Tech’s Tax Paradise

Uber, Apple, and Facebook are still evading U.S. taxes on an epic scale, according to a trove of leaked financial documents called the Paradise Papers.

(Courtesy Photo)

A recent hack of 13.4 million confidential banking documents shows that rampant corporate tax evasion hits close to home here in the Bay Area. The documents, known as the Paradise Papers, reveal how the local tech industry’s use of offshore tax shelters has only become more creative in the wake of recent government crackdowns.

Among other things, the Paradise Papers have exposed underhanded offshore tax maneuvers by more than 120 politicians worldwide, including President Donald Trump’s billionaire Commerce Secretary Wilbur Ross, and even the Queen of England. But they also show similar schemes are used by Uber, Apple, and Facebook.

It was German newspaper Süddeutsche Zeitung which first obtained the documents, that detail the secret dealings of Appleby, an offshore law firm. The documents are slowly being leaked by the International Consortium of Investigative Journalists, and a fresh batch of data was released on Friday.

SF Weekly sifted through it only to find the Bay Area’s biggest tech companies, like Apple, Facebook, and Uber, have all used Appleby to secretly funnel hundreds of billions in assets to offshore tax havens.

Islands with no-tax or low-tax policies are a common theme here. According to the documents, Apple keeps its most valuable patents and trademarks registered on a tiny island off the coast of France. Much of Facebook’s highly profitable user database is not registered to its Menlo Park offices, but in the Cayman Islands. The patent for Uber’s rideshare app is not registered to Uber’s San Francisco headquarters, but instead in Bermuda.

Ask any San Franciscan where Uber’s main offices are located, and they’ll tell you 555 Market St. Yet much of Uber’s intellectual property is registered to “Uber Investment Management, Inc.,” incorporated in 2013, with its headquarters curiously located in the Bahamas. According to Bloomberg, that leaves less than 2 percent of Uber’s net revenue taxable in the U.S.

But Uber is nowhere near the biggest Bay Area tech tax dodger.

Overseas bank accounts for the Bay Area’s large tech companies are not a new phenomenon. Cupertino-based Apple came under fire in May 2013 for offshoring profits in fake Irish headquarters forced CEO Tim Cook to testify before an angry congressional panel. “We do not depend on tax gimmicks,” Cook said at the time, before those Irish schemes were shut down. “We do not stash money on some Caribbean island.”

But a Caribbean island is exactly where Apple inquired about stashing its profits just 10 months later when the Irish loophole was closed. Emails included in the Paradise Papers show that Apple’s law firm Baker McKenzie considered offshore headquarters they could use “without being subject to taxation” in the Cayman Islands, the British Virgin Islands, and Bermuda.

The iPhone manufacturer eventually settled on a small isle in the English Channel, the “Crown dependemcy” of Jersey. To this day, Apple still holds around $252 billion in profits on the island, a tiny tax haven that otherwise has no technical or strategic role for Apple.

Since the 2016 election meddling, we have learned that Facebook and Twitter’s core businesses are certainly of interest to Russia. That’s why it’s significant that a Kremlin-owned bank made substantial — and secret — investments in those social media platforms.

A state-owned Russian entity called VTB Bank made a $191 million investment in Twitter in 2011, shadowing the investment through an international firm called DST Global. That firm also partnered with an offshore entity funded by the Kremlin to make a $200 million investment in Facebook in 2009, back when Facebook was still the No. 2 social network, behind MySpace.

All those investments were sold off when Facebook and Twitter made their IPOs and became public companies.

There is no evidence that the Kremlin was given any business influence at Twitter or Facebook for making these investments. But it certainly deserves scrutiny, since Russia is suspected of using these platforms to sway the 2016 U.S. elections, and the transactions were not entirely public.

But the Bay Area tax and investment chicanery is not limited to big tech companies. The Paradise Papers show that Stanford University, UC Berkeley, and the University of San Francisco all maintain offshore firms to handle investments that are completely unrelated to their educational missions.

