Saturday, August 12, 2017

FCC has few if any options to accelerate modernization of U.S. telecom infrastructure

Maybe Americans don’t need fast home Internet service, FCC suggests | Ars Technica: Americans might not need a fast home Internet connection, the Federal Communications Commission suggests in a new document. Instead, mobile Internet via a smartphone might be all people need. The suggestion comes in the FCC's annual inquiry into broadband availability. Section 706 of the Telecommunications Act requires the FCC to determine whether broadband (or more formally, "advanced telecommunications capability") is being deployed to all Americans in a reasonable and timely fashion. If the FCC finds that broadband isn't being deployed quickly enough to everyone, it is required by law to "take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market." (Emphasis added)

The problem is the FCC has few if any effective options to accelerate the modernization of American telecommunications infrastructure. That's because the biggest barrier to private investment in infrastructure to support advanced telecommunications is economic and not a regulatory matter within the FCC's jurisdiction.

Privately owned telecommunications companies must achieve a rapid return on investment to satisfy investors. That's a tall order given infrastructure construction requires copious amounts of capital be invested up front with a long wait until that investment is recouped and generates profit. Their business model is based on selling monthly service bundles and speed tier subscriptions to individual customer premises. It frequently fails to spin off sufficient predictable revenues to earn the required return on invested capital within the investors' time horizon.

That substantially degrades the business case for investing in infrastructure and raises economic risk, in turn leading to market failure and infrastructure deficiencies and disparities. There is little if anything the FCC or any other regulator can do to address that economic reality. It's fundamental to the predominant U.S. model of private ownership and operation of telecommunications infrastructure.

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