Here is a quick update to my survey of changes in ISP capital expenditures (“capex”) since the dawn of the Title II era.
Some #TechReporters are claiming that Title II is associated with a “spike” in broadband investment, and that “investment is doing just fine.” Others claim that investment is up at select ISPs such as Comcast, Time Warner Cable, and the wireless division of Verizon. Still others claim that we should ignore changes to ISP capex in the first quarter of 2015, despite the fact that ISPs knew which direction the FCC (and President Obama) were heading since November 2014.
The updated table below compares capex for the largest ISPs—those investing at least $300 million in the first nine months of 2014—for the nine-month period ending in September 2014 (the pre-Title II era) with the nine-month period ending in September 2015 (the Title II era).
As the table shows, capex was down significantly in the first nine months of the Title II era for AT&T (-21%), Charter (-23%), and US Cellular (-11%). Although some ISPs experienced an increase in capex, this lift was not sufficiently large to offset the aforementioned declines.
On net, capex fell by a staggering $2.9 billion across the largest ISPs excluding Sprint, T-Mobile, and US Cellular (the pure wireless ISPs). Including the pure wireless ISPs still results in an aggregate decline of nearly $2 billion relative to the same period in the pre-Title era.
Critically, the nearly four percent decline in ISP capex in the Title II era is highly abnormal since the end of Great Recession. According to USTelecom, broadband capex increased every year since 2009. Indeed, broadband capex increased by nearly 10 and 3 percent in 2013 and 2014, respectively. What some call a “spike” in ISP capex in 2015, others would call a U-Turn.
Strong net neutrality was supposed to stimulate investment at the “edge” of the network among content providers, without discouraging investment at the network’s “core.” But large content providers such as Google, Microsoft, and Amazon are also pulling back on capex in the Title II era. So far, the FCC’s grand experiment in market design (and overt favoritism for edge providers) isn’t going according to plan.
When confronted with this gloomy data, the naysayers claim we don’t need any more investment because the days of broadband upgrades are over. Like Fukuyama’s “The End of History,” which posited that Western liberal democracy was the most advanced form of government, the “End of Technology” posits that LTE 4G wireless and DOCSIS 3.0 are the most advanced broadband technologies. (Let’s not inform them of 5G wireless or DOCSIS 3.1.)
Funny how the “End of Technology” just happened to coincide with the dawn of the common carrier era.