Despite claims from some industry-backed researchers and former members of Congress that Net Neutrality has reduced investment in telecommunications, a new research note from Deutsche Bank shows America’s top telephone and cable companies are spending billions on fiber upgrades to power wireless, business, and consumer broadband.

“Telecoms have become much more public signaling their intent to increase fiber investment, with AT&T and Verizon leading the spending ramp,” reports Deutsche Bank Markets Research.

Verizon has been on a fiber spending spree in the northeastern United States, signing contracts with Corning and Prysmian worth $1.3 billion to guarantee a steady supply of 2.5 million miles of fiber optic cable Verizon plans to buy over the next three years. Much of that spending allows Verizon to lay a foundation for its future 5G wireless services, which will require fiber to the neighborhood networks. But in cities like Boston, Verizon is also once again expanding its FiOS fiber to the home service to consumers.

AT&T is committed to connecting 12.5 million homes to gigabit-ready fiber broadband by 2019 — part of a deal it made with the FCC to win approval of its acquisition of DirecTV. AT&T claims it has already connected 5.5 million homes to its gigabit AT&T Fiber network, expected to reach 7 million by the end of this year.

Deutsche Bank thinks providers’ future drive towards 5G service will also simultaneously benefit fiber to the home expansion, because the same fiber network can power both services.

“To support the upcoming innovations such as autonomous driving, IoT, smart cities, the US needs to densify its fiber network,” Deutsche Bank said. “The U.S. fiber penetration rate is 20% vs. 75% for leading OECD countries, which suggests a large gap needs to be closed.”

The bank predicts companies will spend around $175 billion over the next 10 years building out their fiber networks, with most of the spending coming from the phone companies, who may see fiber buildouts as their best attempt to level the playing field with cable operators’ hybrid fiber-coaxial cable networks. As cable operators expand their networks to reach more business parks, they have been gradually stealing market share for phone and data services from phone companies. Consumer broadband is also increasingly dominated by cable operators in areas where phone companies still rely on selling DSL services.

FierceCable notes Comcast and Altice have stepped up aggressive spending on fiber networks for their consumer and business customers. Altice is planning to decommission Cablevision’s existing coaxial cable network and move customers to fiber-to-the-home service. Comcast is deploying fiber services while still selling traditional cable broadband upgraded to DOCSIS 3.1, which supports substantially faster broadband speeds. The two networks co-exist side-by-side. Customer need dictates which network Comcast will use to supply service.

Customers benefit differently in each state, depending on what type of service is available. Comcast’s large footprint in Pennsylvania, outside of Philadelphia, is usually served by traditional coaxial cable. Verizon still sells DSL in much of the state. In Massachusetts, Verizon is building out its FiOS network to serve metro Boston while Comcast will depend on DOCSIS 3.1 upgrades to speed up its internet service. In New Jersey, long a battleground for Verizon’s FiOS service the company stopped aggressively expanding several years ago, Comcast has announced DOCSIS 3.1 upgrades for the entire state.

Independent phone companies are also seeing a bleak future without fiber upgrades. Both CenturyLink and Windstream are planning moderately aggressive fiber expansion, particularly in urban service areas and where they face fierce cable competition. Frontier continues its more modest approach to fiber expansion, usually placing fiber in new housing developments and in places where its copper facilities have been severely damaged or have to be relocated because of infrastructure projects.

None of the companies have cited Net Neutrality as a factor in their future broadband expansion plans. In fact, fiber networks have opened the door to new business opportunities to the companies installing them, and the high-capacity networks are likely to further reduce traffic/transit costs, while boosting speeds. That undercuts the business model of selling digital slow and fast lanes.

Year after year, equipment manufacturers and internet service providers trot out predictions of a storm surge of internet traffic threatening to overwhelm the internet as we know it. But growing evidence suggests such scare stories are more about lining the pockets of those predicting traffic tsunamis and the providers that use them to justify raising your internet bill.

This month, Cisco — one of the country’s largest internet equipment suppliers, released its latest predictions of astounding internet traffic growth. The company is so confident its annual predictions of traffic deluges are real it branded a term it likes to use to describe it: The Zettabyte Era. (A zettabyte, for those who don’t know, is one sextillion bytes, or perhaps more comfortably expressed as one trillion gigabytes.)

