Surge of Broadband Investment Threatened by Utility Regulation

Patrick Brogan

U.S. broadband providers invested $78 billion in network infrastructure in 2014, according to a new analysis of capital expenditures data for wireline, wireless and cable broadband providers. The 2014 investment expenditure was $3 billion, or 4 percent, greater than the $75 billion invested in 2013 and $14 billion, or 22 percent, greater than the $64 billion invested just five years ago in 2009 amidst the financial crisis.Of the 2014 total, the wireline industry invested $28 billion, or 36 percent of the industry aggregate, compared to 43 percent for wireless and 21 percent for cable.

From 1996 through 2014, broadband providers have made $1.4 trillion in capital investments with wireline providers investing more than $720 billion, or 52 percent of this total, compared to 32 percent for wireless and 16 percent for cable. These surging investment levels have taken place during a period of light regulation, which has come to an abrupt end with the Federal Communications Commission’s (FCC) decision(link is external) to impose public utility rules on broadband providers. It is difficult to predict the near-term impact of this decision on investment, but numerous economic analyses(link is external) forecast negative long-term consequences on investment, innovation and other long-term economic benefits that come with broadband investment.

This policy shift is particularly unfortunate given that the nation and economy have reaped substantial benefits from broadband investment over the last couple of decades. Nearly all Americans can get broadband services from a range of providers. According to the National Broadband Map(link is external), as of mid-2014, more than 96 percent of Americans had access(link is external) to fixed broadband and more than 99 percent of Americans could get mobile broadband. Growing infrastructure Investment has expanded the quality and speed of broadband service. As of mid-2014, 99 percent of Americans could get broadband at 10 megabits per second (Mbps) download or greater speeds. Fixed broadband at 50 Mbps download or greater was available to 83 percent of Americans, up from 46 percent in 2010, and 100 mbps download or greater was available to 65 percent of Americans, up from only 11 percent in 2010.

Moreover, the U.S. is among the world leaders in broadband, investing significantly more per capita than the average for industrialized nations in the Organization for Economic Cooperation and Development (OECD). The U.S. approach to date has emphasized light regulation and investment in competing facilities rather than resale, leading to more facilities-based competition than most of the rest of the world. As of mid-2014, 88 percent of U.S. households could choose(link is external) from two or more fixed broadband providers and 97 percent could choose among three or more mobile broadband providers. The U.S. produces a disproportionate share of global Internet traffic and generates more Internet traffic per user or per capita compared to nearly all other countries, activity that could not occur without significant investment in high-quality broadband service.

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About Mark Milliman

Mark Milliman is a Principal Consultant at Inphotonics Research driving the adoption and assisting local governments to plan, build, operate, and lease access open-access municipal broadband networks. Additionally, he works with entrepreneurs and venture capitalists to increase the value of their intellectual capital through the creation of strategic product plans and execution of innovative marketing strategies. With more than 22 years of experience in the telecommunications industry that began at AT&T Bell Laboratories, Mark has built fiber, cable, and wireless networks around the world to deliver voice, video, and data services. His thorough knowledge of all aspects of service delivery from content creation to the design, operation, and management of the network is utilized by carriers and equipment manufacturers. Mark conceived and developed one of the industry's first multi-service provisioning platform and is multiple patent holder. He is active in the IEEE as a senior member. Mark received his B.S. in Electrical Engineering from Iowa State University and M.S. in Electrical Engineering from Carnegie Mellon University.
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