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House battles over investment impact of net neutrality

House battles over investment impact of net neutrality
© Greg Nash

House lawmakers continued a months-long tussle over the Federal Communications Commission's (FCC) new net neutrality regulations in a Tuesday hearing that probed the rules' impact on investments. 

Republicans, who fiercely oppose the regulations, invited a slate of economists to testify before the Energy and Commerce Committee on the potential harm the rules will have on infrastructure investment from Internet service providers (ISPs) such as AT&T and Comcast. 

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"Clearly, the private sector will continue to invest in broadband build-out and improvements. The question is, will that investment plateau or even decline over time," said Rep. Greg Walden (R-Ore.), who leads the subcommittee on communications and technology. 

The regulations have set off a fierce debate in Washington and around the country, mainly because they reclassify Internet service under "common carrier" authority governing traditional telephone service. 

The authority is meant to give the FCC more power to enforce net neutrality rules that prevent ISPs from prioritizing any kind of traffic above another. Those rules bar blocking, throttling and paid prioritization. They also include a general conduct standard to guard against novel forms of abuse. 

"We are no longer debating whether there should be net neutrality rules but instead how to best put them into place," full committee Chairman Fred Upton (R-Mich.) said, pointing to how far the debate has moved in the past year. 

The economic argument is a major reason why telecom companies are challenging the rules in court. Oral arguments in the U.S. Court of Appeals for the D.C. Circuit are set for December. 

A number of economists on the panel said it is too early to point to evidence that the 4-month-old rules are deflating investment.

The three witnesses invited by Republicans, however, predicted the FCC decision would harm industry investment in the long run. 

Robert Shapiro, co-founder Sonecon LLC, has predicted investment could eventually decline between 5 percent and 20 percent per year because of the rules.

He said the rules will have a "substantial adverse effect" but noted that those who claim to know fully how the rules will affect investment are "talking through their hat."  

Michael Mandel of the Progressive Policy Institute similarly said, "We don't know now what is going to happen." The institute has previously blamed the rules for a decline in broadband capital expenditures in the first half of 2015, though others have disputed the cause. 

New York University professor Nicholas Economides, the only witness who supports the rules, said that the economic impact of the entire Internet marketplace, and not just Internet service providers, should be taken into account. 

Echoing analysis from the FCC, he noted that even if broadband investment declines because of the rules, different areas would see increases because of new protections. 

Rep. Anna Eshoo (D-Calif.) said many of the doomsday predictions point to uncertainty in the marketplace. But she said much of that uncertainty has come from companies themselves suing over the new rules. 

"It's the ISPs that went to court that created the uncertainty," she said.