The current discussion within the European Community about the investment impact of “net neutrality” rules is not a new debate. In the wake of the passage of the Telecommunications Act of 1996, dominant U.S. fixed-line providers argued, successfully, that mandatory wholesale rules, providing deeply-discounted rates for wholesale customers, would severely discourage investment in optical facilities. And, in fact, Verizon’s FiOS effort did not get into high gear until after the Federal Communications Commission approved such rules.

These days, the EC argument revolves to a great extent around the impact “network neutrality” rules could have on incentives for broadband investment. Specifically, operators argue that restriction of services to “best effort only,” without the ability to create differentiated service plans involving quality of service measures, will be a significant disincentive to the high rates of investment EC officials would prefer to see.

Some will say the carriers are bluffing about requiring some path to revenue when investing in 100-Mbps or 1-Gbps access facilities. Some of us would disagree. The alternative is to invest in mobile facilities and applications instead.
In fact, some recent global estimates of market share suggest telcos globally are losing the consumer market share battle to cable companies. In fact, looking just at triple-play accounts, it appears cable operators have roughly 66 percent market share. In other words, telcos arguably are losing the market share battle in the consumer market.
The point is pretty simple. If it appears telcos are losing ground in the consumer market, but dominating and growing the mobile market, and if revenue potential in fixed line network services appears to be waning, at some point it will be a wise executive indeed who decides mobility is really where resources and effort ought to be placed.
Placing obstacles to a profitable return on massive new investments does not seem calculated to encourage operators to invest substantially more in fixed access networks.

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