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Study: Broadband faces reduced investment due to Title II

The broadband industry faces a future of increased costs, business restrictions, and open-ended regulatory uncertainty that is likely to significantly reduce investment over the long term. So says an updated analysis of the impact of the Federal Communications Commission’s order that redefines Internet service providers as common carriers under Title II.

The study was released Tuesday by the U.S. Telecom Association in a blog post. USTelecom is one of a dozen cable and telecom organizations and companies challenging the FCC’s net neutrality order in the D.C. circuit court, which could hear oral arguments in the case by the end of the year.

Economists Kevin Hassett of the American Enterprise Institute and Robert Shapiro of the Georgetown Center for Business and Public Policy anchor their analysis on the arguments that substantial new regulation will:

  • raise the cost of most Internet communications;
  • reduce the efficiency of most network arrangements that depend on Internet platforms;
  • devalue the investments made in those platforms or based on them; and
  • force organizations to reorient their enterprises in ways that would minimize the costs of the regulation rather than maximizing efficient operations

In addition, they argue that the general conduct standard represents  a new regulatory hurdle to offering new services and innovations, and that would introduce delay and uncertainty into the innovation cycles for Internet-related products and services.

The scale of negative impact from Title II regulation could be “quite large, from about 5.5 percent to as much as 20.8 percent,” the authors said. Projections of investment harm may be “significantly understated” due to the negative effects of the uncertainty created by the Title II regime.

Advocates of Title II argue that the enhanced regulatory authority would not hamper investment or throttle the entry of new players into the Internet ecosystem.
“The history of the development of our modern communications landscape demonstrates that Title II preserves critical values, promotes competition and investment, and is flexible enough to accommodate changes in technology and the marketplace,” said Gene Kimmelman, president of Public Knowledge before the House subcommittee on communications and technology in February.