Analysis

When the Federal Communications Commission classified broadband Internet service providers as Title II common carriers in the 2015 Open Internet Order (2015 OIO), it argued that emerging industries had thrived under “light touch” variations of Title II regulations and that broadband would be no different. This argument does not hold up to scrutiny, write Thomas Hazlett, H.H. Macaulay Endowed Chair in Economics at Clemson University and former Chief Economist of the FCC, and Joshua Wright, Executive Director, Global Antitrust Institute at George Mason University and former FTC Commissioner, in their article “The Effect of Regulation on Broadband Markets: Evaluating the Empirical Evidence in the FCC’s 2015 ‘Open Internet’ Order.”

This blog post is the fifth in a series featuring the contents of a recent special issue of the Review of Industrial Organization, organized by the Technology Policy Institute and the University of Pennsylvania’s Center for Technology, Innovation, and Competition.

According to our preliminary research, there is some form of zero-rating in 20 out of 28 European nations. Zero-rating spans European Union economies of all sizes, from the United Kingdom to Romania, Germany, and Spain. This finding is consistent with Digital Fuel Monitor’s reports: in 2014, European Internet Service Providers offered at least 75 zero-rated apps; in 2015, they offered at least 35 zero-rated apps; and in 2016, they offered at least 62 zero-rated apps. Our preliminary research has found that today, in 2017, there exists at least 73 zero-rated apps across the continent.

As a result of the speed of information and communications technology convergence, the concept of the business ecosystem has been adopted for understanding the business value chain. Within the business ecosystem, keystones play a central role. Currently, Google and Apple are the keystones of the mobile ecosystem, and they have been quite active in acquiring firms over the past years. This study empirically examines the effects of these two firms’ mergers and acquisitions (M&As), especially the different effects on the acquirer and the rival depending on the type of target firm. After the target firms are classified according to the businesses of the acquiring firm that each target firm is related to, the study examines the effects of different types of M&As on the values of the acquirer, the rival, or both. The results provide a basis for understanding the complex relationship between two keystones within the mobile business ecosystem.

[Commentary] There are differences between what tech giants (Google, Facebook, Amazon, Netflix) of the internet and their smaller counterparts are saying. More importantly, there’s a difference in how the most powerful internet companies are incentivized to act. It’s a fine line, but an important distinction for those who want the existing net-neutrality rules to stay. The protests from big tech companies themselves were more subdued than past demonstrations, and few of the major companies involved explicitly demanded the legally enforceable, Title II-based net-neutrality rules stay in place today. And that leaves the major tech firms a small but significant bit of wiggle room.

Tech giants' relatively meager actions on July 12 serve as a reminder: Net neutrality is about the small, not the big. If the (still mostly hypothetical) fears of Title II advocates come true, and ISPs are able to set tolls for access to better quality, the companies with better funding will more easily be able to pay them.

The Federal Communications Commission’s 2015 Open Internet Order follows years of advocacy to implement network neutrality rules, which appears to contravene Congress’ intention that the internet be free of regulation and the people’s will for a free market for broadband. The application of the Title II regulatory framework to the internet has harmed consumers and innovators. While proponents claim they want competition in the broadband market, the objective of Title II is to create a system of government-owned broadband networks under FCC control and to significantly reduce, if not eliminate, private-sector provision.

[Commentary] A curious thing happened on a day that many internet companies and public policy groups had christened a “Day of Action” aimed at protesting the Federal Communications Commission’s plan to overturn so-called net neutrality rules. The curiosity was that several broadband companies — the very same companies that pushed to rewrite the rules that undergird net neutrality — put out statements suggesting that they, too, supported the aims of the protesters.

