In an exclusive interview today just hours after announcing his plan to repeal "Net Neutrality" rules governing the actions of Internet-service providers (ISPs) and mobile carriers, Federal Communications Commission (FCC) Chairman Ajit Pai has an in-your-face prediction for his critics: "Over the coming years, we're going to see an explosion in the kinds of connectivity and the depth of that connectivity," he said this afternoon. "Ultimately that means that the human capital in the United States that's currently on the shelf—the people who don't have digital opportunity—will become participants in the digital economy."
Pai stressed that regulating the Internet under a Title II framework originally created in the 1930s had led to less investment in infrastructure and a slower rate of innovation. "Since the dawn of the commercial internet, ISPs have been investing as much as they can in networks in order to upgrade their facilities and to compete with each other," he says. "Outside of a recession we've never seen that sort of investment go down year over year. But we did in 2015, after these regulations were adopted." In a Wall Street Journalcolumn published today, Pai says Title II was responsible for a nearly 6 percent decline in broadband network investment as ISPs saw compliance costs rise and the regulatory atmosphere become uncertain. In his interview with Reason, Pai stressed that the real losers under Net Neutrality were people living in rural areas and low-income Americans who were stuck on the bad end of "the digital divide."
Proponents of Net Neutrality maintain that rules that went into effect in 2015 are the only thing standing between rapacious businesses such as Comcast, Verizon (where Pai once worked), and Spectrum and an Internet choking on throttled traffic, expensive "fast lanes," and completely blocked sites that displease whatever corporate entity controls the last mile of fiber into your home or business. Pai says that is bunk and noted that today's proposed changes, which are expected to pass full FCC review in mid-December, return the Internet to the light-touch regulatory regime that governed it from the mid-1990s until 2015.
"It's telling that the first investigations that the prior FCC initiated under these so-called Net Neutrality rules were involving free data offerings," says Pai, pointing toward actions initiated by his predecessor against "zero-rating" services such as T-Mobile's Binge program, which didn't count data used to stream Netflix, Spotify, and a host of other services against a customer's monthly data allowance. "To me it's just absurd to say that the government should stand in the way of consumers who want to get, and companies that want to provide, free data."
The FCC is not completely evacuating its oversight role. ISPs, he says, will need to be completely transparent with customers about all practices related to prioritizing traffic, data caps, and more. Pai believes that market competition for customers will prove far more effective in developing better and cheaper services than regulators deciding what is best for the sector. "In wireless," he says, "there's very intense competition—you have four national carriers and any number of regional carriers competing to provide 4G LTE, and a number of different services. In those marketplaces where there's not as much competition as we'd like to see, to me at least, the solution isn't to preemptively regulate as if it were a monopoly, as if we're dealing with 'Ma Bell,' but to promote more competition."
Pai says that one of the major mistakes of Net Neutrality is its pre-emptive nature. Rather than allowing different practices to develop and then having regulators intervene when problems or harms to customer arise, Net Neutrality is prescriptive and thus likely to serve the interests of existing companies in maintaining a status quo that's good for them. In terms of enforcement of anti-competitive practices, Pai says the Federal Trade Commission (FTC) is better equipped to deal with problems. "The FTC can take action even in the absence of finding harm, consumer harm," he notes, "so even if consumers aren't harmed, if [FTC regulators] deem a particular business practice, any business practice to be unfair or deceptive, they have authority under Section 5 to take action against it. So that's a pretty powerful tool that they've used even in the last couple of years against telecom providers and others in the internet economy whom they believe are not protecting consumers."
In a wide-ranging conversation (listen below as a Reason Podcast), I asked Pai to lay down specific benchmarks by which consumers might judge whether repealing Net Neutrality rules isn't a mistake. He pointed to factors such as the number of fixed and mobile connections, the average costs and speeds of internet plans, and the volume of capital investment as indicators by which his policy could be held accountable.
He also stressed that the increasing shift from traditional ISPs to mobile wireless will benefit from a looser regulatory framework, including the opening up of spectrum that is either under-utilized, off-limits, or otherwise gathering dust. "We're entering a new era of technology known of 5G and that's going to involve massive amounts of investment in networks and spectrum. And that's the kind of thing that will be a big breakthrough for consumers on the wireless side." Referencing Benedict Evans, a partner at the venture capital firm Andreessen Horowitz, Pai believes that "mobile is eating the world": "All of these services are migrating to wireless, and particularly in the future, whether we're talking about low-bandwidth applications, like monitoring yogurt trucks that drive across the countryside, or high bandwidth applications like Virtual Reality, a lot of this is going to be taking place over wireless."