Increasing Internet Regulations Will Hurt Consumers

The President Biden’s impending appointment of a new Democratic chair to the FCC will will undoubtedly rekindle an effort to reimpose public utility-style regulations on internet services.

The return of these internet regulations, referred to as net neutrality, would be incredibly harmful to consumers and the broader economy. The passage of the Open Internet Order (OIO), which imposed net neutrality rules in 2015, directly led to a significant drop in investment for new broadband infrastructure. As a result, internet access in rural areas decreased, and new jobs inside and outside the industry were lost, resulting in depressed GDP growth. To avoid more pain for consumers and the broader economy, the Biden Administration and the FCC should continue to embrace the light-touch approach to internet regulation that has dramatically benefited internet users and the overall American economy.

The passage of OIO in 2015 reclassified internet service providers under Title II of the Communications Act of 1934. Under Title II regulations, providers were treated like a public utility similar to phone networks and water companies. Under Title II regulations, internet service rates and practices of providers were monitored by the FCC. This classification also prohibits these companies from blocking traffic to certain sites, slowing down or throttling speeds, and charging competitors different prices to access their services. 

Before 2015, internet service providers were regulated under Title I of this Act, which classified them as information services exempting them from these regulatory requirements. Added regulations under Title II increase compliance costs for internet companies reducing the amount of capital they invest in infrastructure and innovation.

Prior to net neutrality rules, investment from internet service providers was growing tremendously. According to data from US Telecom, investment in broadband increased by nearly $14 billion between 2009 and 2014.

This growth in investment before net neutrality rules contributed to the creation of nearly 22 million new fixed broadband connections in the United States, expanding the percentage of households with access to the internet from 59% at the beginning of 2009 to 74% by the time net neutrality began in April of 2015.

The introduction of net neutrality regulations under the OIO caused an enormous drop in investment into new broadband infrastructure. US Telecom also found that after the passage of the OIO order, nearly $3 billion less was invested in broadband in 2016.

This drop in private investment had a substantially negative effect on the economy. The New York Law School concluded that continuing net neutrality regulations beyond its repeal in 2017 would have cost up to 700,000 jobs and $80 billion in GDP over the next decade.

The removal of net neutrality regulations in 2017 with the Restoring Internet Freedom Order (RIFO) saw a return of high investments into broadband. According to a survey conducted by the Cellular Telecommunications and Internet Association, wireless investment grew by around $56.5 billion between 2017 and 2019. Additionally, over 72,000 new cell sites were activated during this time, around four times more than during the OIO. In 2019 alone, more than 46,000 cell sites were built, higher than the three prior years combined.

After net neutrality regulations were repealed, the percentage of consumers with access to the internet in rural areas skyrocketed. Under OIO, the number of rural Americans with broadband access dropped from 58% at the beginning of 2015 to 50% by the end of that same year. Since the repeal of OIO, the number of rural Americans with internet access has returned to 63%, the highest level since December 2013.  This buildout has given more people in rural areas the ability to reap the many benefits of an internet connection, such as getting healthcare through telehealth, accessing online educational opportunities, or working remotely.

The abolition of net neutrality also resulted in considerable improvements to internet speeds. Data from the Federal Communications Commission shows the average advertised download speeds in the U.S. in 2017 hovered around 70 Mbps. One year after the net neutrality rules were abolished, average speeds rocketed to 135 Mbps. By 2019, advertised speeds reached 146 Mbps, more than twice the amount from the same period two years earlier.

Higher internet speeds offer consumers the benefits of faster download and upload speeds, as well as better video streaming quality. For businesses, higher speeds improve employee productivity and customer service as well as provide the opportunity to reach customers online. Ensuring these speeds are able to continue to improve will require keeping light-touch regulations that promote innovation in the broadband space.

Returning to net neutrality regulations would be devastating for the future of broadband in America. Title II regulations on internet service caused a direct decrease in the amount invested in broadband infrastructure. As a result of the drop in investment, fewer Americans had access to internet service in rural areas and the nation experienced less economic growth. Since net neutrality regulations were removed, more consumers have obtained internet access and faster speeds, thanks to a higher rate of broadband investment.  The current Administration and the FCC should be promoting a regulatory environment that allows providers to deliver more affordable and faster internet to consumers. Applying onerous and costly regulations will do the opposite.

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