These universities have “endowments,” large donations generally from big-bucks alumni that are invested and intended to create returns to supposedly enroll more students and fund the universities’ hospitals. Because of their charitable nature, endowments are only taxed when they’re invested in private equity or hedge funds.

Unless those endowments are invested in funds headquartered in no-tax locations like Bermuda and the Cayman Islands.

The Bay Area college most egregiously exploiting this loophole is Stanford University, the tech industry’s favorite talent incubator and alma mater to Google co-founders Sergey Brin and Larry Page, Yahoo’s Marissa Mayer, and Trump supporter Peter Thiel.

Stanford and its Board of Trustees hold four offshore investments in Bermuda and the Cayman Islands. These investments have helped increase the size of Stanford’s endowment to $22.4 billion, which Stanford claims is for the “fulfillment of the university’s mission of teaching, learning and research.”

Yet despite a tenfold increase to the size of Stanford’s endowment since 1987, the school still admits virtually the exact same number of students as it did 30 years ago.

UC Berkeley rivals Stanford with two Bermuda-based tax haven investments registered to the Regents of the University of California. The University of San Francisco also holds shares in a tax-free Cayman Islands fund.

Like the recent sexual assault scandals that brought down some of our favorite Hollywood stars, the Paradise Papers have also exposed shady practices among some of our favorite pop culture icons. Madonna, Shakira, and Justin Timberlake have registered the rights to their biggest hit songs, or hold other investments, in tax-free offshore accounts in the Caribbean Islands.

All of the investments and maneuvers described above are technically legal. But what raises eyebrows is how they were kept secret and exposed only when Appleby’s internal documents were hacked and leaked.

If there’s nothing to hide, why were these documents hidden from public view? Per usual, Sen. Bernie Sanders has some opinions.

“The essence of oligarchy is that the billionaire class is never satisfied with what they have,” Sanders said on Twitter earlier this month. “They want more, no matter what impact their efforts have on working people.”

Unfortunately for working people in the Bay Area, that means a higher tax burden while our most profitable tech companies continue to “disrupt” the U.S. tax code.

Does Race Matter in America’s Most Diverse ZIP Codes like Vallejo, CA?

Darryl Johnson, center, and his wife, Marissa Johnson, with their daughter Sienna at their restaurant in Vallejo, Calif. The city is one of the most racially balanced in the United States.CreditJim Wilson/The New York Times

VALLEJO, Calif. — Beyond the burgers and fries coming from the kitchen and the oldies blaring from the radio, the scene playing out daily at the Original Red Onion might appear unfamiliar to much of the country.

The restaurant’s married owners — Marissa Johnson, a Filipino-American, and Darryl Johnson, an African-American — work alongside Jahira Fragozo, who is of Miskito and Yaqui Indian descent. Ms. Johnson bonds with a customer, Hillory Robinson, who is black, over the challenges of motivating their children in the winter. “They need something to do,” Ms. Robinson says.

Ms. Johnson gushes a short time later when a regular, Dylan Habegger, who is white, decides to tackle the restaurant’s new, spicy creation with a name that describes its effect. “Uh oh,” Ms. Johnson tells him, “you’re trying the Burner today.”

The Original Red Onion sits in one of the country’s most racially diverse ZIP codes: 94591, in Vallejo, Calif. About 30 miles north of Oakland, it is the rare place in the United States where black, white, Asian and Hispanic people not only coexist in nearly equal numbers, but actually connect.

At a time when race often still defines where people live and attend school, and the battles between alt-right and Antifa, nativist and immigrant, continue to rage, this Bay Area suburb of 120,000 can seem like a respite from the divided nation. Pick any two people out of this ZIP code, and there is a 76 percent chance they are a different race or ethnicity — and odds are they’ll be comfortable talking to each other.

