A July study that found net neutrality rules have no harmful impact on broadband investment used “made up” data to draw its conclusions, according to another economist.
The study, paid for by the Internet Association (IA), a trade group of top Silicon Valley companies including Amazon, Google, Netflix, and others supportive of the open internet regulations, found “[n]o negative impact on telecom infrastructure investment, broadband infrastructure investment, or cable infrastructure investment” since the Federal Communications Commission adopted the rules in 2015.
Internet Association chief economist Christopher Hooton aimed his study at a number of others backed by net neutrality opponents. Those studies found significant drops in broadband investment since the rules were passed in 2015, with some reporting declines beginning in 2010, when the debate about passing the rules accelerated.
Hooton tries to debunk the latter by economist George Ford of the center-right think tank Phoenix Center. In his study Ford estimates what investment in broadband infrastructure would have looked like had the FCC never proposed classifying broadband as a common carrier service under Title II of the Communications Act (a form of analysis known as a counterfactual).
The authority, used to justify rules against web traffic blocking, throttling, and paid prioritization, potentially subjects internet service providers (ISPs) to tougher regulations like price setting. According to Ford, the threat of price setting and other Title II regulations have driven down broadband investment by $30 to $40 billion and cost the economy 100,000 jobs.
Hooton criticizes Ford’s study for ignoring factors like interest rates, using unrelated control group industries like plastic
and rubber manufacturing to estimate lost investment in the telecommunications sector, and beginning his analysis in 2010, despite the Title II rules not passing until 2015.
The IA economist finds “a clear lack of speculated harms and initial evidence of benefits to markets, consumers, and innovation with both ISPs and edge providers thriving under [net neutrality] rules.”
But Hooton forgoes trying to prove the Obama administration’s claim that the rules would create a “virtuous cycle” of investment, in which the open internet rules promote the creation of new content, apps, and devices, thereby driving the further adoption of broadband and driving up investment and network growth.
“[I]t is important to emphasize that the paper does not investigate the theorized benefits of [net neutrality],” the IA study reads. “[T]he paper does not claim to find a positive causal relationship between the lack of a slowdown in telecom infrastructure investment and the FCC policies – it merely aims to demonstrate the lack of causal impact in either direction.”
It does so, however, by “making up” data, according to a rebuttal paper from Ford out Monday.
“Dr. Hooton’s empirical work suffers from a number of fatal and sometimes shocking defects, including making up a significant part of his data,” the Phoenix Center economist says. “Unfortunately, all his counterfactual analysis is infected with fabricated data, leaving mostly a cursory analysis as meager as the work advanced earlier in the net neutrality debate.”
While Ford’s study stops at 2015, the last year in which accurate investment data is available, Hooton’s study includes a forecasted investment from 2014 into 2020, an approach Hooton himself described as “flawed” in one of his study’s notes.
“The use of forecasted data for impact evaluations is a flawed approach and is included here as a matter of due diligence,” Hooton writes. “As noted, the primary focus of the paper is the 2010 treatment year and impacts calculated from any study for 2015 impacts should be interpreted cautiously given the inherent lag of infrastructure investment decisions and policy reactions (since they are planned in advance).”
In addition to pointing out Hooton’s own admission of using a “flawed approach” that should be “interpreted cautiously,” Ford describes the Internet Association study’s inability to find a positive correlation between net neutrality and investment an “indictment” of the rules, since the FCC justified them based on the “virtuous cycle” theory.
“While Dr. Hooton appears to believe a finding of ‘no effect’ is good news for net neutrality, it is, in contrast, an indictment of policies ostensibly intended to spur increased broadband deployment via the commission’s “virtuous circle” theory of investment,” Ford writes.
Hooton’s research has been the subject of discussions attended by the likes of Democratic FCC Commissioner Mignon Clyburn, who voted in favor of the rules. It’s also been cited by congressional Democrats supportive of net neutrality rules including Minnesota Sen. Al Franken.