Award Winning Blog

Thursday, September 10, 2015

The Myth of Broadband Investment "Disincentivization"

            Some people, who really should know better, have combined one questionable statistic with an absolutely unreasonable inference.  Ostensibly to bolster their argument that the FCC’s Open Internet Order will either enslave or impoverish carriers, sponsored researchers and one or two easily-persuaded FCC Commissioners make this unsustainable leap of faith:

            Wireline broadband providers have reduced plant investment following the FCC’s Open Internet Order.  Therefore, the entire cause of this diminution investment results from the Order.
            Might there be alternative statistics that identify where the money is going and what, if anything, has caused this sudden conservation of capital?

            First, when considering capital expenditure by companies such as Verizon, converging markets and technologies, surely require an examination of the many places money might go.  Verizon might perceive no competitive necessity to invest in wireline broadband.  Additionally the company might prioritize investments in wireless plant, as part of a major strategy to migrate from wired to wireless content distribution technologies.  Verizon is aggressively jettisoning its wireline plant and state franchises.
            Speaking of content, didn’t Verizon recently come up with a cool $4.4. billion to buy AOL whose major assets are content-based?  Would Verizon skimp on all content distribution technology after having just made a significant investment in content?  Didn’t AT&T just get conditional approval to spend over $45 billion to acquire DirecTV, whose major asset combines access to content and broadband distribution of it?

            On the issue of incentive to invest, just today I read how Verizon already wants to commit substantial funds for next generation, 5G wireless broadband distribution technology. See  Bear in mind that Verizon Wireless operates under the Title II, common carrier, telecommunications service provider “public utility” regulatory model that some consider such an investment buzz kill.  Verizon seems to well tolerate this regulatory burden and still manage to invest billion in plant.
            It bears repeating time after time: competitive necessity constitutes the major catalyst for capital expenditures, including next generation network plant. 

            Verizon knows it has to enhance the value proposition for wireless broadband.  And it surely knows the lack of competition means it does not have to extend its FiOS plant, or rush to add funds to wireline technologies about which it does not care.

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