Private investment key to broadband build-out

“If you want broadband, that’s fine, but don’t expect us to fund it if you can’t see a return.” This was managing director and group head of the communications and media group at Stifel Nicolaus Frank Gallagher’s message to a panel of telecom service providers at SuperCOMM. The panel agreed that private investment will be a key driver of broadband infrastructure build out and stressed the need for the FCC to move quickly on issues like inter-carrier compensation and the Universal Service Fund.

Whether it’s a wireline or wireless build out, broadband deployment is capital intensive, and it invariably requires a long wait for any return on investment, said Tom Tauke, executive vice president of public affairs, policy and communications at Verizon Communications. ROI requires adoption by customers, which is proving to be a challenge. Tauke said Verizon is relying on monthly bills for access and services to support the capital investment, but with the price of access declining, the carrier is constantly looking for other sources of revenue from things like advertising.

“Part of the reason there has been concern about the regulatory environment is because any change can have a huge impact on the dynamics of the capital investment decision,” Tauke said, adding that issues like net neutrality threaten the investment being made today in networks. “At the end of the day, you invest capital where you think you’ll get a return.”

Compounding this issue is the fact that broadband expansion into the most rural areas is not economically feasible today, added Steve Davis, senior vice president of public policy and government relations at Qwest Communications. The cap ex required to provide services is significantly higher and must be spread upon a smaller number of customers. These rural areas should be top of mind for the FCC, he said.

“Stimulus money first should go to underserved areas,” agreed Sandy Wilson, vice president of public policy and regulatory affairs at Cox Enterprises. “There is a huge need for more dollars to promote adoption. The other thing is making sure the tax policy enables us to keep moving forward. It can’t incentive consumers to hold on to technologies.”

The demand from customers for new services is growing very quickly, however, according to Steve Oldham, president and CEO of SureWest. The largest problem he sees is how to monetize that demand and turn it into the ability to raise capital more quickly.