Net Neutrality, Reclassification and Investment: A Counterfactual Analysis
Perspectives, PHOENIX CENTER FOR ADVANCED LEGAL & ECONOMIC PUBLIC POLICY STUDIES, April 2017
13 Pages Posted: 7 Jun 2017
Date Written: April 25, 2017
Perhaps the most frequently cited goal of telecommunications policy is the promotion of infrastructure investment, an outcome of some statutory importance. Investment in telecoms infrastructure, in turn, stimulates jobs, which is another key target of public policy. Naturally, in the heated debate over Net Neutrality, the effects of regulation on investment are a central concern, with special attention given to the presence or absence of investment effects from the FCC’s 2010 proposal and subsequent controversial 2015 decision to reclassify broadband Internet access as a common carrier telecommunications service under Title II of the Communications Act of 1934. Using standard econometric methods, reclassification reduced telecommunications investment by about 20% to 30%, or about $30 to $40 billion annually. Actual investment averaged $126 billion annually, a sizable expenditure, but the counterfactual analysis indicates the average investment over the five-year window would have been about $160 billion (or more) annually. That is, over the interval 2011 to 2015, another $150-$200 billion in additional investment would have been made “but for” Title II reclassification. Notably, I find no decline in investment following the release of the FCC’s “Four Principles” to promote an Open Internet in 2005, suggesting it is reclassification — and not neutrality principles — that is reducing investment.
Keywords: Net Neutrality, Investment, Title II, Open Internet, Telecommunications, Broadband, Regulation
JEL Classification: L96
Suggested Citation: Suggested Citation