dslreports logo

story category
ISPs: Reclassify Us as Utilities and The Sky Will Fall
by Karl Bode 12:10PM Tuesday May 13 2014
One of the most common myths in the broadband industry (well, many industries) is that if you just stop regulating providers and let them do whatever they'd like, network investment will explode and we'll all be living in a Utopia of ultra-fast, inexpensive connections in no time. Of course time after time after time we're shown this isn't true, as shortly after deregulating a company like AT&T users wind up getting socked with higher rates and worse service than ever.

History and fact repeatedly isn't on the side of the "less regulation means greater network investment" argument, yet this doesn't stop carriers (and their massive armies of assorted paid mouthpieces) from using it every time they want government to do (or not do) something.

"Giving us almost everything we want each year and even letting us write telecom law sure is nice," incumbent ISP execs and lobbyists will argue, "but if we don't get X, network investment will shrivel and die and you'll all cry over your clogged tubes."

This week, ISPs are marginally-worried the FCC may classify ISPs as common carriers, even though there's really no serious indication that the FCC or Wheeler have the spine to ever make this happen. Like clockwork, the industry is leaping to the "regulation kills investment" trope in letter being circulated this week to members of Congress:
The letter warns that reclassification could open the door to a "wide array of regulatory burdens and restrictions" that could halt progress toward improved broadband service. "I respectfully urge you to consider the effect that regressing to a Title II approach might have on private companies’ ability to attract capital," it concludes.
Except, once again, if you actually bother to look you'd note that despite the industry being increasingly and dramatically deregulated over the last decade, network investment is actually dropping as the increasingly unregulated (or regulator-for-hire driven) markets get less competitive by design:
Click for full size
My chart properly shows annual average investment during these periods and shows clearly that investment is down. I didn't even adjust for inflation, since it's hard to calculate that without NCTA giving us specific annual figures....if you think the light regulatory touch is working because it's leading to an investment boom, you are mistaken. The industry is acting like a low-competition industry, scaling back investment and plowing its profits into dividends and share buybacks and merger efforts.
And that's just cable. Vox doesn't even touch on the fact that AT&T and Verizon (also historically deregulated and in the midst of a massive new and successful deregulatory push) have frozen next-gen broadband expansion (despite some bunk promises about 1 Gbps). In fact, they're hanging up on tens of millions of DSL users they don't want to upgrade, making things even less competitive for cable across more than half of the country.

Why? Because having wimpy, intentionally incompetent, or former lobbyists as regulators isn't the path to technological nirvana, it's the path to uncompetitive markets. Until we stop pretending otherwise (usually under the banner of childish partisan fisticuffs disguised as reasonable conversation) we're destined to run the same hamster wheel over and over again. It's well-past time to stop believing in magic deregulatory horsies and fairies if we're ever to improve our broadband fortunes.

Update: Industry CEOs today all got together and penned a very similar letter to the FCC insisting that a tough regulator with the authority to prevent anti-competitive abuses would somehow eliminate this spike in network investment -- that isn't actually happening.

89 comments .. click to read

Recommended comments


Cleveland, OH

3 recommendations

reply to tshirt

Re: let's see, what happened around 2009...

You have an excuse for everything. It was noted multiple times in the past but their revenue and profit actually kept going up during the crisis, along with price increases. Nor does the recession excuse explain why investment has been dropping the last couple of years when the economy has been improving.


Palo Alto, CA

3 recommendations

reply to hello123454

Re: There's more to it

What corporate taxes? These are companies that have effective tax rates, what they actually end up paying in taxes, lower than most personal tax rates.



3 recommendations

reply to elray

Re: They're absolutely right!

who is we?

Jason Levine

2 recommendations

reply to hello123454

Re: There's more to it

The problem is that business knows their business well, but they also know how to abuse the customers. When businesses are left on their own, with no regulation whatsoever, the quality of their product declines even as the price rises. In theory, market forces should correct this, but then the businesses merge until they have a monopoly (or virtual monopoly) on the market.

In the ISP market, we have monopolies or duopolies virtually everywhere. Take my location, for example. I have Time Warner Cable as my ISP. Verizon hasn't built FIOS by me yet and has no plans on doing so. If all ISP regulations were dropped tomorrow, would that spur Verizon to build FIOS to my house? Would Time Warner Cable suddenly decide to speed up my connection? Or would the status quo remain with prices rising for the same (if not slower due to unfixed network congestion) speeds?

I'd wager the latter would happen. Consumer complaints would be ignored because the ISPs -with no competition and in this scenario no regulation - wouldn't have any reason to listen to them. They would know that people would have nowhere else to go and thus they (the ISPs) could do whatever they liked.
-Jason Levine


Centereach, NY

2 recommendations

reply to tshirt

Re: let's see, what happened around 2009...

said by tshirt:

Fortunately they don't need your condolences BECAUSE they adjusted to the changing conditions.

If the global recession is to blame for reduced investment what's the excuse for the rest of the world continuing to outclass the US at an ever increasing pace?



6 recommendations


That's extremely easy to fix. Executive compensation cannot exceed 1% of network investments. Watch those network investments skyrocket overnight.

Got Helix?
Putnam, CT

2 recommendations

reply to tshirt

Re: let's see, what happened around 2009...

So what was their response? Raise rates 2-3 times a year and add on junk below the price fees? Sorry, I have a hard time feeling sorry for them.


Hazelwood, MO

3 recommendations

reply to tshirt

Regadless, it was $5 billion less over a 5 year period compared to 4 and the cable and phone companies still made out like bandits during this time.

Space Elf
Mullica Hill, NJ

4 recommendations

reply to Papageno

Re: I'm no believer in "Deregulation über alles" but...

I think also that carriers should be prohibited from owning content creation. This way all their income goes to their actual job of running a video and data network and not into buying new studios.
[65 Arcanist]Filan(High Elf) Zone: Broadband Reports