Cisco’s business thrives on scaring network engineers with predictions that customers will overwhelm their broadband networks unless they upgrade their equipment now, as in ‘right now!‘ In turn, the broadband industry’s bean counters find predictions of traffic explosions useful to justify revenue enhancers like usage caps, usage-based billing, and constant rate increases.

“As we make these and other investments, we periodically need to adjust prices due to increases [in] business costs,” wrote Comcast executive Sharon Powell in a letter defending a broad rate increase imposed on customers in Philadelphia late last year.

In 2015, as that cable company was expanding its usage caps to more markets, spokesman Charlie Douglas tried to justify the usage caps claiming, “When you have 10 percent of the customers consuming 50 percent of the network bandwidth, it’s only fair that those consumers should pay more.”

When Cisco released its 2017 predictions of internet traffic growth, once again it suggests a lot more data will need to be accommodated across America’s broadband and wireless networks. But broadband expert Dave Burstein has a good memory based on his long involvement in the industry and the data he saw from Cisco actually deflates internet traffic panic, and more importantly provider arguments for higher cost, usage-capped internet access.

“Peak Internet growth may have been a couple of years ago,” wrote Burstein. “For more than a decade, internet traffic went up ~40% every year. Cisco’s VNI, the most accurate numbers available, sees growth this year down to 27% on landlines and falling to 15-20% many places over the next few years. Mobile growth is staying higher — 40-50% worldwide. Fortunately, mobile technology is moving even faster. With today’s level of [provider investments], LTE networks can increase capacity 10x to 15x.”

According to Burstein, Cisco’s estimates for mobile traffic in the U.S. and Canada in 2020 is 4,525 petabytes and in 2021 is 5,883 petabytes. That’s a 30% growth rate. Total consumer traffic in the U.S. and Canada Cisco sees as 48,224 petabytes and 56,470 petabytes in 2021. That’s a 17% growth rate, which is much lower on wired networks.

Burstein’s findings are in agreement with those of Professor Andrew Odlyzko, who has debunked “exaflood/data tsunami” scare stories for over a decade.

“[The] growth rate has been decreasing for almost two decades,” Odlyzko wrote in a 2016 paper published in IPSI BgD Transactions. “Even the growth rate in wireless data, which was extremely high in the last few years, shows clear signs of a decline. There is still rapid growth, but it is simply not at the rates observed earlier, or hoped for by many promoters of new technologies and business methods.”

The growth slowdown, according to Odlyzko, actually began all the way back in 1997, providing the first warning the dot.com bubble of the time was preparing to burst. He argued the data models used by equipment manufacturers and the broadband industry to measure growth have been flawed for a long time.

When new internet trends became popular, assumptions were made about what impact they would have, but few models accurately predicted whether those trends would remain a major factor for internet traffic over the long-term.

Peer-to-peer file sharing, one of the first technologies Comcast attempted to use as a justification for its original 250GB usage cap, is now considered almost a footnote among the applications having a current profound impact on internet traffic. Video game play, also occasionally mentioned as a justification for usage caps or network management like speed throttling, was hardly ever a major factor for traffic slowdowns, and most games today exchange player actions using the smallest amount of traffic possible to ensure games are fast and responsive. In fact, the most impact video games have on the internet is the size of downloads required to acquire and update them.

Odlyzko also debunked alarmist predictions of traffic overloads coming from the two newest and largest traffic contributors of the period 2001-2010 — cloud backups and online video.

“Actual traffic trends falsified this conjecture, as the first decade of the 21st century witnessed a substantial [traffic growth rate] slowdown,” said Odlyzko. “The frequent predictions about ‘exafloods’ overwhelming the networks that were frequent a decade ago have simply not come to pass. At the 20 to 30% per year growth rates that are observed today in industrialized countries, technology is advancing faster than demand, so there is no need for increasing the volume of investments, or for the fine-grained traffic control schemes that are beloved by industry managers as well as researchers.”

That’s a hard pill to swallow for companies that manufacture equipment designed to “manage,” throttle, cap, and charge customers based on their overusage of the internet. It also gives fits to industry executives, lobbyists, and the well paid public policy researchers that produce on spec studies and reports attempting to justify such schemes. But the numbers don’t lie, even if the industry does.