“The gift about being in close proximity is that you’re desensitized to seeing a different culture and judging it right away,” said Lena Yee-Ross, a 17-year-old high school senior whose mother is Chinese-American and father is black.

Lena Yee-Ross, center, with her classmates Arabella Compton, left, and Christian Bustos at Jesse Bethel High School in Vallejo.CreditJim Wilson/The New York Times

Living next to one another for generations, since a major naval yard drew large numbers to the town with the promise of jobs, has mitigated much of the tension found in more segregated communities. People of all stripes sing arm in arm during Thursday night karaoke at Gentleman Jim’s bar, where on a recent evening a white man with a cowboy hat sat next to a Filipino man in a biker vest, and the songs ranged from Neil Diamond’s “Sweet Caroline” to the Fugees’ “Killing Me Softly.”

Students of different races study side by side at one local high school, and their shades of skin color span such a spectrum that it is difficult to tell what races or ethnicities they are when they congregate for lunch.

Still, Vallejo (pronounced va-LAY-oh) is no promised land.

Stubborn racial divisions remain. The typical black family has a household income that is three-fourths of the city’s median. Nearly three out of every four members of the Police Department are white, and all of the City Council members are either Filipino or white.

Academic performance is improving in schools, but achievement gaps remain: Of the 11th graders at Jesse Bethel High School, which is in the 94591 ZIP code, 42 percent of black students and 51 percent of Hispanic ones tested proficient in English this year, compared with 63 percent of white students and 77 percent of Filipino ones.

Spencer Lane, a 17-year-old white senior at a high school where whites are in the minority, said classmates had told him that he looked as if he could shoot up a school. Ms. Yee-Ross said her mother once heard a news account of a robbery and insisted that the perpetrator had to be black. And the Johnsons have battled racial tension in their family and their business.

A white customer who had been a regular at the restaurant once asked the woman taking his order to make sure that a young black employee did not cook his food, Ms. Johnson said. When she heard commotion at the front of the restaurant, she said, she confronted the customer, who told her: “How can you have people like that working here? His pants are sagging.”

The Johnsons met in Vallejo in 2003, introduced by mutual friends. He liked her toothy smile, she liked his respect, but each harbored racial stereotypes.

Mr. Johnson, 33, assumed that she would be a devoted homemaker who would cook and clean for him. Ms. Johnson, 31, said she was impressed that he did not wear baggy pants and that “he doesn’t talk ghetto.”

As diverse as Vallejo is, Ms. Johnson said she grew up hanging out mostly with Filipinos, a clustering that many local residents of different races said is natural. Immigrants from Mexico or the Philippines may want the company of people who can help them navigate a new country.

But within these groups, stereotypes can fester.

When Mr. Johnson’s mother, Tanja Mayo-Pittman, found out he was dating Ms. Johnson, she thought of the time she worked at Home Depot. She was the only non-Filipino on her team, and felt ostracized in part because her co-workers spoke Tagalog and joked with one another, leaving her to wonder if they were teasing her.

“Until I met them, I couldn’t imagine that they just had open arms toward my child,” she said of her son’s future in-laws.

But those fears and barriers have dropped. “I stopped feeling judged or left out,” she said. “I stopped seeing them as Filipino. I started just seeing them as people.”


East Vallejo is within the third most diverse ZIP code in the country, 94591.CreditPhotographs by Jim Wilson/The New York Times

Ms. Mayo-Pittman, 52, also had to contend with her own formative years in nearby Pinole, when, as a fair-skinned woman, she had trouble fitting in — not black enough for the black people, or white enough to be white.

“To be honest with you, I never wanted my kids to be light-complected because I didn’t want them to have an identity crisis,” she said.

The Johnsons have four daughters together, from age 3 to 11, each with tawny brown skin.

As the girls lounged on the carpet of Ms. Johnson’s grandparents’ ranch-style home one evening, after a dinner of lumpia and white rice, Ms. Johnson joked about some of the questions that had come from her husband’s side of the family: Do you work at a nail salon? How do you speak such good English?

