2016 Broadband Capex Survey: Tracking Investment in the Title II Era

Here are the results of my 2016 domestic broadband capex survey.

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I’ll have a lot more to say, but here are some of the key takeaways:

(1) Of the twelve firms in the survey, eight experienced a decline in domestic broadband capex relative to 2014—the last year in which ISPs were not subject to common carrier regulations. Across all twelve firms, domestic broadband capex declined by $3.6 billion, a 5.6 percent decline relative to 2014 levels.

(2) The biggest drops occurred at AT&T (down $3.4 billion or 16.2 percent relative to 2014 levels) and at Sprint (down $2.4 billion or 62.7 percent relative to 2014 levels). When measuring the impact of Title II on AT&T’s domestic broadband investment, it is important to remove AT&T’s investment in DirecTV and its investment in Mexican cellular properties. A detailed explanation is provided here. Similarly, when measuring the impact of Title II on Sprint’s domestic broadband investment, it is important to ignore Sprint’s capitalization of handsets, an accounting change that occurred in the middle of the experiment. Fortunately, Sprint breaks out these “investments” separately from network investment.

(3) The biggest gains occurred at Comcast (up $1.2 billion or 19.2 percent relative to 2014 levels) and at Charter (up $884 million or 39.8 percent relative to 2014 levels). The Comcast figure excludes investment in NBCU properties (again, the hypothesis is that common carriage regulation undermines investment at the core of the network). The Charter figure requires a decomposition of the aggregated data in Charter’s pro forma, which assumes (counterfactually) that the three companies (Charter, BrightHouse, Time Warner Cable) were a single unit as of January 2015. Some analysts have argued that, by foreclosing ISPs from employing certain arrangements with edge providers, the rules cemented the status quo market structure, thereby assisting (in relative terms) dominant cable operators.

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