Although a lot of growth measured these days comes from wireless networks, they are not immune to growth slowdowns either. The arrival of the smartphone was hailed by wireless companies and Wall Street as a rocket engine to propel wireless revenue sky high. Company presidents even based part of their business plans on revenue earned from monetizing data usage allegedly to pay for spectrum acquisitions and upgrades.

Verizon’s CEO Lowell McAdam told investors as late as a year ago “unlimited data” could never work on Verizon Wireless again.

“With unlimited, it’s the physics that breaks it,” he said. “If you allow unlimited usage, you just run out of gas.”

The laws of physics must have changed this year when Verizon reintroduced unlimited data for its wireless customers.

John Wells, then vice president of public affairs for CTIA, the wireless industry’s top lobbying group, argued back in 2010 AT&T’s decision to establish pricing tiers was a legitimate way for carriers to manage the ‘explosive growth in data usage.’ Wells complained the FCC was taking too long to free up critically needed wireless spectrum, so they needed “other tools” to manage their networks.

“This is one of the measures that carriers are considering to make sure everyone has a fair and equal experience,” Walls said, forgetting to mention the wireless industry was cashing in on wireless data revenue, which increased from $8.5 billion annually in 2005 to $41.5 billion in 2009, and Wall Street was demanding more.

“There were again many cries about unsustainable trends, and demands for more spectrum (even though the most ambitious conceivable re-allocation of spectrum would have at most doubled the cellular bands, which would have accommodated only a year of the projected 100+% annual growth),” Odlyzko noted.

What the industry and Wall Street did not fully account for is that their economic models and pricing had the effect of modifying consumer behavior and changed internet traffic growth rates. Odlyzko cites the end of unlimited data plans and the introduction of “tight data caps” as an obvious factor in slowing down wireless traffic growth.

“But there were probably other significant ones,” Odlyzko wrote. “For example, mobile devices have to cope not just with limited transmission capacity, but also with small screens, battery
limits, and the like. This may have led to changes of behavior not just of users, but also of app developers. They likely have been working on services that can function well with modest
bandwidth.”

“U.S. wireless data traffic, which more than doubled from 2012 to 2013, increased just 26% from 2013 to 2014,” Odylzko reported. “This was a surprise to many observers, especially since there is still more than 10 times as much wireline Internet traffic than wireless Internet traffic.”

Many believe that was around the same time smartphones achieved peak penetration in the marketplace. Virtually everyone who wanted a smartphone had one by 2014, and as a result of fewer first-time users on their networks, data traffic growth slowed. At the same time, some Wall Street analysts also began to worry the companies were reaching peak revenue per user, meaning there was nothing significant to sell wireless customers that they didn’t already have. At that point, future revenue growth would come primarily from rate increases and poaching customers from competitors. Or, as some providers hoped, further monetizing data usage.

The Net Neutrality debate has kept most companies from “innovating” with internet traffic “fast lanes” and other monetization schemes out of fear of stoking political blowback. Wireless companies could make significant revenue trying to sell customers performance boosters like higher priority access on a cell tower or avoiding a speed throttle that compromised video quality. But until providers have a better idea whether the current administration’s efforts to neuter Net Neutrality are going to be successful, some have satisfied themselves with zero rating schemes and bundling that offer customers content without a data caps or usage billing or access to discounted packages of TV services like DirecTV Now.

Verizon is also betting its millions that “content is king” and the next generation of revenue enhancers will come from owning and distributing exclusive video content it can offer its customers.

Odlyzko believes providers are continuing the mistake of stubbornly insisting on acquiring or at least charging content providers for streaming content across their networks. That debate began more than a decade ago when then SBC/AT&T CEO Edward Whitacre Jr. insisted content companies like Netflix were not going to use AT&T’s “pipes for free.”

“Much of the current preoccupation of telecom service providers with content can be explained away as following historical precedents, succumbing to the glamour of ‘content,'” Odlyzko wrote. “But there is likely another pressing reason that applies today. With connection speeds growing, and the ability to charge according to the value of traffic being constrained either directly by laws and regulations, or the fear of such, the industry is in a desperate search for ways not to be a ‘dumb pipe.'”