Ms. Johnson’s father, Al Remorin, 51, grew up in nearby Richmond, where most of his friends were black. He moved to Vallejo in 1979, when he was 13. That’s when he came to know a lot of other Filipinos. He was surprised, he said, to hear some of their racism. People asked him why he talked as if he were black.

Mr. Remorin quickly bonded with Mr. Johnson, often discussing sports. So Ms. Johnson said she was caught off guard by her father’s reaction when she became pregnant.

“How can you?” Ms. Johnson said her father asked. As in: How could she think it was O.K. to have biracial children?


Tanja Mayo-Pittman with her granddaughter Serenity Johnson.CreditJim Wilson/The New York Times

Mr. Remorin said he did not recall saying that. He never had an issue with his daughter having biracial children, he said. Back in his day, he rarely saw “half-Filipinos and half-blacks, or half-this and half-that,” he said. “It’s hard enough as it is being nonwhite, and you imagine when they’re half-this and half-that.”

Things are different today. In the Vallejo-Fairfield metropolitan area, 22 percent of marriages from 2011 to 2015 were interracial, more than double the national rate in the same period, according to a Pew Research survey.

Even in 2001, The New York Times was reporting that Vallejo was one of the most racially balanced cities in the country. Then, as now, racial and ethnic groups often stuck with their own.

Back then, there were also concerns about the racial makeup of the police, with no African-Americans above the rank of sergeant. Today, the longest-serving member in the history of the department is black and currently a lieutenant, but there are no other African-Americans above the rank of sergeant.

“There is not really the interaction in the way we would like,” Liat Meitzenheimer, who is black and Japanese, said in 2001. “Kids in the neighborhoods play with each other, but by and large, people stay to themselves.”

A decade and a half later, Ms. Meitzenheimer still lives in Vallejo and she says those divisions still exist.


Al Remorin with his granddaughters Cheyenne and Serenity Johnson.CreditJim Wilson/The New York Times

“For somebody who has lived here for 32 years now, it really hasn’t changed,” she said in a recent interview. “There are people actively trying to find ways to bring people together so that we participate from different communities together on single issues, whether it be sports or some artistic endeavor.”

Vallejo is even more racially balanced now, with the white population dropping and other racial and ethnic groups growing. Hispanic and white residents each make up about 25 percent of the population. A little more than 23 percent of the city is Asian and nearly 21 percent black.

The 94591 ZIP code — where the Johnsons live, own their business and send their children to school — is a sprawling swath of the city known as East Vallejo. Among ZIP codes with at least 50,000 residents, it is the third most diverse in the country, according to a Times analysis of census data.

Vallejo’s diversity stems from the Mare Island Naval Shipyard, which for nearly a century and a half attracted families with the promise of stable jobs. The yard closed in 1996, and with it went much of this town’s fortunes; the city declared bankruptcy in 2008. It remains a largely working-class bedroom community, though some fear that the relatively affordable housing could lure more affluent Bay Area residents, displacing low-income residents.

Past restrictions that kept people of color confined to certain neighborhoods have largely fallen, but glaring disparities endure. Black households rank lowest in median income, at $42,000. Residents have complained of brutality by the police force against black and brown people, and the seven-member City Council currently does not have a black or Hispanic member.

“I think that’s part of that racial divide, where Filipinos want to have Filipino leadership or African-Americans want to have an African-American leader or whites want to have a white leader, so they specifically target an individual for election,” said Bob Sampayan, who was elected the city’s first Filipino-American mayor last year.

But Mr. Sampayan and other local residents see promising signs of integration, like the diverse neighborhood watch patrols that sprang up after cuts to the Police Department and the diverse group involved in the city’s participatory budgeting process.

