The country's biggest broadband operators say that if the Federal Communications Commission requires them to abide by strict rules treating all users equally regardless of size and sales, they won't be incentivized to make investment in their networks, the kinds of investments we all agree are long overdue. They claim it won't be worth it to build new high-speed networks.
Yet the claim that net neutrality would discourage future infrastructure investment seems to be a bluff. In fact, net neutrality may be a significant benefit for the industry's established players of which Comcast, Verizon and AT&T are the biggest.
Heading into the final months of debate on the issue, the big providers are pressuring the FCC to turn its back on President Obama's call for broadband services to be reclassified under Title II of the 1934 Communications Act, an actin that could result in Internet traffic usage being regulated similar to a utility.
"We think that that is a -- that would be a mistake," said Time Warner Cable CEO Rob Marcus at a Dec. 9 conference hosted by UBS. "It's highly likely to cause all sorts of unintended consequences, create uncertainty, dis-incentivize investment, and probably at the end of the day end up costing customers more for lesser services."
At the same conference, UBS analyst John Hodulik asked Verizon finance chief Francis Shammo how net neutrality regulation would affect "his view on the attractiveness of investing further in the United States," to which he answered that whatever the FCC decides, the rules do "not influence the way we invest. I mean, we're going to continue to invest in our networks and our platforms."
In other words, if Verizon can charge more for better services, it will do so. Remember, Obama didn't call for the FCC to be able to regulate rates.
The upshot? Although the National Cable and Telecommunications Association and high-profile executives such as Marcus may claim that they will stop investing in new infrastructure, it's probably untrue. Shammo, better positioned than anyone to comment on Verizon's financial future, shot down the possibility of a freeze on investment.
Moreover, whether or not net neutrality is enforced, companies such as Verizon and Time Warner Cable will continue to try and gain market share by expanding and improving their networks. For instance, Verizon is currently deploying fiber in Philadelphia, Washington D.C. and all five boroughs of New York City, where it is hoping to undermine Time Warner Cable's grip on households.