Tracking Inconsistent Zigs and Zags in Telecom Policy Research

Sponsored researchers surely embrace Oscar Wilde’s view that “consistency is the last refuge of the unimaginative.”  Why bother building a multi-year record of empirical evidence when there are ample publishers and even appellate court judges (and their law clerks) waiting for intellectual support no matter how suspect.

Just now, I am seeing how both wireless and wireline carriers have unleashed a torrent of inconsistent advocacy research.  On one hand, the conventional wisdom dished from this group and their sponsored researchers was the “fact” that network neutrality and other regulations directly and negatively impact investments made in infrastructure.  Former FCC Chairman Amit Pai made a point to repeat this assertion early and often and it became gospel truth, so much so that cherry-picked and quite questionable “research” became the foundation for the appellate court affirmance of the Restoring Internet Freedom Order.

Now, circumstances and motivations have changed with the Covid pandemic offering a true test whether carriers have made sufficient plant investment, both under the disincentivizing network neutrality regime and free of it.  No one has convinced me that a single regulatory or degregulatory initiative substantially impacts carrier investment decisions one way or the other, particularly because of far more impactful factors such as interest rates and the normal ebb and flow of technological development cycles.  

Carriers did not close their wallets when network neutrality rules were in force.  That is corroborated by ample current evidence—now touted by the carriers-- that during the pandemic, U.S. carriers were able to meet rising demand for bandwidth.  If the carriers had scrimped on investment, because of the horrendous burdens imposed by network neutrality, how could their networks show such resiliency and ability to accommodate significant increases in subscribership and bandwidth requirements? It shows me that the need to stay competitive and to install new technology, such as 5G, trumped any incentive to forestall investment to make a regulatory and public policy statement.

Additionally, carriers cannot credibly oppose municipal broadband networks and expanded universal service subsidies if they persist in spreading the gospel that network neutrality forced underinvestment.

We no longer hear that consumers do not want, and will not pay for something better than 25 megabits per second download speeds and 3 megabits per second upload speeds.  We no longer hear that carrier networks are woefully underfunded and unable to satisfy consumer requirements. Such assertions now would support the case for market failure and the need for taxpayer funded networks, because the carriers have no interest in building.  Of course, now that Covid has unleashed a torrent of new universal service money, who can dispute the premise that incumbent carriers want to tap the gravy train.

By the way, the new FCC has yet to reinstitute network neutrality, but I am not seeing any new evidence of substantial increases in network investment by carriers still freed from the unconscionable burdens previously imposed.

Who needs consistency?

Massive 5G Investment, Despite “Regulatory Uncertainty”

            Riding closely on the heels of substantial investment in Fourth Generation wireless infrastructure investment comes a Fifth Generation.  Wireless carriers in the United States appear to have accelerated the rollout of 5G. See, e.g., http://www.cnbc.com/2017/02/27/momentum-is-building-for-5g-rollout-ericsson-ceo.html; https://www.cnet.com/news/verizon-to-hold-worlds-first-crazy-fast-5g-wireless-field-tests-next-year/; https://www.bloomberg.com/news/articles/2017-02-27/at-t-boosts-5g-networks-rollout-as-online-video-demand-spikes

            Hang on. Aren’t we living an acutely painful world of regulatory uncertainty foisted on the marketplace by network neutrality zealots?  How can carriers invest substantially in a wireless broadband technology if regulators are hell-bent to mandate access and openness?

            It strikes me that wireless carriers in the United States and elsewhere can handle regulatory uncertain and make prudent investments in next generation network infrastructure.

            There are legitimate reasons not to support network neutrality, or to advocate reforms.  But make no mistake: removing “regulatory uncertainty” is a bogus rationale having no real impact on carrier investment strategies.

AT&T-DirecTV and the Benefit of Multiple Requests

            AT&T appears likely to secure all required governmental approvals of its $48.5 billion acquisition of DirecTV.  AT&T has made multiple requests for acquisition authority of late and the odds of multiple “mother may Is” seems to work here.  The company couldn’t get the needed authority to buy out TMobile and the wireless consumers are far better off in having a maverick innovator among the 4 carriers that pretty much control the nation’s wireless infrastructure.  Most analysts think a merger of AT&T and DirecTV won’t matter much.

            AT&T can make plausible arguments that the merged venture will not harm competition, or consumers even as it provides desirable diversification opportunities for both companies.  The FCC and Justice Department will have to emphasize this prospect rather than dwell of the snarky and unnecessary threats by CEO Randall Stephenson that AT&T won’t invest in next generation network infrastructure because of burdensome network neutrality obligations and general notions of regulatory uncertainty.  See Washington Post, AT&T is putting its fiber deployment on ice over net neutrality — for now (Nov. 12, 2014)

available at: https://www.washingtonpost.com/blogs/the-switch/wp/2014/11/12/att-is-putting-its-fiber-deployment-on-ice-over-net-neutrality-for-now/.

            So AT&T has ample retained earnings and borrowing options to shell out $48.5 to buy out a content competitor, but the marketplace is too risky to invest in plant?  Apparently it makes financial sense to buy market share and diversify content distribution technologies rather than extend the geographical market coverage of AT&T’s hybrid fiber optic/copper U-verse network.

            AT&T is neither a maverick, nor an innovator.  Its interest in DirecTV may evidence backward, or status-quo thinking.  In the worst case, AT&T will have bought a venture whose one service will decline in value and market share over the next few years. If cord cutting and shaving picks up momentum in the wired cable television environment, won’t subscriber churn increase for the satellite alternative to cable?  Or will exclusive rights to some NFL football games pay for the deal?

            Does it make sense to double down on an incumbent medium, rather than emphasize new media opportunities?  The managers at AT&T appear keen on hedging their bets by embracing old media even as technological and market convergence point elsewhere.