George Ford

Explaining non-adoption for Internet service has led to a debate about whether non-adopters place a low value on Internet use or whether the price of connectivity is too high. Survey evidence consistently points to a lack of interest as more important than price, but a new report by the National Digital Inclusion Alliance claims that recent survey evidence points to price as the dominant cause. The conclusion is impermissible.

Recently a new study seeking to rebut the Federal Communications Commission’s conclusion on investment was made public. The author of the study is Christopher Hooton, Chief Economist of the Internet Association (a proponent of Title II regulation) and a scholar at George Washington University’s Institute of Public Policy. This new paper is not Hooton’s first attempt at an empirical analysis of investment and Net Neutrality, the first being an unskilled effort in 2017. In that work, Hooton fabricated large portions of his data and failed to understand what sort of investments he was studying

In 2018, the Federal Communications Commission’s Restoring Internet Freedom Order reversed its 2015 decision to apply common carrier regulation to broadband Internet access services under Title II of the Communications Act of 1934. Empirical evidence indicating negative investment effects of the regulation played a key role in this reversal, though the quantification of these investment effects were a matter of substantial controversy. This article surveys the studies cited in the recent decision and the FCC’s scrutiny of them.

Broadband availability data is collected from broadband providers at the census block level, which is the smallest geographic unit used by the Census Bureau for data tabulation. In collecting and reporting these data, it is assumed that if a single home in a census block has access to broadband (however defined), then every home in the census block has broadband.

USTelecom recently released an update to its US broadband industry capital spending series. In this update, USTelecom reported that sector investment rose $1.5 billion (or 2%) between 2016 and 2017—a reversal of a two-year decline following the 2015 Open Internet Order.

Free Press Policy Director Matt Wood told Congress that “Comcast’s total capital spending for the two years following the 2015 [net neutrality] vote increased by 26 percent." In contrast to claims, Comcast’s investment data provide, if anything, evidence that reclassification has been detrimental to capital spending. 

In this bulletin, I aim to quantify the relationship between higher broadband speeds (10 Mbps versus 25 Mbps) and the growth rates in important economic outcomes in U.S. counties including jobs, personal income, and labor earnings. Doing so exposes the potential for severe selection bias in studies of broadband’s economic impact, which is addressed in this study using Coarsened Exact Matching. Once balanced, the data reveal no economic payoff from the 15 Mbps speed difference between the years 2013 and 2015.

[Commentary] This version of the Bytes Chat discusses the wisdom of restrictions against municipal broadband with three economists who are following the issue closely.

Kyle Wilson: It’s worth remembering that unlike schools, installing a municipal network creates a new stream of revenue, even though it may not be enough to break even.

Using data on the prices paid by multichannel video programing distributors (“MVPDs”) for basic cable networks, Ford conducts a retrospective analysis of the price effects of the Comcast-NBCU merger. Estimates from both the difference-in-differences and lagged-dependent variable models indicate no systematic increase in the prices for Comcast’s networks following the merger, including general interest programming, news channels, and national and regional sports networks. Programming costs, however, exert a potent influence on affiliate prices, with full pass through in many cases.

Free Press recently released a report on the capital expenditures of broadband service providers entitled, It’s Working: How the Internet Access and Online Video Markets are Thriving in the Title II Era. The Free Press Report, authored by S. Derek Turner, claims that capital spending by Broadband Service Providers (“BSPs”) “accelerated” following the Federal Communications Commission’s reclassification of broadband Internet access connections as a Title II common carrier telecommunications service in its 2015 Open Internet Order, increasing by 5.3 percent between 2013-2014 and 2015-2016. The Internet Alliance, a trade group representing the interests of companies supporting reclassification, appears to use the Free Press’ data to support the same claim.

Free Press’ analysis, as usual, fails to meet the most basic of professional standards, and involves nothing more than the adding up of nominal total capital expenditures for a sample of BSPs and comparing the sums between two periods. Such simple-minded analysis is incapable of measuring the effect of a policy change. The relevant question is not whether capital spending rises or falls in any given year or pair of years, but whether such expenditures are below the levels they would have been “but for” the regulatory intervention. To answer that question, we need a counterfactual. That is, if absent a regulatory intervention capital spending was scheduled to rise by 10 percent next year (the counterfactual), but rises by only 5 percent due to an intervention, the intervention reduces investment despite the fact expenditures were higher. Unlike recent research finding sizable harmful effects from reclassification, the Free Press Report offers no counterfactual, so their Report adds nothing serious to the analysis of Net Neutrality and reclassification.