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Information Laundering, Economists and Ajit Pai’s Race to Roll-Back the Obama-era FCC’s Net Neutrality Rules

Today, the International Journal of Communication published my reply (co-authored with Jeff Pooley) to a recent paper in the same journal by economists Gerald Faulhaber, Hal Singer and Augustus Urschel. That paper has become especially influential after the Federal Communication Commission’s Chairman Ajit Pai repeatedly called on its “independent” evidence to justify his plan to roll-back common carriage (net neutrality) rules for internet access providers and to create an Office of Economics and Data. As our reply shows, the paper contains undisclosed ties to the telecommunications industry and is riddled with factual errors. Most importantly, its central claim that economics and economists have been “curiously absent” at the FCC in recent years is simply incorrect.

Faulhaber, Singer and Urschel’s “The Curious Absence of Economic Analysis at the Federal Communications Commission” is a prominent example of how industry-friendly think tanks have commissioned academic economists, legal scholars and others to flood the ‘marketplace of ideas’ with dubious ideas and ‘white papers’, often without disclosing these origins. These efforts, in turn, give a veneer of academic legitimacy to Pai’s sprint to reverse not just the net neutrality rules adopted two years ago, but a raft of measures that deal with concentration in the broadband, mobile wireless, cable TV and broadcasting markets, broadband privacy and pricing, and on and on. If the rollback is successful, Pai’s FCC will deliver a regulatory agenda beyond the biggest telecom-ISP and media companies’ wildest dreams.

In their paper, Faulhaber, Singer and Urschel purport to tell the story of the rise and fall of economic analysis at the FCC. They hold up the Commission’s landmark 2015 decision to reclassify broadband internet access services as “common carriers”—the bedrock historical principle underpinning what most people call “net neutrality”—as Exhibit A in support of their “curious absence” allegation. The authors also point to the FCC’s alleged failure to conduct cost-benefit analyses as further evidence of the agency’s supposed indifference to economics. Finally, the authors singled out John Oliver’s 2014 late-night rant on net neutrality for triggering “four million angry letters”. The episode exemplified, in their telling, the triumph of unruly populism over economic expertise—a gaping wound that needs to be redressed, and fast, they urge.

Straight away, however, the article’s main claim that economists have next to no influence at the FCC struck us as preposterous. This must be, we thought, the first article ever published to claim that economists don’t have enough influence on federal policy making. The story of social science and U.S. policy since World War II just is the story of economics (see, for example, Bernstein, 2004 and Franklin, 2016). More to the point, economists have been extensively—and disproportionately—involved in FCC rule-making for decades, this one included. What could the authors possibly mean?

Adding to our doubts, we quickly discovered that a longer version of the same paper had been submitted to the FCC’s official docket last summer, not once but twice, by CALinnovates—an “advocacy” group with deep ties to the telecommunications industry (see the submissions to Broadband Privacy and Business Data Services proceedings). In other words, the paper published in the IJoC originated as a white paper commissioned by a telecommunications industry advocacy group but without disclosing any of this background do the journal’s editors or readers.

Digging deeper, it soon became evident that the paper’s authors have been especially active in many hot-button issues before the FCC in recent years, including its landmark Open Internet Order in 2015—the main object of their criticism. They have also cast doubts on how the FCC has dealt with blockbuster mergers and acquisitions and sky-high levels of concentration in the mobile wireless market, backed an unsuccessful legal appeal of those 2015 net neutrality rules, and lent their work to a volley of actions now underway by the Trump administration’s new FCC Chair, Ajit Pai (see here and here).

In April—just five days after the peer-reviewed article appeared—Pai gave a major speech at the Hudson Institute lamenting that the views of economists “have become an afterthought.” Citing the paper (but with no mention of its provenance), Pai announced a new FCC Office of Economics and Data (OED). The authors’ “curious absence” claim supplied the warrant for creating the OED. Pai soon issued his fateful plan to roll back net neutrality regulations—set to take effect in a matter of weeks—and again invoked the authors’ work as a warrant for taking the course that he has (see here and here).

In short, an industry front group commissioned and funded research that was put on the public record in two FCC proceedings and then published in a leading academic journal. Soon it was cited by the country’s top policy-maker to justify his industry-friendly regulatory rollback. We contend that this is a clear case of information laundering.

