Shocker: ISPs Cut Back 2020 Investment Despite Tax Breaks, Death Of Net Neutrality

from the ill-communication dept

Why it's almost as if you can't take telecom giants (and their lawyers, consultants, and political allies) seriously.

If you recall, the broadband industry and the Trump FCC repeatedly proclaimed that modest consumer protections like net neutrality had dramatically stifled telecom sector investment, and were we to ease regulatory oversight of giants like AT&T and Verizon, it would result in a wave of new sector investment the likes of which we'd never seen before. Ignore the fact that data routinely disproved this claim; this "net neutrality stifled investment" claim was made almost daily by the telecom sector and the wide variety of mouthpieces paid (one way or another) to support them.

Funny thing about that. Despite just having received billions in tax breaks and regulatory favors, AT&T, Comcast, and Charter are all slated to lower their CAPEX and network investment significantly in 2020. Others 2020 CAPEX projections, like Verizon, were entirely flat. This static or reduced investment arrives despite the slow but steady deployment of 5G, the accelerated deployment of which was also a big cornerstone of the net neutrality repeal's justification:

"Comcast and Charter missed 3Q expectations for capex and guided 2019 lower than previously planned," wrote the analysts at Nomura's Instinet in a recent note to investors. "We have lowered our combined 2019 capex forecast for Comcast and Charter from $14.6 billion to $14.2 billion."

And AT&T...surprised Wall Street analysts with a significantly lower-than-expected capex for 2020. The operator said it expects to spend around $20 billion on capex next year, which is way down from the $23 billion it expects to spend this year and the $22 billion that most Wall Street analysts had expected AT&T to spend in 2020."

Fewer jobs, higher prices, and lower investment was not what we were promised. It's the precise opposite of what the endless parade of telecom-linked think tankers, academics, consultants, and other hired mouthpieces claimed would happen. And it's certainly not what Ajit Pai said would happen when he recently told Congress net neutrality had a disastrous impact on sector investment, despite the fact that biggest study of its kind on the subject ever undertaken just last month showed that net neutrality had no meaningful impact on broadband investment levels whatsoever.

It's simply no longer debatable, and it's fairly telling to see which groups and individuals are still trying to push this line of debunked detritus.

Granted this is a con AT&T has been running on the American public for decades now. The company will proclaim that immense broadband deployment and employment gains can be made if the government just lobotomizes itself and does whatever AT&T is demanding at the moment (lower tax rate, fewer regulations, new regulations AT&T supports, merger approval, etc.). When the government inevitably follows through, AT&T's promises then mysteriously disappear. And like Lucy and Charlie Brown football, nobody in the US seems particularly interested in learning from the experience.

Filed Under: broadband, capex, investment
Companies: at&t, comcast, verizon

Comcast Network Investment Drops Despite Repeated Claims Killing Net Neutrality Would Trigger Investment Wave

from the ill-communication dept

Why it's almost as if the Ajit Pai FCC and broadband industry haven't been entirely honest with us.

This week we noted how Wall Street is predicting that the telco and cable industries will see notable declines in network investment next year, despite the FCC and industry's repeated, breathless claims that killing net neutrality would somehow spur network investment. This, as we've long noted, was based on the bogus industry claim that net neutrality somehow stifled such investment, a claim repeatedly disproven by public SEC filings, earnings reports, and even statements by more than a dozen major ISP CEOs.

Almost as if on cue, Comcast released the company's latest earnings report showing, you guessed it, that the company saw a 3% dip in cable network CAPEX last quarter despite all of that sweet, potent, "internet freedom" Ajit Pai claims to have been spreading around:

"Comcast's cable division spent 3 percent less on capital expenditures last year, despite promises that the repeal of net neutrality rules would boost broadband network investment. Comcast's cable division spent $7.95 billion on capital expenditures during calendar year 2017, but that fell to $7.72 billion in the 12 months ending on December 31, 2018."

