Wheeler: Verizon Recognizes Title II No Big Bugaboo

Suggests Reclassification Is Workable for Wall Street Too
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FCC chairman Tom Wheeler said Thursday (Dec. 11) that he agrees with Verizon's CFO Fran Shammo that reclassification of Internet access under Title II would not affect the company's investment in its network.

That came in a press conference after the FCC's December public meeting. In that press conference, Wheeler seemed to suggest that Title II was a workable approach both from and industry and a Wall Street perspective.

Wheeler said he was not surprised by the comment. As evidence he cited the AWS-3 auction, which has already doubled the take of the FCC's next largest spectrum auction, despite the fact in September he signaled to a CTIA convention crowd that he was contemplating extending open Internet rules to wireless broadcband and despite the fact that he has been talking about the possibility of Title II " all along" and despite the fact that the President has weighed in on Title II.

"When Verizon makes that kind of statement, I think it is logical. I think it is reflected in what various Wall Street analysts have said in terms of Title II being less of a bugaboo if it is done correctly."

He also said it was also reflective of the world Verizon has been living in. He said that the Communications Act "specifically says that wireless will be treated as a common carrier, but that the commission shall forbear from the vast majority of common carriage sections of Title II, except for 201, 202 and 208. so for 20 years all the wireless carriers have been living under Title II with appropriate forbearance, and have been able to raise and invest hundreds of billions of dollars and build a global network that is the envy of the world."

Wheeler would not give a timetable for releasing an open Internet order beyond saying he wants to do it "quickly, right and succinctly."

That has been predicted to be either February or March, but Wheeler would not be pinned down.

In a blog post following up on that CFO statement (http://publicpolicy.verizon.com/blog/entry/the-relationship-between-inve...), Shammo attempted to clarify her 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, she 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."