Net Neutering: Telcos Threaten Pullback

CHICAGO -- Supercomm 2009 -- Execs in attendance at this year's Supercomm conference are preoccupied with looming net neutrality regulation coming from the Federal Communications Commission (FCC) , regulation they say could have a negative effect on telecom investment.

In his keynote speech this morning, AT&T Inc. (NYSE: T) president of operations John Stankey likened his mood ahead of the FCC's meeting on the topic to how he would feel before going to a funeral.

Stankey said the new rules could have a limiting factor on service provider spending, as they attempt to inappropriately manage long-term investments amid regulatory uncertainty.

"When you're in an industry where you have long-lived assets, that uncertainty can be really problematic to capital formation," Stankey said.

The FCC's approval of a draft set of net neutrality rules comes at the same time that the government is encouraging service providers to increase broadband adoption. David Zesinger, senior vice president of federal affairs at CenturyLink, warns that net neutrality regulation could have a negative impact on the broadband initiative, particularly in rural markets.

"In rural markets, the hurdles are high. There are high multiples already to what the cost of urban buildouts are. To add this to the burden of building out that last five or 10 percent, it really will discourage deployment," Zesinger said.

Jim Cicconi, senior executive vice president of external and legislative affairs for AT&T, lamented, "If you impose heavy regulations or heavy taxes on investment, you get less of it, not more of it."

While citing lesser investment as the main reason that the government shouldn't begin regulating how service providers manage their networks, Cicconi also warned that net neutrality regulation was primarily being pushed by "certain groups" that have "never invested the time in deploying broadband... and had no experience in running or managing networks.

"The only thing worse than those groups purporting to be experts is if the government bases its policy on their supposed expertise. I think the government is playing a very dangerous game if it listens to advice of this nature."

Jeff Campbell, senior director of Government Affairs for Cisco Systems Inc. (Nasdaq: CSCO), warned that not all network management is equal. For instance, he notes that public safety or healthcare services should have better access than consumer services.

"People aren't going out to manage networks because they want to -- there are costs involved and they have to buy equipment to do so. People are managing networks because it enables something," Campbell said.

Campbell also noted that network management has been proven successful for dealing with issues of network congestion in other nations:

"If you look around the world at who's managing traffic for congestion purposes, one of the most active markets for that is Japan, the broadband nirvana that is spoken of so much, where they have such great access. Yet there's an enormous amount of network management that happens there."