That is, if you're playing a long at home, precisely the opposite of what Comcast and other large ISPs repeatedly proclaimed while successfully convincing the FCC to effectively neuter itself, shoveling any remaining authority to an FTC that lacks the authority or attention span to police bad actors in telecom. In 2014, for example, Comcast repeatedly proclaimed that the FCC's net neutrality rules (arguably modest by international standards) would devastate job creation, network investment, and innovation:

"The sheer uncertainty surrounding such a regulatory environment would produce ‘a profoundly negative impact on capital investment.’ By itself, reduced investment would inhibit job creation, hinder the deployment of broadband infrastructure, and undermine the ‘virtuous circle’ of innovation that the open Internet rules are designed to advance."

By that logic, the inverse should have happened in the wake of the repeal. Instead, facing the one-two punch of little broadband competition and little real oversight of a growing natural monopoly, Comcast and other ISPs did what everybody knew they'd do, pass that savings on to investors and executives, instead of shoring up their networks or historically terrible customer support. All while raising rates higher and higher. And, oh, laying off employees despite nabbing billions in both Trump era tax cuts and regulatory favors, the financial impact of the latter is largely incalculable.

None of this was hard to predict, especially if you've studied history (especially telecom history). This is the same pattern has played out time and time again in telecom. Promise the earth, sea, and sky in exchange for taxpayer subsidies, tax breaks, and regulatory favors, then use the regulatory capture to double down on all of the industry's worst habits. By the time the press and public has figured out you're full of shit, you're off to the next PR ploy, which, in Comcast's case, involves pushing for regulation that hamstrings online ad players you desperately want to compete with in the streaming ad wars to come.

You'd like to think this is a cycle of dysfunction we'd eventually learn our way out of, but there's simply no indication that's occurring any time soon.

Filed Under: ajit pai, capex, fcc, investment, net neutrality
Companies: comcast

Remember When Ajit Pai Said Killing Net Neutrality Would Boost Network Investment? About That...

from the head-fake dept

You'll recall that one of the top reasons for killing popular net neutrality rules was that they had somehow supposedly crushed broadband industry network investment. Of course, a wide array of publicly-available data easily disproved this claim, but that didn't stop FCC boss Ajit Pai and ISPs from repeating it (and in some cases lying before Congress about it) anyway. We were told, more times that we could count, that with net neutrality dead, sector investment would explode since carriers would be "unchained" from "burdensome regulation."

You'll be shocked to learn this purported boon in investment isn't happening.

A few months ago, Verizon made it clear its CAPEX would be declining, and the company's deployment would see no impact despite billions in tax cuts and regulatory favors from the Trump FCC. Both AT&T and Verizon have similarly announced massive workforce reductions as well. Some investment growth is happening in wireless as carriers prepare for fifth-generation (5G) wireless service (which they would have deployed regardless of the attacks on net neutrality). But even that's a bit lower than Wall Street and sector analysis expected.

And according to the latest analysis from MoffettNathanson, both fixed-line telcos and cablecos are expected to see notable declines in CAPEX and investment:

"Telco-related wireline capex, meanwhile, is slated to fall from $20.3 billion in 2018 to $19.6 billion this year. That slight drop comes as AT&T completes the fiber buildout commitments originally promised when it acquired DirecTV by July, and as Verizon redirects capital to wireless, Moffett said. Capital spending among the four publicly traded cable operators covered by the MoffettNathanson -- Comcast, Charter, Altice USA and Cable One Inc. -- is expected to decline significantly this year -- some 5.8%.

My math may be shaky, but a 5.8% decline in cable industry CAPEX doesn't quite sound like the investment revolution Ajit Pai and his squad of industry allies promised.

To be clear, there's a lot of reasons that ISP CAPEX rises and falls. When Pai and friends were trying to claim that net neutrality killed network investment back in 2017, we noted extensively how they were cherry picking very narrow windows of CAPEX decline that had nothing to do with net neutrality. For example, one company's CAPEX had dipped under net neutrality because it had just finished a cable set top box upgrade project.

