AT&T, Verizon CFOs Predict Title II Litigation
Verizon and AT&T are both still reeling from the FCC's recent decision to classify US fixed and mobile broadband as telecom services under Title II of the Communications Act, and both of the carriers' financial chiefs are predicting litigation as a result.
Speaking this week at a Deutsche Bank conference, AT&T Inc. (NYSE: T) CFO John Stephens and Verizon Communications Inc. (NYSE: VZ) CFO Fran Shammo both said they expect litigation spanning several years, and costing lots of money, to arise as a result of the decision. (See Verizon CFO Slams Title II Regs for ISPs .)
The Federal Communications Commission (FCC) voted last month to impose net neutrality regulation on both fixed and mobile broadband providers under Title II, part of a communications law passed in 1934 aimed at common carriers. Commission Chairman Tom Wheeler said it is only intended to ban traffic blocking, throttling and paid prioritization, but with a "light touch" and on a "case-by-case" basis. (See The Title II Ruling: A 'Wow' Moment and Wheeler: We'll Enforce Title II 'Case-By-Case'.)
Even with these reassurances, the US's two largest wireless operators aren't convinced it will play out as such. Verizon's Shammo said Tuesday that no Internet service provider has ever blocked or prioritized traffic, rendering the regulation unnecessary. Stephens echoed his comments, calling Title II a solution in search of a problem. Both also expressed concerns that they haven't yet seen the 317-page document outlining the decision. (See FCC Vote Shows Net Neutrality Strains.)
"We don't know what the 300-plus pages say yet, but I have to assume there will be a lot of litigation around it," Shammo said, adding that the process would cost taxpayers a lot of money.
Stephens' sentiments were largely the same, although he wasn't as defensive as Shammo seemed. He noted that he needs to see the order, but any kind of uncertainty is not good for investment. He fears the new rules will stymie investment and innovation not just for the "guys putting in fiber and towers," but also for the Silicon Valley types -- who were largely in favor of net neutrality -- that are thinking about building services that ride on the network. (See Internet Pioneers Decry Title II Rules and Net Neutrality Arguments Have Historical Echo.)
"We expect litigation over the matter," he said. "We'll see what the documents say, but it will probably go on for a few years and cost more dollars."
When the CFOs say they expect litigation, it's safe to assume they'll be the ones bringing the charges. Verizon threatened to sue last year if the federal government went ahead with the proposed Title II reclassification, and AT&T said -- then later took back -- that treating broadband as a utility might force it to stop expanding its fiber network. (See Sprint CTO Blesses a Light Touch of Title II and AT&T to FCC: We Haven't Killed Broadband Rollout.)
These concerns have been echoed by others, including many Republicans and those opposed to the new regulation. The documents are to be shared soon, at which time there will be more clarity on what the new regulation actually entails. Either way, the fight is clearly far from over. (See US Telecom: FCC's Move Has Global Implications and ACA Doesn't Buy FCC's Rate Reg Reassurances.)
— Sarah Thomas, , Editorial Operations Director, Light Reading