It was all going so, so well for American ISPs. Not only did they have a former cable lobbyist as head of the Federal Communications Commission, but he was even planning to push through a new proposal that would have given them the power to create separate Internet fast lanes where they could charge more to Internet companies to ensure their traffic got delivered faster. And to top it all off, many of them were planning to engage in a huge wave of mergers that would give them even more power over the broadband and/or pay TV markets, from Comcast-Time Warner Cable to Sprint-T-Mobile to AT&T-DirecTV.
But alas for them, it seems that America’s ISPs have finally overreached. FCC chairman Wheeler’s proposal to allow for Internet fast lanes has created an enormous backlash not just from net neutrality advocates but also from major tech companies such as Google, Microsoft, Amazon and Facebook, as well as major Silicon Valley venture capitalists and popular entertainers ranging from Pink Floyd’s Roger Waters to Pearl Jam’s Eddie Vedder to actor Mark Ruffalo to director Oliver Stone.
Emboldened by this backlash, net neutrality advocates have started banging the drum to get the FCC to reclassify broadband providers as telecom companies, which would let the commission enforce strong net neutrality rules that would make ISPs keep the Internet a level playing field where both big tech companies and small startups would all get the same treatment when it comes to traffic prioritization.
This has unsurprisingly completely freaked out American ISPs, which is why many of their CEOs have just sent a letter to the FCC warning them of all the horrible, terrible, scary things that will happen if they get reclassified as telecom companies. In fact, the ISPs say that “even the potential threat of Title II [reclassification] had an investment-chilling effect by erasing approximately ten percent of some ISPs’ market cap in the days immediately surrounding” the FCC’s original attempt to reclassify ISPs as telecom companies, which the commission backed down on under heavy industry pressure. The ISPs also warn that “such an action would greatly distort the future development of, and investment in, tomorrow’s broadband networks and services.”
What makes this last “threat” particularly hilarious is that ISPs have already started slowing down their investments in network upgrades even without being reclassified as telecom carriers. As Vox’s Matt Yglesias notes, the National Cable Telecommunications Association’s own data shows that average annual broadband investment peaked in the period from 2005 through 2008 but has declined since then to levels that are just above the average annual investment we saw between 2001 and 2004 — and that’s without even adjusting for inflation.
“The industry is acting like a low-competition industry, scaling back investment and plowing its profits into dividends and share buybacks and merger efforts,” Yglesias concludes.
And this is where American ISPs’ business practices over the last decade or so are really going to come back to bite them. While Comcast, Time Warner Cable, AT&T and Verizon are able to influence lawmakers with millions in lobbying dollars, there is no way that they’re going to rally the general public to their side, especially when well-loved companies such as Netflix and Amazon are pushing back against them.
While I’d still rate it highly unlikely that ISPs will actually get reclassified as telecom carriers, I also think it’s even more unlikely at this point that the FCC will hand them the power to fracture the Internet into fast and slow lanes. The days when ISPs could get whatever they want just by greasing lawmakers’ and regulators’ palms appear to be over. If they want to wield more influence over the public in the future they might have to start doing something truly radical, such as making their customers hate them a little less.