Setting the record straight on Net neutrality and infrastructure investment

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A new report by the U.S advocacy group Free Press provides clear evidence that, despite the claims of some Internet Serivce Providers, Net neutrality will not harm network investment. On the contrary, the report shows that legal protections in favor of an open Internet will have a positive impact on investment in both the network and applications markets.

The report’s findings include:

Net Neutrality will likely encourage increased investment in network infrastructure and spur even higher levels of investment in the applications and content sector (which is the key driver of growth in the digital economy), by providing innovators with and open communicational infrastructure.
Contrary to the claims of some ISPs, the data provided by Free Press shows that Net neutrality does not hinder investment in networks. AT&T’s overall gross investment increased by more than any other Internet service provider’s in America during the two years that it was required by the FCC to operate a neutral network under merger conditions. During this period of mandated Net Neutrality, AT&T’s investment in its wireline network increased from 13 percent of revenue to 20 percent of revenue, well above the average of all other Internet service providers.

– Another interesting finding of the Free Press report is that even though most U.S ISPs are claiming that Net Neutrality will deter investment, they are currently disinvesting in their networks. Indeed, current infrastructures are depreciating, and investments in networks fails to compensate the decrease in value of existing assets. AT&T, while operating under Net Neutrality conditions, was one exception to this trend.

The author, S. Derek Turner, research Director at Free Press, concludes that:

While the impact of network neutrality obligations on network investment is likely negligible — or even positive — the absence of nondiscrimination protections will have a substantial negative impact on investments made in the content and applications markets. Currently, the Internet is an open platform that provides online innovators with a high degree of predictability about a major segment of their business. An innovator knows that she can develop a new idea or application, and that it will work on any end-user’s Internet-connected device. Without network neutrality, this certainty is lost. Losing network neutrality could badly undercut the current investment in applications and services — a sector of our economy much larger than the network infrastructure itself.” (Emphasis added).

Download the report.