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Verizon: What We Meant When We Said Net Neutrality Rules Wouldn’t “Influence” Our Investment Strategy

Verizon says its short-term plan remains the same, but net neutrality rules could change future investments.

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Verizon Communications CFO Fran Shammo clearly didn’t read the industry memo about how more regulation of broadband lines is bad because it would lead Internet providers to stop investing in their networks.

During an analyst call Tuesday, Shammo was asked about the Federal Communication Commission’s current effort to write new net neutrality rules and what it would mean for Verizon if the agency re-regulated Internet lines under Title II of the Communications Act.

From the transcript of the Dec. 9 analyst call:

Analyst question: 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?

Fran Shammo, Verizon Communications CFO: 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.

The problem here is that Verizon and other Internet providers have repeatedly warned that future investments in broadband networks may not happen if the FCC opts to re-regulate Internet lines under Title II. Shammo’s remarks appear to contradict what his own company has been telling Washington, which is that tougher net neutrality rules would stifle investment.

Verizon said in a Thursday morning blog post that Shammo’s comments are consistent with the company’s long-held position that Title II regulation would hurt long-term investment in Internet lines. “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,” the company wrote.

To be fair, there is a long tradition of highly regulated companies telling Wall Street one thing and Washington another.

AT&T ran into a similar issue recently when CEO Randall Stephenson told investors that the company plans to stop building a new high-speed fiber network to 100 cities until the FCC finalizes net neutrality rules.

That threat didn’t go over very well at the FCC, which is currently considering whether to let AT&T buy DirecTV. The agency demanded more details, and the company was forced to send a three-page letter clarifying that it wasn’t talking about the investment it had promised the agency it will make if it is allowed to buy the satellite-TV company.

Asked about Verizon’s comments on Thursday, FCC Chairman Tom Wheeler said he wasn’t surprised. He noted that wireless carriers have spent $43 billion on an ongoing airwaves auction, even after he hinted in September that wireless networks should be subject to net neutrality rules because “it’s pretty hard to carry 55 percent of the Internet [traffic] and not be subject to Open Internet [rules].”

“When Verizon makes that kind of statement, I mean, I think it’s logical. I think it’s reflected in what various Wall Street analysts have said in terms of, you know, Title II being less of a bugaboo, if it’s done correctly,” Wheeler told reporters during a press conference.

This article originally appeared on Recode.net.

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