The FCC can only be called “embattled” when it comes to the legal storm brewing around Net neutrality (News - Alert). It’s facing lawsuits from several broadband providers, and one of that group’s top industry associations argues that regulation of the world of the Internet will have a chilling effect on investment.
The FCC (News - Alert) voted earlier in the year to reclassify broadband as a public utility, thus bringing it under its purview for regulation, just like landline phone service and wireless. It subsequently released its Open Internet Order, which went into effect over the summer, and which prevents ISPs from striking deals for paid prioritization with over-the-top content companies, among other things.
“This policy shift is particularly unfortunate given that the nation and economy have reaped substantial benefits from broadband investment over the last couple of decades,” said Patrick Brogan, vice president of industry analysis at USTelecom (News - Alert), the industry association, in a blog. He added, “The recent FCC decision to reverse course and regulate broadband as a Title II utility risks dampening broadband investment, thereby slowing the pace of innovation over the long term. As USTelecom has written, the rules dampen expectations of long-term revenue growth, increase compliance costs, and increase the risk-adjusted cost of capital.”
USTelecom noted that U.S. broadband providers invested $78 billion in network infrastructure in 2014, across wireline, wireless and cable broadband providers—with telcos representing 36 percent of that, the greatest percentage. Overall, the 2014 investment expenditure was $3 billion, or 4 percent, greater than the $75 billion invested in 2013.
From 1996 through 2014, broadband providers have made $1.4 trillion in capital investments with wireline providers investing more than $720 billion, or 52 percent of this total, compared to 32 percent for wireless and 16 percent for cable.
That ongoing CAPEX outlay, which has taken place during a period of light regulation, has been brought on by a state of healthy competition, Brogan argued. As of mid-2014, 88 percent of U.S. households could choose from two or more fixed broadband providers and 97 percent could choose among three or more mobile broadband providers.
“Nearly all Americans can get broadband services from a range of providers,” he said. “More than 96 percent of Americans had access to fixed broadband [in 2014] and more than 99 percent of Americans could get mobile broadband. Growing infrastructure Investment has expanded the quality and speed of broadband service . . .[averaging] 10Mbps download or greater speeds.”
He added, “The U.S. approach to date has emphasized light regulation and investment in competing facilities rather than resale, leading to more facilities-based competition than most of the rest of the world.”
Continued wireline industry investment will be essential to network modernization and international competitiveness of course, to support demand for cloud computing and data centers, telework, video and audio streaming, video calling and conferencing, data analytics and other services based on the growing Internet of Things. Meanwhile, nearly all mobile broadband traffic depends on fixed network backhaul or offload onto Wi-Fi-enabled fixed networks. Thus, wireline providers are among the critical contributors to our nation’s innovative capacity.
FCC regulation threatens that, according to USTelecom and its members.
“While it is hard to isolate the impact of regulation among all relevant factors, and it takes time for a major regulatory shift to reveal the full extent of its market impact, at least one independent financial analysis predicts a 4.5 percent decline in wireline and wireless telecommunications services capital investment in 2015, excluding cable,” Brogan warned.