Free State Does Math on Broadband Investment

Filing suggests multiplier needed to calculate wider economic hit from Title II

One of the hot-button issues in the debate over the impact of Title II regulations on broadband is their effect on investment.

ISPs argue that billions of dollars in investment have been foregone due to the regulatory overhang of Title II common-carrier rules, including the threat of rate regulation, either before the fact (ex ante) or after (ex post).

Free-market think tank the Free State Foundation is in the former camp and suggests the damage may be even greater than the numbers indicate.

As part of FCC chair Ajit Pai's proposal to roll back Title II and review net-neutrality regs, the agency is proposing to use a "multiplier" to calculate the amount, if any, of lost investment from Title II, beyond the immediate investment to the total impact of that lost investment, say on construction workers not getting paid because of buildouts not being built out -- something like counting the number of other dominoes that fall rather than just counting the first one.

The Free State Foundation, in comments to the FCC, submitted an assessment of such a cost-benefit analysis by senior fellow Theodore Bolema that suggested it would be reasonable to multiply lost investment assessments by between 1.25 and 1.75, which would mean Free State's own estimate of a $5.6 billion reduction in what would have been invested between 2015 and 2016 were Title II not in place would translate to more like between $7 billion and $9.8 billion.

"If the current investment trend were to continue," said Free State president Randolph May in the FCC submission, "the negative economic impact resulting from the Open Internet Order regulatory regime will only become greater over time.”