Delay in Release of Net Neutrality Order Only Adds to Uncertainty, AT&T CFO Says

“We need to see the order,” Stephens said emphatically, during remarks at a Deutsche Bank financial conference. “Any kind of uncertainty is not good for investment.” Stephens noted that the industry has spent more than $250 billion on networks since the FCC decided to apply a light regulatory touch on broadband during the Clinton administration. “There’s no problem with what’s going on,” he said. “Investment has been great. Innovation has been great.”

AT&T CEO Randall Stephenson Tuesday sharply criticized the FCC’s moves on net neutrality in a letter accompanying the company’s annual report (see 1503100064). FCC officials have explained that release of the order won’t be instantaneous and finalization takes time since staff must respond to comments, including the dissents filed by the FCC Republicans (see 1502270045).

AT&T’s concerns are well founded, said Craig Moffett, analyst at MoffettNathanson. “Telecommunications companies make long duration investments, with long payback periods and useful lives that are sometimes measured in decades,” he said Wednesday. “It is very hard to make those kinds of investments without at least some measure of certainty about how regulation might inform returns. And in this case it is particularly difficult, as the principal controversy is around whether the order does or doesn’t introduce a real risk of price regulation.” Moffett predicted the release of the order won’t do much to settle the “core controversy” over whether the FCC will impose rate regulation as a result of the rules.

Former FCC Commissioner Robert McDowell, now at Wiley Rein, agreed that the likely chilling effect on investment is very real. "This isn't a faux issue,” he said. “The manufacturers and suppliers of the expensive components of what makes the 'Internet' have been warning of this scenario for years, and they are perhaps the most clear-eyed and objective parties in this debate. Title II is about regulating the economics of networks and, therefore, slowing down the velocity of capital needed to improve the networks of tomorrow. What we are seeing today is only the prologue to what will be a long tragedy." McDowell represents various clients opposed to the rules.

The effect of the decision itself, not the timing of release, is the issue, said Cinnamon Mueller attorney Barbara Esbin, who represents ACA and other cable clients. “Having said that, until we see the order, we can’t measure just how bad the damage will be,” she said. “The publicly available information on what is in that 300-page document is actually pretty thin.”

Michael Calabrese, director of New America’s Wireless Future Project, said the comments are nothing new from AT&T. “AT&T and Verizon would do better to explain why they paid over $28 billion for more spectrum just weeks ago if they truly believe Title II with extensive forbearance is such a drag on future business prospects,” Calabrese said. AT&T and Verizon were the biggest and third biggest bidders, respectively, in the AWS-3 auction (see 1501300051).

The wireless industry has “boomed” under Title II and light-touch nondiscrimination rules since the early 1990s, Calabrese said. “Sprint has honestly stated the new rules won’t stop dominant and incredibly profitable companies like AT&T from investing and there is no evidence to suggest otherwise.”

"It's amazing that broadband providers, along with their favorite analysts and lawyers, can keep shouting about harms to investment with zero evidence backing up their arguments,” said Free Press Policy Director Matt Wood. “They keep saying it, and they keep getting ink for it, but it's just not true. Every claim they've advanced has been debunked -- not only by the in-depth analysis from advocates like Free Press, but by the cable and telecom companies' own statements to their investors.” The emperor has no clothes, but he “keeps strutting down the street anyway,” Wood said. “Randall Stephenson might want to look in the mirror and notice how threadbare his own story is."

Everyone is anxious to see the order and delays in release speak to process issues at the FCC, said Randolph May, president of the Free State Foundation. “But I doubt very much that seeing the text of the order will resolve much uncertainty,” he said. “And I have no doubt that investment will be dampened. But because we will never know what investment would have been absent reclassification, it will be impossible to know the amount of foregone investment."