The Vallejo Chamber of Commerce, once a mostly white organization, now has its first Latina chairwoman, and nearly half of its board members are people of color. Different ethnic chambers of commerce — Filipino, Hispanic and African-American — work more closely with the city chamber under a group called the Vallejo Business Alliance.

Then there are the day-to-day interactions that blur conventions of race and culture.

Christopher Morales, 17, said his black friends were not offended when he, a Mexican-American, used an anti-black slur because their relationships transcended race. It is an attitude, he conceded, that puts Vallejo in something of a diversity bubble.

“It doesn’t really offend us,” he said, “until someone from, like, an outside town comes over here.” 

Robert Gebeloff contributed reporting from New York. Susan Beachy contributed research from New York.

Follow John Eligon on Twitter @jeligon

“We Want Our Money Back!” The Rallying Cry of the 99% After GOP Tax Scam Bill Passes Senate

The political landscape has never been more primed for a landslide against the ruling class.

by Steven Singer (
Protesters demonstrate near the full Senate budget committee markup of the tax reform legislation on Capital Hill November 28, 2017 in Washington, DC. Republicans in the Senate hope to pass their legislation this week and work with the House of Representatives to get a bill to President Donald Trump before Christmas. (Photo by Tasos Katopodis/Getty Images)

WASHINGTON, DC – NOVEMBER 28: Protesters demonstrate near the full Senate budget committee markup of the tax reform legislation on Capital Hill November 28, 2017 in Washington, DC. Republicans in the Senate hope to pass their legislation this week and work with the House of Representatives to get a bill to President Donald Trump before Christmas. (Photo by Tasos Katopodis/Getty Images)

We want our money back!

Every penny!

With interest!

Do you hear us, Republican Senators?

Early this morning while most of us slept, you passed a $1.5 trillion tax giveaway to the wealthiest people in America!

And you did it 51-49 with only one Republican, Bob Corker of Tennessee, joining all Democrats against it.

This was a 500 page piece of lobbyist written legislation hastily put together – in some cases scribbled in pen across type written pages – that no one had a chance to read before voting.

I am no fan of the corporate Democrats who have taken over what used to be a progressive party. But we can’t blame them for this one.

This scandal belongs entirely on the shoulders of Republicans.

The Dems even offered a resolution to delay the vote so that legislators had a chance to read it. All 52 Republicans voted against it!

This is what happens when the people lose control of their government.

This is what happens when the rich control lawmakers with their money.

There is no longer any doubt that we no longer live in a Republic. We no longer have any form of representative Democracy. We live in a pure plutocracy.

The rich pay the representatives and the representatives do what the rich want.

The wealthy are their real constituents. We are merely patsies told polite falsehoods to keep us in line.

You have no political power.


Governments get their legitimacy from the consent of the governed.

You did not give your consent to give away more than a trillion dollars to rich douchebags who don’t need it. But Republicans gave it to them anyway.

Therefore, our government has no legitimacy.

We are an occupied people.

We are the victims of a palace coup.

The question remains if there is even a semblance of democratic principles left to allow us to regain what has been stolen.

The present plutocracy is weak. It has not had time enough to consolidate its power.

The old plan of gradually stealing control under cover of neoliberal policies has been abandoned. This is a naked power grab.

Perhaps it will be the jolt we need to snap us all awake.

Perhaps it will be enough to move the 99% to grab what little remains of the system set up by Washington, Jefferson, Madison, Hamilton and the other founders.

We must rise up and demand these crooks pay us back.

“We want our money back!” should be our rallying cry.

If there are any lawmakers left in the halls of power that want to represent us, they should take a page from the GOP handbook.

How many times did Republicans propose overturning Obamacare regardless of whether they had the votes or the power to do so?

We must do the same with this tax scam bill.

At every turn, we should propose repealing the bill and forcing the wealthy to pay back every red cent they stole! With interest!

It doesn’t matter if it won’t pass. Do it.

Clog the wheels of power with our cries. Don’t let them do a single thing more to make the lives of the majority of the population worse.

