated way of thinking about net neutrality. “That’s so yesterday’s issue,” he says.
The reason to regulate ISPs under Title II, Wheeler argues, isn’t just to prevent them from blocking and throttling; it’s to force them to act in a “just and reasonable” manner as the law requires, no matter how the technology evolves or what new forms of discrimination may emerge in the future. “The question today and going forward is: What are the behaviors of the companies that control the pathway that is the most important network of the 21st century?” Wheeler says. The answer to that question is now in the court’s hands.
Update: This story was updated after the U.S. appeals court on Thursday temporarily blocked the Biden administration’s efforts to restore net neutrality rules.