Friday, November 20, 2015

One More Reason We Cannot Tell What Impact Common Carrier Regulation Has on Investment

There remains significant debate about the imposition of common carrier regulation on Internet access services, in particular the effect on capital investment in new facilities. Determining any such impact is not an easy, for any number of reasons.

The Phoenix Center for Advanced Legal & Economic Public Policy Studies provides yet one more reason why it is nearly impossible to gauge such impact.

As a mandatory condition of the AT&T deal to buy DirecTV, the Federal Communications Commission  required AT&T to build out fiber to home connections  to 12.5 million customer locations within four years after the deal closed.  

The FCC would rationally fear that its reclassification of broadband Internet access as a Title II telecommunications services will reduce investment incentives, counter to the mandate of Section 706 to promote availability and adoption via infrastructure investment.  

By mandating that AT&T engage in aggressive wireline investment as a condition of its acquisition of a DBS satellite provider (a ridiculous proposition on its face), the Commission virtually ensures that investment will grow by whatever amount it takes to install 12.5 million new fiber-to-home connections by AT&T.

That’s one way to ensure investment. But the investment tells us nothing about the direct impact of common carrier regulation on supplier incentives.

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