Democrats, now is your last chance to show us where you really stand.

You and I both know that if the Republicans had offered even the slightest concessions, many Dems would have voted for almost the same tax scam bill. It would have been a terrible piece of legislation that stole banks full of money from you and me. But it wouldn’t have been quite as terrible.

Frankly, that’s not enough, Democrats.

You aren’t to blame for what just happened, but you haven’t proven yourselves to be part of the solution.

If you want our continued support, you need to move to the left. HARD!

The masses have been stoked and stirred by this scandal. The political landscape has never been more primed for a landslide against the ruling class.

Democrats could take advantage of this and earn a blue wave next year.

But this will only happen if you run candidates that are willing to fight on our side in the class war that has already begun.

Bernie Sanders is great, but let’s be honest. He’s elderly, and he’s a moderate.

That’s right. Crazy Bernie with his kooky socialist ideas is in the middle of any sane political spectrum. He only seems like a radical because of how far to the right the spectrum has shifted in this country.

We need real progressives who aren’t afraid to take on the establishment and fight inequality, police brutality, white supremacy, school privatization and a host of ills that – frankly – Democrats have historically championed almost as much as Republicans.

The pieces are all lined up. The board is ready to play.

We will support anyone who supports us.

We are coming for Republicans.

They will be repealed and replaced.

We will get back every penny they just stole last night. And we will grab every Richy Rich plutocrat by the heels, turn them upside down and shake until we get back every penny they took – with interest.

We will wring every last drop of Democracy we can from this government.

And if we find that there is not enough left…

History has an answer for what comes next.

Americans don’t take kindly to taxation without representation.

And that’s exactly what Republicans gave us last night.

Steven Singer

Steven Singer is a husband, father, teacher, blogger and education advocate. He often writes at his own blog here.

(Courtesy of Bob of Occupy)




Last Wednesday, Federal Communications Commission Chairman Ajit Pai released his draft order to completely eradicate Net Neutrality.

You can read the full text here. The short version is that Pai’s order takes the Net Neutrality rules off the books and abandons the court-approved Title II legal framework that served as the basis for the successful 2015 Open Internet Order.

The FCC is scheduled to vote on this dangerous proposal at its meeting on December 14. Groups like Free Press, Battle for the Net and others are urging citizens to make their voices heard before then.

Pai’s draft is a lot of things: thin on substance and reasoning, cruel, willfully naive — and it’s everything that ISPs like AT&T, Comcast and Verizon could have wanted (and more). But what it’s not is sensible or grounded in reality. It will take away every safeguard we need to protect the open internet we’ve always had, giving ISPs the power to kill off their competition, choke innovation, charge more for different kinds of content, suppress political dissent, and marginalize the voices of racial-justice advocates and others organizing for change.

We’ve had just a few hours to read this dud, launched by the FCC the day before Thanksgiving. Here are a few of the many lowlights in the draft order and a quick explanation of why they’re wrong.

While we’ll have more analysis in the days to come, this is our first take. And if no one puts a stop to Pai’s plans — with more than 200,000 rightly outraged internet users calling lawmakers and urging them to do just that on Tuesday alone — we’ll have even more to say on this when we take the FCC to court.


Under the existing regulations the FCC passed in 2015, we have clear bright-line rules prohibiting harmful behavior by phone and cable companies. Those rules are coupled with the strong but flexible safeguards that the 2015 order built in for other schemes ISPs might use now or invent in the near future to interfere with internet traffic.

Pai’s order trashes all of those and leaves only scant transparency rules in place.

With the flimsiest of justifications, Pai plans to “eliminate the conduct rules adopted in the Title II Order — including the general conduct rule and the prohibitions on paid prioritization, blocking and throttling.” (See ¶ 235 of the draft order. We’ll quote passages in the draft like this throughout this post.)