So why, now, are broadband companies suggesting that they support the aims of the other side? There are two possibilities: A cynic might argue that it’s just puffery, that the broadband industry is simply trying to present a friendly image to an outraged online horde. Or you might take them at their word. Here’s one idea for longtime proponents of network neutrality: Call the broadband companies’ bluff, if that’s what it is. Maybe it is time to push Congress, rather than the FCC, to take up the neutrality fight — and maybe, finally, end the debate for good. Internet giants control the world’s most important channels for information, from your Facebook feed to Google results to your phone’s home screen. They are more than capable of applying enormous pressure to members of Congress to push for what they want. And then, if nothing else, we’ll be able to see where the broadband companies really stand.

A regulatory revival at the Federal Communications Commission during the Obama Administration dramatically curbed capital spending on broadband infrastructure. Since the specter of reclassification was first introduced by then-Chairman Julius Genachowski in 2010, investment has consistently been at least 20% below expectations. More recently, significant attention has focused on the reductions in infrastructure investment following the 2015 Open Internet Order (adopted on February 25, 2015). Data from USTelecom and CTIA, for instance, show sizeable declines in capital spending in 2016, the year following the decision. Even Free Press, an advocate for Title II, offers evidence that real investment declined in 2016. Given the importance of broadband infrastructure deployment in the modern economy, the decline in capital spending will almost certainly play a role in the current FCC’s proposal to reverse the reclassification decision and the legal defense of that decision.

[Commentary] Could a consumer revolt against cable television rates before the 1992 election replay with digital data in the upcoming election cycle?

Rep Marsha Blackburn (R-TN), chair of the of the House Commerce Committee’s Subcommittee on Communications and Technology, introduced a bill that requires internet service providers to get opt-in consent from consumers before sharing sensitive personal information, and allow opt-out of sharing other information. Her abrupt and unconventional turn on internet privacy came after widespread public reaction to the congressional repeal of the Federal Communications Commission’s privacy rules.

Those who believe that the bill is not likely to pick up any legislative momentum might argue that general anxiety about digital trails left across the internet does not pack the political punch of rising cable rates that consumers could feel when they balanced their checkbooks each month. Blackburn’s bill also may be seen as a response to some of the edge providers that were most vocal in their objections to the repeal of the privacy rules.

"There is no other industry in the world like broadcasting,” the CEO of the National Association of Broadcasters (NAB) Gordon Smith told his annual convention. “No other industry has, at its core, such an overarching focus on bringing communities together and serving the public good,” Smith opined. “No other media industry is as dedicated to supporting our local communities.” That “overarching focus” on “serving the public good” is being stealthily watered down, with the industry’s support, by the Trump Federal Communications Commission. In little-noticed decisions, the agency has been removing regulatory requirements to protect broadcast localism, shield a diversity of local voices, and avoid the establishment of a dominant national broadcaster.

Exhibit One: imagine broadcast localism without a local broadcast studio. The Trump FCC, voting along party lines, is now preparing to eliminate this “fundamental” part of a licensee’s local community obligation.
Exhibit Two: skirting Congress’ mandate that no single broadcaster have more than 39 percent of the national audience.
Exhibit Three: using contracts to get around local ownership rules.
In short, the Trump FCC has set the stage for a dramatic overhaul of the national landscape. It took no time for one company to seize the opportunity.

Sinclair Broadcast Group, owner of more TV stations than anyone else and a Trump election ally, quickly embraced the new reality. It now appears that broadcast localism, a diversity of local voices, and the congressional mandate against one company dominating local broadcasting are about to become casualties of the Trump FCC.

[Tom Wheeler is the former Chairman to the Federal Communications Commission]

If Congress grants an exception to legacy news publishers to pressure Google and Facebook, it might lead to the kind of concessions publishers have won in Europe. In the US, pressure on Facebook and Google has been successful in helping publishers gain traction, but the culture of European publishing and the vigor of its regulatory environment is totally different from the free-market roots of the US news industry.

Whatever the outcome, a larger question remains about the right relationship between journalism and the most powerful companies in the world. This is a long-term issue, which is unlikely to be settled by one group or cartel gaining regulatory concessions but, rather, by a more profound change in the regulatory and commercial environment.