Murky origins aside, does Faulhaber, Singer and Urschel’s core claim that the FCC has “abandon[ed] the dismal science” (p. 1215) hold water? Our reply argues an emphatic “no”. Our review of FCC workshops, roundtables, working papers, seminars, reports, dockets and rulings—including during its landmark 2015 Open Internet Order and several blockbuster mergers and acquisitions—provides detailed evidence to refute the paper’s core “curious absence” charge. Indeed, the public record is stuffed full with economists’ contributions—including those of the authors, though they mention none of it. As we show, the agency has actually been working in earnest to bolster, not sideline, economic analysis in recent years—a conclusion in line with other researchers’ findings (e.g., Copeland, 2013).

Moreover, while the authors charge that the FCC’s cavalier disregard for sound economic judgement is revealed by the fact that it does not do proper cost benefit analyses, the truth is that there are nineteen federal, independent regulatory agencies and none of them does such analyses along the lines they call for—except the Consumer Financial Protection Bureau (and for reasons specific to its own creation in 2011 in the aftermath of the financial crisis of 2008). While there have been calls since at least the Reagan Administration for things to be otherwise, those calls have been rejected because to concede to them would undercut regulators’ independence. In short, despite the authors’ misleading suggestion to the contrary, the FCC is not unique in this regard and as a matter of fact all federal independent regulatory agencies except the CFPB report to Congress (see Breger & Edles, 2015; Sunstein, 2013).

When Faulhaber, Singer and Urschel bemoan the “curious absence” of economists at the FCC in the IJOC paper, what they’re really objecting to is their own string of policy losses across several high-profile issues in recent years. What they want, in effect, is an across-the-board do-over on these issues. Their paper—with its serial non-disclosure—is already helping that effort. Indeed, the authors have been fighting on this project’s front-lines for years and their IJOC paper and its undisclosed precursors have been weaponized for this campaign.

The stakes couldn’t be higher. Pai is sprinting to reverse the most prominent accomplishments of the Obama-era FCC—and leaning on Faulhaber, Singer and Urschel’s paper to legitimate his efforts. The IJOC paper, and its undisclosed predecessors, also serve as the touchstone for op-eds across think tanks and their blogs as well as the business and popular press. The authors’ appeal to the authority of economics, in short, cloaks a full-throated political project designed to remake communications markets along the lines that incumbent telecommunications, broadband internet, and media industries have desired all along.

If the lessons of the last century are a guide, the outcomes of these battles could shape the emergent internet- and mobile wireless-centric communications universe for many decades to come. Moreover, the fact that much the same charges are being lobbed at regulators in Canada, the EU, India and other countries underscores the point that while the specifics of the US situation—and the FCC—are unique, the lessons to be learned are far more global in scope.

Legal Threats

We plainly struck a nerve. After a draft of our reply was shared with the article’s authors in late May, the journal’s editor received a barrage of letters from attorneys representing CALinnovates, the telco-linked group. The legal threats—explicit and implied—ramped up in each letter.

We will address more of the substance of these letters in a subsequent post in short order but for the time being we’ll close by saying that, to its credit, the International Journal of Communication stood its ground, asking us to furnish documentation on just those errors of fact claimed by the lawyers. We replied with a point-by-point accounting. And on their claim that we ourselves had written the “hit piece” under hire to either Free Press, Open Media, Mozilla or Google, we had a blunt response of our own: “Neither of us has ever received a single cent of funding for this reply or for work whatsoever from any parties.”

Bluster aside, the innuendo and legal threats had the opposite effect, strengthening our resolve to publish the reply. As a general matter, sponsored surrogacy like the “Curious Absence” paper needs ummasking because it tries to harness the academic credibility of scholarly, peer-reviewed publishing for private gain—typically without disclosing either the interests or processes in the information laundering behind such efforts. And if such critiques are necessary in general they are acutely so now before the Pai-led FCC recasts the evermore internet-centric communications universe in an industry-serving mold. If Pai succeeds, it will be hard to go back—hard, that is, to get the regulatory toothpaste back in the tube. At that point, exposing the industry scholar-lobbyist network’s campaign would be (merely) academic.

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