The new order leaves internet users entirely without protections, relying on ISPs to behave and avoid exploiting their status as gatekeepers to the entire internet. Pai and his Republican colleagues at the FCC want to do nothing short of legalizing internet blocking and discrimination by cable and phone companies. They flip-flop back and forth in the order between predicting that this won’t happen; saying that maybe some other agency could put a stop to it if it does (¶ 259); and, in other instances, actually rooting for it by praising the supposed benefits of pay-for-play prioritization and internet slow lanes (¶ 252).

The new order makes it clear what kind of power is being handed over to ISPs by all but inviting them to offer “curated services” in the name of ISPs’ own freedom of speech rather than their broadband customers’ rights (¶ 262).

In other words, as we’ve known since details of this plan started to emerge last week, the Trump FCC wants to let the most-hated and worst-rated companies in America block and edit speech on the internet.

Pai makes the willfully naive argument that even in the absence of effective oversight and prohibitions against blocking and discrimination, “transparency substantially reduces the possibility that ISPs will engage in harmful practices, and it incentivizes quick corrective measures by providers if problematic conduct is identified” (¶ 205). He then leans on ISP statements that these companies have “publicly committed not to block or throttle the content that consumers choose” (¶ 260).

When it comes to letting ISPs divide the internet into fast lanes for the few that can pay the extra toll, and slow lanes for everyone else, the order actually celebrates the idea.

“We anticipate that lifting the ban on paid prioritization will increase network innovation [because] the ban on paid prioritization agreements has had … a chilling effect on network innovation” (¶ 250).

Only at this FCC and in the boardrooms of some big ISPs does anyone believe that slowing down websites and apps counts as “innovation.”

But this is the “trust the cable company” future that Pai envisions for the internet. The draft order puts a ridiculous amount of faith in ISP promises. Before firm rules on solid legal footing were put in place by the 2015 order Pai wants to abandon, ISPs blocked content, throttled websites and used their power to rig the market in their favor.

This new FCC order would return us to a world where ISPs have a green light to block, slow down and limit quality access to any websites or applications they want.


Free Press has written the book on the continued need for the laws that protect people’s communications rights on the internet. Those rights don’t change just because the technology has evolved — or at least they shouldn’t change.

The laws that protect these rights are in what’s called Title II of the Communications Act. And despite current Republican officials’ selective memory loss on this, these laws were updated on an overwhelmingly bipartisan basis in both chambers of Congress in 1996 to establish the legal definitions and duties that still do and still must apply to broadband service.

Broadband internet access is what the law calls a “common-carrier transmission service.” That means it lets internet users transmit the information of their choosing, to and from the points of their choosing, and that it must do so without unreasonable discrimination by the carrier that transmits the content.

That’s how broadband customers perceive the service that ISPs offer and sell to them, and that’s the service we all need to have any chance of connecting and communicating with each other and accessing all the internet has to offer.

The draft order fails in its vain attempt to refute Free Press’ statutory analysis on these questions. A proper read of the legislative history, and of FCC steps and missteps past, explains Congress’ true intent and the meaning of the law. But the best the Pai team can muster are ahistorical references to Clinton-era interpretations of an internet ecosystem long since gone, along with a smattering of ISP talking points and legal arguments shot down in court just last year.

Talking about how the Commission treated AOL’s dial-up internet access service in 1998, and pretending that this same reasoning should apply to ISPs like Comcast and AT&T that control the physical networks we use to get online today, just won’t cut it (¶ 63). Nor will the absurd claim that just because ISPs transmit internet speech and information, the broadband access line itself must be an information service too (¶ 29).

These are simply attempts to ignore the reality of modern broadband internet services that people depend on today — and that still need rules guarding against the network owners’ incentive and ability to discriminate.

The Obama FCC followed the law and fulfilled its congressionally mandated duties by returning to Title II, and to the proper understanding of broadband internet access as a telecom service. That decision was upheld not once but twice by the federal appeals court that reviewed the agency’s reasoning.

