Telephone companies didn’t get much help from Wall Street analysts, who told the Senate Commerce Committee March 14 that they weren’t sure new video systems would produce a profit.
“There is a high degree of skepticism that the substantial investment underway at the [phone companies] to deliver broadband networks to the home will deliver a satisfactory return on the incremental investment,” said Luke Szymczak, vice president of JPMorgan Asset Management.
“The costs of these networks are far beyond what the returns of the new services can provide,” said Craig Moffett, VP and senior analyst of U.S. cable and satellite broadcasting at Sanford C. Bernstein & Co.
The committee is expected to vote on a bill next month that would ease phone-company entry into cable markets and perhaps include network-neutrality safeguards.
The analysts were sympathetic to telco and cable arguments on Internet neutrality. Moffett warned that if network owners were barred from creating a “fast lane” on the Internet to generate more revenue to cover capital expenditures, they would have to recover much, if not all, of their cost from subscribers, whose monthly bills would likely rise substantially.
“Mandated net neutrality would further sour Wall Street’s taste for broadband-infrastructure investments, making it increasingly difficult to sustain necessary capital returns, and it would likely mean that consumers alone would be required to foot the entire bill for whatever network investments do get made,” Moffett said.