Witnesses Struggle To Cite Proof of Net Neutrality Harms to Market

House Communications Subcommittee ranking member Anna Eshoo, D-Calif., scoffed at “lots of fog” on investment, and declared early on that the sky is not falling due to the order. Many Republicans and some witnesses fixated on the order’s reclassification of broadband as a Communications Act Title II service. “Give me an 18-carat example, if you will, of where investment, since the FCC came out with what they came out with, where essentially the sky is falling in or a dark pattern has emerged since then that this is so off the charts that Americans and shareholders beware? Across the whole ecosystem -- where is it?” Eshoo asked.

“Economists cannot say at this point, using direct data,” replied Robert Shapiro, chairman of Sonecon, whose clients include AT&T and Google. “What is in, according to the way I read those data, show a decline, which I attribute to uncertainty.” Shapiro repeatedly slammed what he saw as possible uncertainty resulting from the order. Shapiro later told House Communications Vice Chairman Bob Latta, R-Ohio, he has “every reason to believe” reclassification will “reduce investment” in what's “likely to include a lot of rural build-out.”

Effects of the order are “yet to be felt,” Frank Louthan, managing director at Raymond James Financial, told Rep. Billy Long, R-Mo. “The rate of change is very slow.” But Louthan changed his tone when speaking to other lawmakers. “Investment is already suppressed because of these things,” he later told Rep. Renee Ellmers, R-N.C.

House Communications Subcommittee Chairman Greg Walden, R-Ore., warned of “ripple effects” of the order and cited uncertainty, such as what will happen in the courts and under a new FCC chair, plus “hidden costs” of compliance. “What if someone pushes the FCC to walk back some of the forbearance they agreed to as part of their Open Internet order?” Walden asked in his opening statement. “All of these uncertainties serve to tamp down dollars spent on improving networks and services to consumers.”

“It’s less innovation” and “less investment,” insisted Commerce Committee Vice Chairwoman Marsha Blackburn, R-Tenn., blasting the FCC's “Title II power grab.”

Rep. Brett Guthrie, R-Ky., asked Progressive Policy Institute Chief Economic Strategist Michael Mandel, who strongly slammed reclassification, about companies cutting back, but Mandel had no concrete information about market effects. “We don’t know what’s going to happen as things change, evolve over the next several years,” said Mandel, saying the issues are long-term ones that change over time. The ISPs “are the top investors and continued to be so,” Mandel said. But Guthrie suggested “we’re moving into an unknown,” and Mandel again slammed Title II: “If your car is working, why replace the engine?”

Nicholas Economides, economics professor at New York University Stern School of Business, was the one witness who defended the order and he also pushed back against claims of any investment harms. “It’s too early to say whether the rule is going to create more investment or less investment,” Economides said. “And economic theory supports that.” Commerce Committee ranking member Frank Pallone, D-N.J., told him he was “troubled” by the claims of investment harm “given there’s very little data that proves that point.”

Rep. Mike Doyle, D-Pa., questioned the funding behind witnesses critical of the order and worrying about its effects. He asked whether the Progressive Policy Institute receives money from telecom companies. The funding comes from a “wide variety” of sources, including “telecoms and edge providers,” Mandel said, refusing to name specific companies. AT&T has supported Shapiro’s research on Title II. Shapiro mentioned the research during the hearing without disclosing the financial support. Walden suggested Google has supported Economides, which Economides denied. “We’ll show you some of these documents that would indicate something different at some point,” Walden said.