Net Neutrality Would Reduce Investment, Says Frost & Sullivan

Network neutrality has the potential to significantly discourage broadband infrastructure investment, increasing the investment risk, Frost & Sullivan analysts say.

You won't be surprised at that conclusion if you are in the communications service provider business and have to work with investors, or are on the capital allocation side of the business, or ever have modeled expected returns from broadband investment under conditions where robust wholesale access is the rule, where competition is very heavy or where there is little opportunity to provide new revenue-generating services beyond simple access.

In a highly-competitive market, nvestments in access infrastructure are highly sensitive to expected subscriber revenue. Anything that reduces the potential new revenue can drastically affect the investment analysis.

In the presence of net neutrality, operators would likely reduce investment due to the increased risk. Where projects proceeded, consumers would ultimately pay the cost, as they always do.

Net neutrality acts like a tax on the Internet, Frost & Sullivan says. It imposes overhead on network operators, which, in turn, decrease network investments, providing less opportunity, not only for the operators, but also for those that use the operators' networks as well, analysts say.

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