Broadband investments hurt by net neutrality: Nokia

By Tony Chan

The enactment of broadband privacy and net neutrality rules by the former US Federal Communications Commission have negatively impacted broadband investment in the country, according to the testimony of Nokia head of technology policy and public affairs for the Americas Region Brian Hendricks before a meeting with US Senate Committee on commerce, science and transportation.

While he maintained that Nokia did not take a position on either topic, he said the company has seen a “clear impact” on the market for broadband infrastructure.

“In the case of the FCC’s now repealed broadband privacy rules, limitations on broadband service provider access to, and utilisation of data that is routinely available to other technology companies in the ecosystem directly limited the capability of broadband providers to realise potential value creation opportunities in the future. And, that alters the value calculation that providers make in determining whether, and how much to invest in certain technologies,” Hendricks said.

“In the same way, the ex ante prohibition of innovative pricing models (for example fee-based prioritisation directly at the consumer’s direction) under the net neutrality rules, and the inclusion of a nebulous ‘general conduct standard’, in our judgment created a significant risk to broadband provider investment.”

In particular, he pointed to the prohibition of “new pricing options” as a major risk for service providers who want to explore new traffic management and pricing practices and even new services.

“Those risks have been a regular discussion point between broadband providers and their suppliers, and have directly impacted product discussions including whether to continue developing specific features in new products and whether to move forward with specific deployment plans,” he said.

“Along with an observable decline in capital expenditures in the last two years, these developments are a clear indication of a negative impact on investment from the regulation.”

Hendricks further argued that operators’ profits should not be used to gauge the investment sentiment of the industry, instead proposing other measurements such average revenue per user and return on capital employed as more suitable barometers.

“In our experience, profit is frequently not an accurate, or at least not a complete, barometer of the health of the investment environment,” he said. “Since the adoption of the network neutrality order in 2015, the ARPU of all but one US wireless carrier has declined as opportunities to introduce new sources of revenue were constrained.”

“Whatever position one takes on the issues of privacy and net neutrality, and we take none here; restrictions on the ability to generate marginal revenue through certain innovative activities like data analytics and prioritisation invariably impact the capital expenditure decision making because they limit the ability to fully and flexibly monetize marginal infrastructure investment.”

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