Shammo: Title II Jeopardizes Investment In Innovation

Verizon CFO Says He Was Clarifying Misquotes In Press and Congress
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Verizon Communications chief financial officer Fran Shammo told analysts on a 4Q earnings call Thursday (Jan. 22) and later expounded in a blog post reclassifying broadband access under Title II would be "an extreme and risky path that will jeopardize our investment and the development of innovation in broadband Internet and related services."

He "reiterated" the "inverse relationship between regulation and investment," according to Verizon, and said again that he had been "misquoted in the press and Congress," referring to an earlier analyst call where he was perceived by many to downplay the effect of Title II on investment by saying that the company planned to continue to invest in its networks.

He was asked again about Title II during the Thursday 4Q earnings "given recent government comments."

At Jan. 21 Hill hearings in the Senate and House, Democrats invoked the Verizon CFO to buttress their arguments that the Title II investment disincentive talk from ISPs was a red herring. At those hearings, National Cable & Telecommunications Association President Michael Powell, for one, said that companies would continue to invest, but it was the velocity and volume of that investment that would be affected.

FCC Chairman Tom Wheeler has also cited Shammo's earlier comments to argue Title II reclassification was not a big "bugaboo." 

In a blog post late last year following, Shammo attempted to clarify his initial comments. "As Verizon has indicated on several occasions over the past few weeks, discussions about potential regulatory changes related to net neutrality have been going on for a decade, and we don't change our short-term view on investment based on rumors of what might or might not happen,"  he blogged.  "But as we and other observers of the net neutrality debate have made abundantly clear, experience in other countries shows that over-regulation decreases network investment. If the U.S. ends up with permanent regulations inflicting Title II's 1930s-era rules on broadband Internet access, the same thing will happen in the U.S. and investment in broadband networks will go down."

For the record, this is what Shammo said in answer to questions from USB analyst John Hodulik.

Hodulik: "Obviously there's a lot of commentary coming out of Washington about this move to Title II. Obviously Verizon has been one of the more vociferous opponents of any sort of increased regulation, especially on the Wireless side.

What's your view of that potential occurrence down in Washington? Does it affect your view on the attractiveness of investing further in the United States?"

Shammo: "Yes, to be real clear this does not influence the way we invest. We're going to continue to invest in our networks and our platforms both in Wireless and Wireline FiOS and where we need to.

"So nothing will influence that. If you think about it we were born out of a highly regulated company so we know how this operates. But related to this discussion around Net Neutrality, the FCC has the right to regulate under 706.

"They do not need to go to Title II. And why would you go to a 1930 piece of literature to try to regulate something that is a 21st-century technology?

"And I also think that if you look at other countries who have done this it kind of leads you down a path of total failure because it really, really slows down investment and slows down innovation.

"So I guess the last comment is it's working, why do we need regulation around something that's working? And again they can do this under the realms of their legal ability. And I think if they go all the way to the extreme of Title II, I'll quote what Randall said on stage about a month ago which is I think it's going to be a very litigious environment."

CTIA President Meredith Attwell Baker signaled at those same Hill hearings that if Title II is imposed on mobile broadband, it will sue.