Broadband Capex Rebounds, Says USTelecom, Noting Policy Shift; Pai, Carr Hail News
U.S. broadband capital expenditures rose 2 percent in 2017 to $76.3 billion, said USTelecom's annual report Thursday. The group credited the FCC's recent "internet freedom" and tech transition orders and congressional "tax reform" with helping to reverse a two-year capex decline that "began" when the FCC "moved to impose common carrier" regulation on broadband providers in 2015. The report confirms FCC "policies to promote broadband deployment are working," said FCC Chairman Ajit Pai. "Investment is pouring back into this space," said Commissioner Brendan Carr at a USTelecom event.
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The "decline in broadband providers’ capital expenditures started in 2015, accelerated in 2016, and returned to growth in 2017," said the report, citing $78 billion in 2014 spending, $77.5 billion in 2015 and $74.8 billion in 2016. It said the 2015 decrease "coincided" with the FCC's Communications Act Title II broadband classification and net neutrality regulation. The "parallel shifts in policy and capex suggest that expectations regarding common carrier regulation may have been a factor," it said.
A Title II net neutrality advocate cited other keys. "Broadband investment is being driven by two key factors: Demand for streaming and cloud computing and smaller competitive broadband builders who are laying far more fiber than the incumbents," said Incompas CEO Chip Pickering in a statement. "Game changing economic studies in response to USTelecom’s forbearance petition debunk USTelecom's misguided effort to cut off competition, showing that competitive providers are driving new network investment."
"These capex findings could bolster the FCC’s legal case for eliminating broadband regulation," said an ex-FCC official who doesn't advocate on net neutrality. "I’d feel better about the legitimacy of these numbers if they weren’t produced by companies who want the FCC to win in court."
USTelecom collected capex data for wireline, wireless and cable broadband providers, mostly from company financial statements. It excluded satellite providers, telecom resellers and electric utilities, with figures "not adjusted for inflation or quality," and "made estimates for non-reporting companies." Figures exclude spectrum auction payments and merger and acquisition costs, Patrick Brogan, vice president-industry analysis and report author, told us.
Carr said the FCC is focused on promoting the "massive" long-term investment needed to expand broadband by removing regulatory barriers. He cited a March order streamlining historical and environmental reviews of 5G small-cell systems and a September order restricting state and local fees. The commission wants to "make sure we have sufficient and predictable funding" for RLEC broadband deployment, he added.
The Agriculture Department hopes to have a "solid plan" it can announce by year-end on the details of a $600 million Rural Utilities Service broadband pilot program of grants and loans, Secretary Sonny Perdue told the event.