The same is true here. As MoffettNathanson notes, some of this dip is thanks to AT&T shifting its focus toward paying off debt for its megamergers. Another chunk of it is because streaming competition is reducing the desire for the clunky old cable box. And in the case of the biggest dip at Charter Communications (Spectrum), it was in large part thanks to the completion of an all-digital transition in the wake of its costly acquisition of Time Warner Cable.

None of that changes the fact that Ajit Pai and a chorus of telecom industry sycophants repeatedly misled the public and Congress about the net benefits of their historically-unpopular policies. Repeatedly. Now, we're left with the end result; a coalition of natural monopolies with even less competition or accountability than ever, eager to get to work not on investing back into the network, but extracting higher and higher consumer and competitor costs courtesy of limited competition. Limited competition Ajit Pai and friends can't even admit is real, much less have a plan to do anything about.

I know this is a crazy thought, but it's almost as if when you appoint industry sycophants to positions of oversight, their primary goal is to improve carrier revenues, leaving everything else (competition, consumer welfare, innovation) foundering in the rear view mirror.

Filed Under: ajit pai, broadband, capex, fcc, investment, lies, net neutrality
Companies: at&t, verizon

Oh Look, Wireless Sector Investment Is Declining Despite Tax Cuts, Repeal Of Net Neutrality

from the ill-communication dept

You'll recall that one of the top reasons for killing popular net neutrality rules was that it had somehow killed broadband industry investment. Of course, a wide array of publicly-available data easily disproves this claim, but that didn't stop FCC boss Ajit Pai and ISPs from repeating it (and in some cases lying before Congress about it) anyway. We were told, more times that we could count, that with net neutrality dead, sector investment would spike.

You'll be shocked to learn this purported boon in investment isn't happening.

A few weeks ago, Verizon made it clear its CAPEX would be declining, and the company's deployment would see no impact despite billions in tax cuts and regulatory favors by the Trump FCC. Trump's "tax reform" alone netted Verizon an estimated $3.5 billion to $4 billion. A recent FCC policy order, purporting to speed up 5G wireless deployment (in part by eliminating local authority over negotiations with carriers), netted Verizon another estimated $2 billion. And that's before you even get to the potential revenue boost thanks to the repeal of net neutrality and elimination of broadband privacy rules.

Ironically, Verizon's dip in CAPEX came right on the heels of the wireless industry and Ajit Pai, in perfectly coordinated unison, trying to claim that a CAPEX rise in 2017 was directly due to the repeal of net neutrality. They ignored an important point however: net neutrality wasn't even repealed until June of this year. If this endless roster of favors was to impact network investment, accelerate network deployment, and unleash a magical wave of "innovation," that should all be happening right now. And yet, the opposite is happening. And of course it's not just Verizon. AT&T and Sprint are also reducing overall CAPEX:

"Sprint, Verizon and AT&T have all reduced their overall capex numbers for 2018. The operators cite a variety of reasons, from timing issues to more efficient network technologies. But the ultimate result is the same: Where there was once excitement, now there’s a decided sense of pragmatism."

Now there's a number of different reasons for this, including some cost savings in moving from legacy hardware to more efficient virtualization technologies. But again, a decline is not what was promised ahead of the sales pitches for the tax cuts and the attack on net neutrality. The nation was, time and time again, promised unrivaled "innovation and investment boosts" if the nation's companies received a multi-billion-dollar tax cut, and net neutrality and other "regulatory underbrush" was cleared out of the way. That didn't happen.

Instead of investing all these tax breaks, perks, and savings back into the network, they were pocketed by investors and executives. Which, for anybody with half of a functional brain stem was the entire point of having a former Verizon lawyer running the FCC in the first place. This is a longstanding trend in telecom: promise the public the world if they get tax cuts, subsidies, and blind deregulation, then avoid doing pretty much all of those things while pocketing the savings. Perhaps someday America will actually learn some kind of lesson from the experience.

