Telecom Regulation And Incomplete Disclosure At PoliticoFebruary 13, 2013 11:59 AM EST ››› SIMON MALOY
Click over to Politico and you'll find an opinion piece by Mike McCurry, chair of the tech advocacy group Arts+Labs, championing a laissez-faire approach to regulation of the broadband and wireless markets, and highlighting the "investing, innovating, and competing" we're seeing from big telecom players like AT&T, Verizon, Comcast, and T-Mobile. There are a couple of key facts missing from McCurry's piece. First, Arts+Labs is partners with AT&T, Verizon, and Comcast-owned NBC Universal, which should have been disclosed given McCurry's advocacy on their behalf. Second, any discussion of the current spike in wireless investment has to acknowledge that government intervention -- killing the AT&T/T-Mobile merger -- made it possible.
Over the past five years, the nation's leading network providers have collectively invested over $100 billion in faster and better services on their on-ramps to the Internet. In 2011 alone, U.S. investment in wired and wireless network infrastructure rose 24 percent. These investments are being made because companies in the broadband industry -- both wired and wireless providers -- are competing like mad for customers.
Look at what four of the largest competitors are doing. AT&T announced that it will invest $14 billion in both its wired and wireless networks on top of its planned investment for a total of $22 billion a year for the next three years. Verizon is spending billions to keep up with relentless demand for wireless broadband services, seen most recently in its purchase of an additional $3.9 billion of wireless spectrum. Last fall, Time Warner upgraded the speed of its standard broadband Internet tier by 50 percent in many of its service areas. Comcast, which already widely offers speeds of up to 105 mbps and is rolling out 305 mbps speeds, has also focused on the populations least likely to sign up for broadband, offering discounted Internet service packages that start at around $10 per month for low-income families. Scores of other companies, from Sprint to CenturyLink to T-Mobile to Frontier, are also investing, innovating and competing.
Head to the Arts+Labs homepage and you'll see a list of their partners -- "entertainment companies, software providers, telecommunications providers, artists and creators." Featured quite prominently on that list are NBC Universal, AT&T, and Verizon. The bio appended to the Politico piece identifies McCurry as Arts+Labs' chair, but doesn't note these telecom companies' involvement with the group.
Also it's not quite accurate to characterize broadband providers as "competing like mad for customers." The big wired-internet providers already enjoy local monopolies across the country, and they've even entered into anti-competitive partnerships with one another. As part of a spectrum deal approved by government regulators last year, Comcast and Verizon set up a joint marketing agreement that allows the two companies to promote each other's services -- for example, sign up for a Verizon wireless plan along with Comcast's TV, internet, and home phone services, get a free gift card. Verizon is a provider of broadband internet, and yet they're a party to Comcast's promotion of its own internet service. There are restrictions on the partnership, but as Public Knowledge observes, the agreement "decrease[s] Verizon's incentive to continue competing against the cable companies on wireline broadband services."
As for the wireless market, McCurry is right that it's currently seeing a spike in investment and the promise of new competitive vigor. And that's because the Department of Justice and Federal Communications Commission stepped in to prevent AT&T and T-Mobile from joining forces and creating a wireless duopoly with Verizon. T-Mobile originally entered into the merger because their parent company, Deutsche Telekom, wanted to abandon the American market. When the deal fell through, AT&T was obligated to fork over billions in spectrum and cash to T-Mobile, which invested that money in building out their network in a renewed effort to compete. AT&T's $14 billion investment in their own network was motivated by the failure of that deal.
None of this is to endorse the idea that government regulators should be stepping in at every turn to guide the wired and wireless marketplaces, but it's important to recognize the salutary impact of limited federal intervention, and to disclose the interests of those arguing on behalf of the regulated.