A number of Wall Street analysts also fear common carrier telecom companies are a revenue growth ‘dead-end,’ offering up a commodity service about as exciting as electricity. Customers given a choice between AT&T, Verizon, Sprint, or T-Mobile need something to differentiate one network from the other. Verizon Wireless claims it has a best in class LTE network with solid rural coverage. AT&T offers bundling opportunities with its home broadband and DirecTV satellite service. Sprint is opting to be the low price leader, and T-Mobile keeps its customers with a network that outperforms expectations and pitches constant promotions and giveaways to customers that crave constant gratification and change.

The theory goes that acquiring video content will drive data usage revenue, further differentiate providers, and keep customers from switching to a competitor. But Odylzko predicts these acquisitions and offerings will ultimately fail to make much difference.

“Dumb pipes’ [are] precisely what society needs,” Odylzko claims and in his view it is the telecom industry alone that has the “non-trivial skills” required to provide ubiquitous reliable broadband. The industry also ignores the utility-like built-in advantage it has owning pre-existing wireline and wireless networks. The amortized costs of network infrastructure often built decades ago offers natural protection from marketplace disruptors that likely lack the fortitude to spend billions of dollars required to invade markets with newly constructed networks of their own.

Odylzko is also critical of the industry’s ongoing failure of imagination.

Stop the Cap! calls that the industry’s “broadband scarcity” business model. It is predicated on the idea that broadband is a limited resource that must be carefully managed and, in some cases, metered. Companies like Cox and Comcast now usage-cap their customers and deter them from exceeding their allowance with overlimit penalties. AT&T subjectively usage caps their customers as well, but strictly enforces caps only for its legacy DSL customers. Charter Communications sells Spectrum customers on the idea of a one-size fits all, faster broadband option, but then strongly repels those looking to upgrade to even faster speeds with an indefensible $200 upgrade fee.

“The fixation with video means the telecom industry is concentrating too much on limiting user traffic,” Odlyzko writes. “In many ways, the danger for the industry, especially in the wireline arena, is from too little traffic, not too much. The many debates as to whether users really need 100Mbps connections, much less 1Gbps ones, reveal lack of appreciation that burst capability is the main function of modern telecom, serving human impatience. Although pre-recorded video dominates in the volume of traffic, the future of the Net is likely to be bursts of traffic coming from cascades of interactions between computers reacting to human demands.”

Burstein agrees.

“The problem for most large carriers is that they can’t sell the capacity they have, not that they can’t keep up,” he writes. “The current surge in 5G millimeter wave [talk] is not because the technology will be required to meet demand. Rather, it is inspired by costs coming down so fast the 5G networks will be a cheaper way to deliver the bits. In addition, Verizon sees a large opportunity to replace cable and other landlines.”

On the subject of cost and broadband economics, Burstein sees almost nothing to justify broadband rate hikes or traffic management measures like usage caps or speed throttling.

“Bandwidth cost per month per subscriber will continue flat to down,” Burstein notes. “For large carriers, that’s been about $1/month [per customer] since ~2003. Moore’s Law has been reducing equipment costs at a similar rate.”

“Cisco notes people are watching more TV over the net in evening prime time, so demand in those hours is going up somewhat faster than the daily average,” he adds. “This could be costly – networks have to be sized for highest demand – but is somewhat offset by the growth of content delivery networks (CDN), like Akamai and Netflix. (Google, YouTube, and increasingly Microsoft and Facebook have built their own.) CDNs eliminate the carrier cost of transit and backhaul. They deliver the bits to the appropriate segment of the carrier network, reducing network costs.”

Both experts agree there is no evidence of any internet traffic jams and routine upgrades as a normal course of doing business remain appropriate, and do not justify some of the price and policy changes wired and wireless providers are seeking.

But Wall Street doesn’t agree and analysts like New Street Research’s Jonathan Chaplin believe broadband prices should rise because with a lack of competition, nothing stops cable companies from collecting more money from subscribers. He isn’t concerned with network traffic growth, just revenue growth.

