Infrastructure investment by telecom companies slowed by 11 percent for the first half of 2015, according to a new report, in part because of uncertainty imposed by Title II regulations enacted by the Federal Communications Commission this year.
“In the telecom industry, pro-investment policy should support ‘light touch’ regulation,” said the report published by the Progressive Policy Institute on Monday. “Here we have the makings of a natural experiment, since the FCC departed from this approach last February by imposing Title II regulations on broadband service.
“That might be related to the build-out of … networks,” the report adds, or “it could be due to higher levels of regulation, which potentially reduces the gains from further investment.”
The FCC voted to reclassify Internet providers as Title II utilities this year in order to impose new regulations on them, which included requiring that they provide a “minimum level of access” and avoid “commercially unreasonable” practices. However, the FCC did not define what those terms meant, instead promising to rule on regulatory decisions on a case-by-case basis.
Republicans argued that would have a chilling effect on future investments. “The proposed net neutrality rules and legal theories will stifle innovation and investment by the private sector,” FCC Commissioner Michael O’Rielly argued in his dissenting opinion.
The commission’s Democrats argued that the impact would not be significant, and passed the rules in a 3-2 vote. Several telecom companies filed suit against the rules as a result, claiming there would be an economic impact that the FCC refused to acknowledge.
The findings included in PPI’s study will not help the FCC’s lawyers, who must make the case that the economic impact hasn’t been so bad in oral arguments on Dec. 4.
The authors, who ranked the top 25 nonfinancial American companies by their capital spending in the U.S., found that the top industries were respectively telecom and cable providers; energy production companies; and technology and Internet companies. The three categories comprised 60 percent of the list, but accounted for 71 percent of total capital investment.
AT&T, Verizon, Comcast and Time Warner Cable represented the largest telecom and cable companies. Of those, AT&T and Verizon topped the list overall, spending a combined $37 billion.
Second quarter filings with the Securities and Exchange Commission indicated that AT&T’s capital expenditures were down 29 percent for the first half of 2015 compared to the same period last year, while Verizon’s had decreased by 4 percent.
