There is a bit of a phony war of words going on in the US around Net Neutrality. On the one side cable executives are going on about there being a fall in the Capital Expenditures of cable operators since the Title II regime came in, on the other pro-cable politicians are being vilified by poster campaigns talking of broken promises over privacy bills and net neutrality.
Everyone knows that capex goes up and down based on a handful of issues. In an early next-gen technology market like DOCSIS 3.1, costs go up, and in the merger of CMTS and QAM, around CCAP, spending is combined into one device and might go down. They key thing is that it is cyclical around technology upgrades, not around government policy. Secondly there has been a tendency to underinvest among Telcos in broadband in the US since 2007, which has resulted in AT&T and Verizon losing something like 20 million broadband homes to cable.
It is true that telco and cable executives under-invest in a technology when they are faced with a political decision they don’t like – it’s a form of governmental protest – it’s not because the economic environment is uncertain. It’s a choice. Also published figures will rely on what write-down strategy is used for the depreciation of installed plant. The figures can be easily played with.
The US is always full of this phony rhetoric, like kids in a pram throwing out their toys when they cannot get what they want.
Separately the backlash against politicians has been orchestrated by a consumer group called Fight for the Future and it has raised something over $250,000 to fight for net neutrality from individuals and businesses which rely on the internet. It will continue to crowdsource more funds and use them to point out which Republicans in congress are going back on campaign promises. It refers to all such supporters as “Team Cable.”
David Cohen of Comcast said in a blog this week that since Title II has emerged capex at US ISPs has declined by $3.6 billion. But the great bulk of this might have been the slow-down in cellular capex at Verizon and AT&T after spending on the 4G roll out, although that will actually emerge in 2017 figures. The filed results for those years show his premise is nonsense. AT&T, Verizon and Comcast combined invested $47.1 billion in Capex in 2016, 45 billion in 2015 and 44.7 billion in 2014. The direction combined is clearly up, although it is “lumpy”. If Cohen is not numerate enough to look the numbers up himself, we can show him where to find them.
Another set of capex figures came from economist Hal Singer, who said the top 12 ISPs invested 5.6% less in 2016 versus 2014, before Title II was enacted. It does not take an economist to add up 3 numbers, but it does take one to tell a blatant lie. He deleted the Cpaex spend of AT&T in Mexico, although it was obvious that AT&T wanted to spend a specific amount to keep investors happy, and needed to upgrade those networks it had just acquired. So he manipulated the figures to paint the picture he wanted to.
“A CTIA study found that capital expenditures declined for wireless providers by 17.4% from 2015-2016,” Cohen added. “A study by Dr. George S. Ford found that the threat of Title II regulation between 2011 and 2015 reduced broadband investment by about 20% to 30%, or about $30 to $40 billion annually. That reduction amounts to “about $150-$200 billion over the five-year period,” or the equivalent of losing an entire year’s worth of investment.”
All of this can be checked at the SEC.GOV website and none of it is true. Some people think they have a right to make up numbers when their political beliefs and their favorite “way of cheating” are at risk. Comcast has blocked traffic in the past and been told to change policy by the FCC, take the case of Vonage in 2007 and Netflix more recently. It needs to be policed.
Those who say investment isn’t impacted by the Title II regime “aren’t living in the real world,” Cohen said. Well David what color is the sky where you live? Purple?
The way this plays out is that the FCC chairman will continue to dismantle the Title II move, and unless Congress tells him otherwise, it will be gone in this administration. Chairman Ajit Pai is looking more and more isolated in his need to do this, and in the next administration it will likely be re-introduced. Sooner or later a government Act will need to be passed enshrining this in American law, but each side has attempted to phrase it in a way that has infuriated the other and embarrassed their parties. It will be with us as a debate for a long time yet.