“As the primary source of value to households shifts increasingly from pay-TV to broadband, we would expect the cable companies to reflect more of the annual rate increases they push through on their bundles to be reflected in broadband than in the past,” Chaplin wrote investors. Comcast apparently was listening, because Chaplin noticed it priced standalone broadband at a premium $85 for its flagship product, which is $20 more than Comcast’s non-promotional rate for customers choosing a TV-internet bundle.

“Our analysis suggests that broadband as a product is underpriced,” Chaplin wrote. “Our work suggests that cable companies have room to take up broadband pricing significantly and we believe regulators should not oppose the re-pricing. The companies will undoubtedly have to take pay-TV pricing down to help ‘fund’ the price increase for broadband, but this is a good thing for the business. Post re-pricing, [online video] competition would cease to be a threat and the companies would grow revenue and free cash flow at a far faster rate than they would otherwise.”

The European Commission’s latest study on broadband pricing shows while Europe and Asia offer consumers affordable broadband, North American providers are forcing Americans and Canadians to essentially pay twice as much for equivalent levels of service.

Just as was the case in 2015, the report found some of the most costly broadband packages in the world are sold to customers in Canada and the United States. This year, the study found the average Canadian paid more than $52 a month for standalone broadband, in the U.S. an average of $42 a month. In contrast, Europeans paid an average of $30 and Asians paid $22 a month for comparable service. Customers in the U.S. and Canada with a triple play bundle package of broadband, TV, and phone service paid more than double what their counterparts in Asia and Europe did last year.

As U.S. and Canadian providers raise broadband speeds and constrict the number of service tiers they offer, customers are forced into more expensive tiers, whether they need or want them. That further exacerbates the digital divide based on broadband affordability.

In Europe, competition in many EU member states has caused prices to drop for some types of service. Double and triple play packages offering 100Mbps or less declined in price by as much as 10.6% in 2016.

The study found:

For the download speed basket 12-30Mbps, the EU vies with Japan and in some cases Korea showing the least expensive prices in one or more of the four service bundles. The lowest price for Double Play with fixed telephony in the €28 is also the lowest compared to all the countries analysed. The EU, Japan and South Korea have relatively similar prices when compared with Canada and, in particular, the USA.

Comparing the €28 with other countries in the world, the pattern in the 30-100Mbps speed basket is similar to the 12-30 Mbps basket. Japan is the least expensive country for three of four bundles; only Single Play is slightly less expensive in South Korea. Here, the EU28 just fail to present the lowest price for Double Play with fixed telephony. Again, the EU, Japan, and South Korea stay at more or less close compared to Canada and the USA. Alternatively, Canada is the most expensive country in three of four bundles. However, USA shows the most expensive Double Play with fixed telephony – despite considering the lowest price offers in three States there.

With regard to the 100+ Mbps basket of advertised download speeds, Japan and South Korea are decisively the least expensive markets, across all service bundles. South Korea has the least expensive offer for Single Play, Japan for Double Play including TV services. For the top download speed basket, the EU lies in mid-field between the low-cost Asian and the high-priced North American countries.

Other conclusions:

• Ultra-fast broadband offers (100+ Mbps) were still most expensive in the USA and Canada
• The least expensive offer for South Korea across all bundles was faster than 100Mbps
• Compared to Japan and South Korea, European citizens have to pay similar prices for offers of up to 100Mbps, but significantly more for ultra-fast connections.

The United Arab Emirates now has the highest penetration of fiber optic broadband in the world, according to data from the FTTH Council Europe.

At least 93.7% of UAE homes are now hooked up to fiber-to-the-home internet service, and the country’s largest provider — Etisalat — promises it will spend millions more to further expand fiber connected home broadband and mobile services across the country.

In contrast, the United States has only wired 13.1% of its homes to fiber broadband, 11.8% in Canada. The countries with the highest percentage of fiber connections are the UAE, Qatar, Singapore, South Korea, Hong Kong, and Japan.

According to the World Bank, broadband internet is today seen as critical to the transition to knowledge-intensive economies across the world. Countries in the Middle East and North Africa are accelerating their fiber broadband programs, believing the technology will prove transformational to remake or build their economies in a digital world. As many first world countries’ telecommunications networks are captive to large, for-profit corporate interests that have dragged out broadband expansion to protect profits, the developing world has a chance to leapfrog over countries in North America and Europe and launch new connected technology centers for the digital economy.

