Sprint's Bye: Carriers will still invest in networks even under Title II regulations

Sprint's (NYSE: S) decision to split from its wireless rivals and endorse an FCC plan that would reclassify broadband as a telecommunications service under Title II of the Telecommunications Act was part of an effort by the carrier to show that such a move by the FCC would not stop investment in networks, according to Sprint CTO Stephen Bye. The FCC plans to vote on such a proposal on Feb. 26 as part of an effort to craft net neutrality regulations.

"It's one of those topics that is highly charged, highly politicized and we took a step back and said it works in the interest of our customers, our consumers and the industry and we frankly found some of the arguments (of our competitors) to be less than compelling," Bye told Reuters this week. 

"Our competitors are going to continue to invest so they are representing a situation that won't play out," he added.

Executives from Verizon (NYSE: VZ) and AT&T (NYSE: T) have said that a Title II approach to net neutrality would stifle innovation and investment. T-Mobile US (NYSE:TMUS) CEO John Legere has adopted a wait-and-see mindset with the new FCC rules but has in the past spoken out against putting wireless under Title II rules.

Verizon Combinations CEO Lowell McAdam said on an investor call last week that the reclassification effort is "completely the wrong way to go" and would hamper job creation and innovation, Reuters noted. Verizon CFO Fran Shammo said last month on the company's earnings call that a Title II approach "will absolutely affect us and the industry on long-term investment in our networks."

"That can be seen factually as to what happened in the rest of the world, where you have high regulation, the networks are not invested in, they are not good quality of service networks," Shammo said, according to a Verizon transcript of his remarks. "And that's where this will put us."

Similarly, AT&T CEO Randall Stephenson said on AT&T's fourth-quarter earnings call late last month that "these really strident, heavy-handed regulations on wireless and broadband if we go down that path that's what causes everybody some apprehension and uncertainty and begins to change investment thesis and so forth," according to Seeking Alpha transcript of his remarks.

However, Bye said that the FCC's record-setting $44.9 billion AWS-3 spectrum auction is a "great proof point of the level of investment the companies in the industry are willing to make."

AT&T bid $18.2 billion and Verizon bid $10.4 billion in the auction, which Sprint did not participate in. Since then, Verizon has indicated it will sell cell towers and wireline assets for $15.5 billion to fund the purchases. AT&T reportedly plans to sell some of its data centers in a deal that could fetch $2 billion, and it might use the cash to fund spectrum license purchases.

"The notion that some of our competitors are suggesting that they will stop investing if Title II is brought into effect... That's something we've refused," Bye said. Sprint will need to invest significantly in its network in the next few years, especially to deploy TD-LTE service on its 2.5 GHz spectrum and launch carrier aggregation cross all three of its LTE spectrum bands.

In January Sprint said that it would be fine with a reclassification as long as mobile broadband is given a great deal of flexibility. Sprint thinks carriers "need to be able to control the devices permitted on their networks to ensure quality customer experience and mobile device and network functionality," the carrier said last month. Further, Sprint argues the FCC "should adopt a broad definition of 'reasonable network management practices' that takes into account network architecture and technology."

Sprint thinks that for mobile broadband providers the FCC "should adopt a presumption that a network management practice is reasonable if it is applied to similarly situated users (devices, price plans), applications, and/or content in a nondiscriminatory manner and is intended to protect the network, alleviate congestion, ensure a quality user experience, and/or ensure equitable use of network resources," the carrier said in January.

According to a fact sheet distributed by the FCC earlier this month, for a network management practice to be considered "reasonable" it must be "primarily used for and tailored to achieving a legitimate network management--and not commercial--purpose. For example, a provider can't cite reasonable network management to justify reneging on its promise to supply a customer with 'unlimited' data."

Meanwhile, the FCC's net neutrality proposal continued to be knocked by Republicans, including Republican FCC Commissioner Ajit Pai, who said in a statement that the proposal "expressly states that usage-based pricing, data allowances--really, any offers other than an unlimited, all-you-can-eat data plan--are now subject to regulation."

"Indeed, the plan finds that these practices will be subject to case-by-case review under the  plan's new 'Internet conduct' standard," Pai said. "That standard evaluates at least seven vaguely defined factors in determining whether a practice is allowed. The plan makes clear that these practices are now on the chopping block, with those of mobile operators under special scrutiny. This means that consumers who use less data may end up subsidizing consumers who use more data."

The rules would also put future uses of zero-rating and sponsored data programs under the microscope to ensure they are not harming consumers or content providers. "Preventing companies from differentiating themselves from the competition by giving consumers a wide variety of options will mean less choice and less free data for consumers," Pai added. "If you like your current service plan, you should be able to keep your current service plan. The FCC shouldn't take it away from you."

For more:
- see this Reuters article
- see this Ars Technica article
- see this Re/code article

Special Report: Complete coverage: Net neutrality for wireless and wireline carriers

Related Articles:
House to probe whether White House improperly influenced FCC on net neutrality
Zero-rating, throttling and other wireless practices targeted by FCC's net neutrality rules
FCC's Wheeler lays out net neutrality plans while AT&T, Verizon reportedly prep lawsuits
CTIA's Baker praises Republican net neutrality bills, but AT&T's Stephenson sees lawsuits ahead
Republican lawmakers embrace net neutrality, but would block FCC from using Title II
Sprint splits from industry, is OK with Title II for net neutrality as long as wireless has flexibility

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