Net Neutrality

Fretting Over Title II

With the threat of a switch to a common carrier regulatory regime looming over the US broadband industry, leaders of the major broadband providers are not exactly happy campers these days.

Take AT&T Inc. (NYSE: T) Chairman and CEO Randall Stephenson. Speaking on the company's fourth-quarter earnings call last week, Stephenson indicated that he's worried sick about the potential impact of reclassifying ISPs as common carriers under the Title II section of the Communications Act. Specifically, he's concerned that the move could disrupt AT&T's plans to "obsolete" its aging copper plant by 2020 and move all its customers and services over to its new fiber networks.

"With any new investments, we're up in the air now," Stephenson told financial analysts on the call. Although AT&T supports the four basic principles of net neutrality spelled out by President Obama, he explained, "what gives us pause" is the prospect of "really strident, heavy-handed regulations."

Unlike in the past, though, Stephenson did not come right out and threaten that AT&T would stop upgrading its networks if the Federal Communications Commission (FCC) decides to reclassify ISPs as Title II common carriers. After all, Stephenson still has his company's proposed purchase of DirecTV Group Inc. (NYSE: DTV) to shepherd through the agency's lengthy approval process.

Time Warner Cable Inc. (NYSE: TWC) Chairman and CEO Ron Marcus sounded a similarly worried theme on his company's earnings call last week. Asked about the potential impact of Title II on his company's network upgrade plans, Marcus said much depends upon the details of the implementation, including how much the FCC decided to forbear from imposing actual Title II regulations. But, he noted, "It almost goes without saying that, to the extent it creates uncertainty, it will be likely to chill our enthusiasm for investment."

Keeping his comments short and clipped on the call, Marcus declined to say any more about Title II and net neutrality. After all, he also has a big deal to help shepherd through the FCC with his friends at Comcast Corp. (Nasdaq: CMCSA, CMCSK).

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Unlike his counterparts at AT&T and TWC, Verizon Communications Inc. (NYSE: VZ) CFO Fran Shammo has no such worries about major pending deals that need US government approval. So don't even get him started on Title II.

Speaking on his company's earnings call last week, Shammo slammed the proposed switch to a Title II regulatory regime as "an extremely risky path that will jeopardize" the future of broadband in the US. He argued that the adoption of Title II regulations would "completely change the way we view our investments in our networks," as well as the way other broadband providers view theirs. "This will absolutely affect us and the rest of the industry," he stated. (See Verizon CFO Slams Title II Regs for ISPs .)

Going further than either Stephenson or Marcus, Shammo also warned that any attempt to impose Title II rules would "tie up the industry" in prolonged regulatory battles and prompt more lawsuits against the feds. In the last regulatory fight over net neutrality rules for the Internet, Verizon led the legal charge against the FCC's mandate, eventually overturning those rules in the federal courts.

So, with FCC Chairman Tom Wheeler preparing to present his latest net neutrality proposal to the Commission for a vote on February 26, two of the four biggest US broadband providers have now come out squarely against Title II, with the third (TWC) cautiously hedging its bets. Now let's see what Comcast Chairman and CEO Brian Roberts has to say on his company's earnings call on February 24. Stay tuned for more.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

brooks7 2/3/2015 | 4:39:46 PM
Re: So worried...  


Read my post in the thread about Intel buying Lantiq.  That is what I said...saying wireline access capex is stagnant is a generous position to take.  

So, I write on how we can create an environment that incents AT&T, Verizon, CenturyLink, Frontier, Fairpoint, Comcast, Charter, Cox (TWC left off because it is going poof), Sprint and T-Mobile to invest in Broadband capex for the residential market.  The small guys seem to spend/have spent more per sub.  So I ignore them.  Giving grants and loans hasn't worked.  So, we need to find something that does or ponder structural separation.


Edit/PS:  This is one of my kvetch's about us here on the boards.  I recognize that LR can't do this because of the nature of the publication, but WE ought to be thinking about not Title II but how to set up an environment to get the Telcos/Cable Cos/MNOs to invest the way we want them to.

KBode 2/3/2015 | 1:11:06 PM
Re: So worried... Well it's also worth noting that FiOS expansion (like U-Verse expansion) is mostly done. They're focusing on wireless (again with the vocal component already regulated under Title II). So the argument that fixed-line investment in particular will stagnate under Title II is a hollow argument when fixed-line investment ALREADY was stagnant.
brooks7 2/3/2015 | 12:55:32 PM
Re: So worried... Kb, I will only speak to the wireline part of your comment. FiOS is regulated by Title II for voice. But nobody expected to change voice revenue directly with FiOS. There would be an improvement in voice revenue from customers taken back from cable broadband/VoIP. But it is broadband that the analysis rested upon. For top of that voice (POTS) is a universal service so Veizon is obligated to provide it in any case. And the installation of FiOS was more concerned by UNE-L than Title II. I wonder if the installation of Title II will add that fuel to the fire. Seven
KBode 2/3/2015 | 12:03:08 PM
Re: So worried... I think the fact wireless voice and FiOS have been regulated under Title II illustrates the "investment harm" is a bogus claim. I think the ONLY thing these companies are worried about is that regulators will prevent them from abusing gatekeeper power to engage in bad (but very profitable) behavior.
alanbreznick 2/2/2015 | 8:56:21 PM
Re: Broadband Interesting, eh? So what do you think the FCc should do?
alanbreznick 2/2/2015 | 8:54:59 PM
Re: So worried... Sounds like you don't believe the guy? think the FCC should call his bluff? It looks like Tom Wheeler may do exactly that. 
KBode 2/2/2015 | 1:51:09 PM
So worried... "Speaking on the company's fourth-quarter earnings call last week, Stephenson indicated that he's worried sick about the potential impact of reclassifying ISPs as common carriers under the Title II section of the Communications Act."

So worried that AT&T was willing to spend $18.2 billion in the recent AWS-3 auction? :)
pdunbar 2/2/2015 | 1:11:16 PM
Broadband Oh you mean that in every other country broadband rates have gone up while fees have gone down...except in the US where quite the opposite is happening. 

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