"Soaring Profits" for Broadband Access Providers?

The Phoenix Center says claims by proponents of increased Internet regulation are quite wrong in claiming that firms such as AT&T, Verizon, Sprint-Nextel, Qwest, Comcast, and Time Warner Cable are making "record profits," "substantial profits" or  "soaring profits" that justify further regulation.

Quite to the contrary, those firms are earning at lower rates than the average Standard & Poors 500 firms does, and have done so for the last five years.

The Phoenix Center found that the profitability of the larger broadband access service providers is generally equal to, or below average, for firms in the S&P 500. It would be more accurate to say that profits are "'typical," not "soaring or 'substantial.'

Conversely, content firms like Google and EBay are substantially more profitable than the access providers are,  implying that access providers are not benefiting as much as others in the Internet ecosystem from the surge in broadband adoption and use.

Across all measures of profitability, Google and Ebay are two-to-four times more profitable than the better performing broadband providers.

In fact, the Phoenix Center found that both Wal-Mart and Colgate-Palmolive have much higher profits than the large access providers.

FCC Chairman Julius Genachowski has issued a challenge to the industry for data-driven analysis," according to study co-author and Phoenix Center President Lawrence J. Spiwak. "Accordingly, parties calling for regulation need to present more than just hyperbole about 'soaring' profits -- they need to present facts."

"The evidence shows that BSP profitability is fairly typical of American industry, if not a little low" said study co-author and Phoenix Center Chief Economist George S. Ford, PhD. "Based on available evidence, regulatory intervention based on substantial profitability by large BSPs has no basis in fact."