Filed Under: ajit pai, capex, fcc, investment, net neutrality, wireless
Companies: at&t, sprint, t-mobile, verizon

Ajit Pai, Telecom Lobbyists Are Now Coordinating Their Lies In Perfect Symmetry

from the ill-communication dept

So we've made it pretty clear by now that the FCC's entire justification for repealing net neutrality was based entirely on fluff and lobbyist nonsense. But because the Administrative Procedure Act requires that regulators actually provide hard data to justify massive reversals in policy, both the Ajit Pai FCC and his BFFs at Verizon, Comcast, and AT&T have clung tightly to one, completely false claim: that net neutrality harmed network investment. But as we've stated countless times, that's simply not true.

That's not an opinion, it's based on SEC filings, earnings reports, and the on-the-record statements of nearly a dozen telecom industry CEOs.

That undeniable fact hasn't really bothered the folks at US Telecom, the telecom industry's biggest lobbying and policy organization. The group last week penned a blog post with an accompanying graph proudly proclaiming that telecom network investment was on a sharp upward trajectory after the repeal of net neutrality. From the missive:

"Broadband investment rebounded in 2017, as a series of positive consumer and innovation policies and a pro-growth regulatory approach helped reverse the industry’s previous spending pullback, according to new research released today by USTelecom."

"Lobbying organization's skewed research confirms lobbying group's claims! News at 11." To "prove" their point, US Telecom released this handy graph showing the spike in 2017 investment:

One obvious problem: net neutrality wasn't officially repealed until June of 2018, making any claim that the 2017 CAPEX spike was due to its repeal utterly laughable. And again, it's worth noting that even the 2015 dip US Telecom leans so heavily on has been hotly contested. CAPEX dips in 2015 for AT&T, for example, came because the company ended a wave of U-Verse broadband upgrades, not because of net neutrality. Similar CAPEX dips at Charter occurred because the company ended the deployment of digital cable adapters. Other ISPs saw CAPEX spikes during that same period.

CAPEX and network investment fluctuations can occur due to a myriad of things, from a company ending its planned roll out of a new set top box, to the routine deployment of standard security improvements. ISPs routinely hire economists who are willing to fiddle with the math and cherry pick very specific windows of CAPEX to suggest net neutrality is to blame. But massaged data funded by telecom lobbyists isn't science, it's theater.

Meanwhile, defining the health of the industry based on CAPEX and investment alone is a fool's errand, and if you want to truly judge said health, you'd need to look at the level of competition, consumer prices, and all of the obvious, ugly metrics you can be damn sure a telecom lobbying firm primarily bankrolled by AT&T isn't going to want to talk much about.

Of course none of this stopped FCC head Ajit Pai from quickly issuing a statement (pdf) of his own, mirroring the industry's false claims that his extremely-unpopular attacks on consumer protections were somehow directly responsible for the 2017 spike:

"Since my first day on the job, this agency has been focused on cutting through the regulatory red tape and increasing broadband investment, most importantly in rural America where the digital divide remains all too real. Today’s report confirms that the FCC’s policies to promote broadband deployment are working. After Internet service providers reduced new investments in 2015 and 2016 under the prior Administration’s regulatory approach, broadband investment increased in 2017 by $1.5 billion over the previous year. That’s real progress for American consumers, and another step toward better, faster, and cheaper broadband for all Americans."

Can we again stop to appreciate the U.S. government parroting lobbyist talking points and filing lawsuits in perfect unison without absolutely ZERO concern for the ethics or optics? One yearns for the day when we used to at least pretend that lobbyists weren't directly dictating tech policy, leaving genuine consumer welfare a distant afterthought.

Again, like so many other aspects of the Trump era, the hope is that if you repeat a lie frequently and often enough, it becomes truth in the minds of Americans (or at least in the minds of your partisan supporters). But as John Adams once declared, facts are stubborn things, and no matter how many press releases he issues, the facts aren't on Ajit Pai's side.

Filed Under: ajit pai, capex, competition, fcc, net neutrality, telecom investment
Companies: ustelecom