Pixel Envy

Written by Nick Heer.

American Broadband Companies Cut Capital Expenditure in 2018, Undermining Argument for Dismantling Net Neutrality

Kiran Stacey, Financial Times (via Lindsey Barrett):

Companies such as AT&T and Verizon had argued for years against net neutrality rules that forced them to treat all internet traffic equally. The companies said that without such restrictions, they would be able to charge companies more for delivering their internet traffic faster, bringing in money they could use to invest in their networks.

In late 2017 Ajit Pai, the Trump-appointed FCC chairman, announced his organisation would repeal the rules, in one of the most significant pieces of deregulation undertaken by the Trump administration.

Mr Pai said at the time the previous rules had “depressed investment in building and expanding broadband networks and deterred innovation”.

However, the 2018 figures suggest that the change has not led to an immediate investment boom.

Following the introduction of the net neutrality rules in 2015, the big four telecoms companies increased overall capital spending in both 2016 and 2017. Last year, however, investment slipped by 0.4 per cent.

Remember how, just after net neutrality laws were introduced, capital expenditure actually rose? And then how, after those rules were repealed, the telecommunications lobby and Ajit Pai went back in time to ascribe those capex increases to the repeal? Well, now we’ve reached the logical conclusion of this story, where it’s revealed that the capex argument was, of course, complete bullshit all along.

To be clear: I’m fairly certain net neutrality laws have virtually no impact on capital expenditure by ISPs, as stated in Stacey’s article:

Craig Moffett, a telecoms analyst and founding partner at MoffettNathanson, said: “You have to ask whether any sane person would make long-term investments based on a change in FCC policy, especially one that is subject to so much legal and political volatility.”

Mr Moffett estimates the industry will increase its capital spending by 3.3 per cent this year, something he called “relatively restrained” given the favourable tax and regulatory regime the Trump administration has tried to put in place.

Capex will go up and down based on actual demand for broadband, expansion plans, new technologies — Sprint cited 5G rollout for its 2018 increase in capex — and equipment replacement.

So why did Pai and the rest of the Republican commissioners vote to roll back net neutrality rules? Karl Bode, writing in Techdirt in 2017, before the repeal of the laws:

At the heart of the sales pitch for this “modernization” of the FCC and killing of net neutrality rules? An ocean of farmed industry data insisting that net neutrality protections stifle broadband investment, damage the self-esteem of children, harm puppies, and threaten to (rip the Earth off of its orbital axis*. All magically fixed, of course, if we free some of the least-liked and most anti-competitive companies in America from regulatory oversight and public accountability.

In short: an ideologically-compulsive disregard for regulation, even if those regulations are sensible, widely-supported, and necessary in an age of an unrestrained anticompetitive merger and acquisition environment.