Wednesday, August 10, 2016

FCC Regulations Are Pushing ISPs out of Broadband Infrastructure Market

Today, Hal Singer, a principal at Economists Incorporated, published an op-ed in Forbes discussing how Internet service providers (ISPs) are investing in capital outside of the broadband infrastructure market due to the FCC’s 2015 Open Internet Order. Mr. Singer shows that AT&T, Verizon, and Sprint have all decreased their capital expenditures by $1.9 billion, $1.2 billion, and $1.5 billion, respectively, from the first half of 2014 (before the FCC adopted the Open Internet Order) to the first half of 2016.
Mr. Singer also says that other FCC proposals are discouraging ISPs from investing broadband infrastructure. The proposal to pursue price controls for business data services would stifle the deployment of fiber. The FCC’s privacy NPRM would harm ISPs’ ability to sell targeted advertisements and offer “free” services to consumers. (See my Perspectives from FSF Scholars from earlier this month.) And the FCC’s set-top box NPRM would create barriers for ISPs to integrate themselves into the pay-TV market. Mr. Singer makes a convincing case that the FCC’s assault on broadband (he calls it “The Wheeler Tax”) is pushing ISPs out of the broadband infrastructure market and into the edge market. Do not be surprised if ISPs continue to purchase edge providers, like we have seen with Verizon’s recent purchases of Yahoo and AOL.