Capital Expenditures in Broadband: 2Q-16 Update

Capital continues to flee digital infrastructure. The table below compares the first six months of 2016 with the same period in 2014–the last year in which ISPs were not subject to Title II regulation.

Screen Shot 2016-08-11 at 11.38.33 AM

Aggregate capital expenditure (capex) declined by nearly $2.7 billion relative to the same period in 2014. While Title II can’t be blamed for all of the capex decline, it is reasonable to attribute some portion to the FCC’s draconian rules. After all, the rules (needlessly) bar ISPs from creating new revenue streams from content providers, and (needlessly) expose ISPs to price controls. Both measures truncate an ISP’s return on investment, which makes investment less attractive at the margin.

This is incredibly frustrating because net neutrality protections could have been achieved though an alternative source of legal authority (section 706). Mr. Wheeler took ISP investment for granted. Bad assumption.

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  1. Investment Down Among Internet Providers Since Net Neutrality, Economist Says – InsideSources

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