But the Pai FCC wants to throw all of that out of the window, then throw up its hands and say we can’t have rules anymore.

Set aside for a moment that ditching Title II means the FCC is weakening or abandoning all sorts of other duties it has — from promoting broadband affordability and deployment (¶ 189) to protecting consumers from privacy invasions (¶ 178). The Pai FCC’s trust in an understaffed and overburdened Federal Trade Commission’s ability to police the privacy policies of internet companies is misplaced and dangerous.

By abandoning the Communications Act, and possibly punting oversight of ISPs’ Net Neutrality promises to the FTC (¶ 140), Pai is turning his back on the FCC’s sound legal framework for preventing discrimination online.

This FCC is abdicating its responsibilities and using the worst legal arguments it can find to justify its actions.


One of the main arguments the Pai order offers for all of this upheaval is the supposed harm that a Title II legal framework has wreaked on broadband investment. This harm is a fiction Pai invented, backed only by a handful of ISP lobbyists and shills who’ve been willing to lie through their teeth or concoct the supposed evidence for this alleged economic downturn (¶¶ 90-91).

The fact of the matter, as we’ve shown dozens of times now, is that broadband investment doesn’t turn on regulation alone. It doesn’t plummet simply because the FCC restores the same kinds of protections against discrimination that have been kept in place continuously for a wide range of Title II voice and broadband services for the past several decades.

The numbers bear this out: Broadband investment on the aggregate has gone up in the two years following adoption of the 2015 Open Internet Order. Most individual publicly traded ISPs have spent more than they had in the two years prior to the 2015 order — with companies like Comcast investing about 26 percent more in that time.

This increase in investment has occurred even as ISPs saved money on buildout thanks to efficiency improvements from new fiber and wireless technologies.

Measuring aggregate investment alone, by a single industry sector alone, is the wrong metric anyway. Broadband speeds actually improved at a rapid clip after the 2015 order, and that’s what the FCC should be measuring here: the services that broadband customers get, not just the dollars that ISPs spend.

Investment also boomed for companies that use the internet to deliver their services, including but by no means limited to internet video sites and online pay-TV substitutes, all of which had the certainty under the 2015 Open Internet Order of knowing they had an open pathway to customers on the internet.

But all of this makes no difference to Pai and his cronies. They casually conclude that ditching the statutory framework Congress established for broadband will somehow increase investment in networks (¶ 98), despite mountains of economic evidence to the contrary and the fact that ISPs routinely told their own investors that Title II and Net Neutrality had no impact on their spending.

The order traffics in the same old falsehoods ISPs and Pai have trotted out before to justify overturning these safeguards. The order claims that broadband investment is down, while ignoring the reality that broadband investment tends to be cyclical and the fact that broadband speeds and raw dollars spent on broadband networks have both gone up markedly during the two years since the 2015 Open Internet Order passed.


Pai’s order is heavy on destruction and light on sound reasoning. We know why: Title II simply works; courts have ratified it twice; Americans across the political spectrum and in both political parties are overwhelmingly in favor of those protections; and it’s crucial for allowing the voices of marginalized groups and activists to reach society at large.

The new order is the result of a broken process at the FCC used to reach a faulty and false conclusion on the facts and on the law. The FCC has lost in court every time it’s attempted to prop up open-internet protections on flimsy legal-authority claims. This time should prove no different, and we’re already preparing our legal challenge.

The FCC will vote on Pai’s internet-destroying plan at its Dec. 14 meeting. There’s still time to let the FCC know what you think. You can also urge your members of Congress to condemn Pai’s plan, as hundreds of thousands of you have already done in the past 24 hours.

If we turn up the pressure, there’s a small (but growing) chance we can put the brakes on Pai’s bad ideas before the FCC votes. So keep fighting and speaking out — and don’t fall for Ajit Pai’s lies.

Originally published by Free Press