Lower Broadband Capex Raises Concern From USTelecom

USTelecom says its early data “strongly suggests” that investment in broadband dropped in 2016, for the second year in a row. That raises a red flag for the association.

“Closing the digital divide and bringing more Americans access to the benefits of high-speed internet service won’t happen if new investment in broadband infrastructure continues to fall,” writes Patrick Brogan, vice president of Industry Analysis for USTelecom in a blog post. In 2016, capital expenditures for ISPs was $71 billion, down from $73 billion in 2015, and $74 billion in 2014, USTelecom’s current estimate shows. That’s $2.5 billion to $3 billion lower in 2016 than it was in 2014, the year before the FCC reclassified the internet as a utility – known as Title II.

Claims by some interest groups that broadband provider capex actually may have increased in 2015 and 2016, depend on figures that ignore accounting adjustments for certain non-material items like leased cell phones and acquisitions, such as AT&T’s merger with DirecTV and a Mexican wireless operation, according to Brogan.

The association studied capex from publicly-held cable, wireless and wireline incumbent Local Exchange Carriers. The group represents some $5 billion of capex in 2014 and 2015. If their capital spending in 2016 grew, the estimate will be revised. The data excludes information from certain Competitive Local Exchange Carriers; most of them are privately held.  

“Michael Horney of The Free State Foundation postulated in a report using data from a USTelecom study, that broadband investment slowed by $5.6 billion since the Open Internet Order. The crucial question going forward is what would have capex been if Title II had not been imposed, controlling for other factors?” asks Brogan rhetorically.

USTelecom plans to release the full report later in the year. Note FCC Chairman Ajit Pai intends to have the agency restore the classification of broadband internet access as an information service; a vote on beginning a rulemaking to accomplish this is set for the May 20 meeting.

May 10, 2017      

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