For the UAE, fiber optic broadband is a critical part of the country’s Vision 2021 strategy to invest vast sums in infrastructure and development programs to diversify the country’s economy away from its dependence on oil and gas reserves and guarantee future prosperity.

Even as millions of Spectrum subscribers began paying higher rates for programming and equipment this month, Charter Communications has sweetened the deal for its new customers by offering free DVR service with their triple play bundle of TV Select, internet, and voice service for $89.97/mo during the first year. The cable company will also reimburse customers up to $500 to cover any early termination/contract buyout fees for canceling their satellite or telephone company video package.

Charter’s “Strategic Accounts” department is handling the promotion, and it will benefit customers where there is significant competition between Spectrum and AT&T and Verizon or satellite providers like DirecTV and Dish Networks. Spectrum does not cover early termination fees from cell phone companies, and you must have subscribed to a “comparable level of service,” which disqualifies competitors like Hulu, Netflix, DirecTV Now, and Amazon.

Like the rebates Time Warner Cable used to offer customers, there is a specific process to submit documentation to qualify for this rebate, and skipping a step means… no rebate and no recourse. In addition to this FAQ, Stop the Cap! has this advice:

1. You must install and keep current a qualified Spectrum triple play package from the time you submit the rebate request until the day you receive a check.
2. You cannot have had Spectrum Video service within the last 30 days, something we’ll explain below.
3. Your account must not be past due.
4. You must submit a copy of your provider’s final bill showing itemized early termination fees actually billed to your account. Bank/credit card statements showing charges are not eligible.
5. You must complete the “Charter Contract Buyout Form” in full and submit it by e-mail or by mail to: Spectrum, 7800 Crescent Exec. Dr., Charlotte, NC 28217, ATTN: Strategic Accounts Dept. with your documentation. Try to make sure the names on both accounts match.
6. Your rebate request must be received by Charter within 60 days of installation of a Charter triple play package or within two weeks of the date listed on the competing provider’s final bill, whichever is later.
7. Charter will only reimburse you for the actual amount of the early termination fee, up to a maximum of $500. Cash the check within six months or lose it.

Charter insists customers who have had Spectrum Video service within the last 30 days cannot qualify for this rebate. This is an effort to close a loophole where an existing Spectrum customer cancels their regularly-priced cable service, switches to a competitor for a few weeks, and then promptly switches back to a Spectrum package at the new customer price, which also leaves Charter on the hook for paying the early termination fee charged by the other company. To avoid this, a customer would have to cancel Spectrum service, switch to a competitor for at least 31 days, and then switch back to Spectrum. That is likely to be a hassle for most people.

Customers who have participated in these rebate schemes in the past also warn that companies can reject a rebate if you do not have a “comparable” level of service with a competitor. In other words, if you signed up for a $20 basic video package and then head to Spectrum for a $90 triple play package, the company may not consider that “comparable.” “Comparable” can mean the dollar amount of the video package you have with a competitor or the combination of a satellite package with one provider and a broadband package with another. You can contact Charter directly and check if your existing package(s) qualify. If the representative says yes, write down the name of the person and keep it handy in case your rebate request is later rejected.

Charter says you won’t have long to wait for a rebate rejection or a check.

“When you submit your information to the Contract Buyout Team, your information goes through a verification process, which can take up to 5-7 business days. After approval, your check will arrive within 10 business days,” the company reports.

Other factors to consider:

• Cable TV equipment is required and costs extra ($5.99/mo per HD box or DVR for new customers).
• You will receive Spectrum’s base internet package, which is 60Mbps or 100Mbps in former TWC Maxx service areas. A $199 upgrade fee applies for faster speed.
• Installation fees apply. You can avoid them with a self-install kit which can be mailed or picked up at a Spectrum retail store at no extra charge.
• Fees and surcharges apply. The most important is the Broadcast TV Fee, which usually adds around $7.50 a month to your TV bill.
• Rates reset to Charter’s regular price at the end of one year. There is no contract, so you can cancel anytime.