Thursday, December 3, 2015

So Why Would Verizon and Other Carriers Want to Spend Yet More Billions on Content?

            Perhaps you’ve read the relentless and false recitation of an assertion that the Wall Street Journal, American Enterprise Institute and others have treated as the gospel truth: that incumbent carriers such as Verizon and AT&T have substantially reduced capital expenditures this year solely because of the FCC’s Open Internet Order. 

            It strikes me that there has not been enough pushback against the bogus notion that would not pass muster with peer review.  First, one can detect a reduction in capex if and only if the definition of capital investment is limited only to transmission facilities.  Only with a narrow and ludicrous definition can one find a reduction of any sort. Using a widely accepted definition, incumbent carriers have continue to make sizable investments, this year particularly through mergers and acquisitions.
            Just now there is speculation that Verizon might acquire portions of Yahoo’s assets.  Why would Verizon waste billions of dollars on content, if it thought that regulation and/or regulatory uncertainty would somehow prevent it from profitably delivering the content?
            The capex false claim becomes down right fraudulent when experts, who ought to know better, attribute their calculation of reduced capex, as solely caused by a single regulatory event.  So help me out here: how did they narrow 100% of causality to a single regulatory event?  How did they eliminate other variables such as the possibility that this particular year did not require a major upgrade in wireline or wireless broadband plant?  How did they managed to ignore the billions invested in companies whose business plan assumes ample ways to deliver product to paying subscribers?
            As the hearing about the FCC’s Open Internet Order begins, I hope the court applies the rule of law and not advocacy masquerading as statistics. I have major problems with the FCC’s tactics and strategies, but I hope empiricism matters more than a clever and deceitful “outreach campaign.”

1 comment:

larry f martinez said...

Bandwidth is becoming a commodity; the chief means for differentiating your bandwidth and to slow its commodification is through content. Prof. Frieden's analysis is on target, especially the Verizon example with Yahoo.