At a hearing Wednesday to question President Donald Trump’s nominees for the Federal Trade Commission, Democrats expressed concern about some signals from the three Republican and one Democratic nominees that they intend to enforce consumer protection laws as long as there is evidence they have the indisputable authority to act.

What happens when corporate interests and special interest groups insist the FTC’s regulatory powers are uncertain, limited by precedent, blocked by court opinions, or contrary to the wishes of Congress remained uncertain after the hearing.

The Senate Commerce Committee is facing some urgency to approve the nominations to fill a large number of vacancies at the FTC, which currently prevents the agency from taking votes on actions. If all four nominees are approved, the FTC will still have a single open commissioner’s seat on the Democratic side.

The nominated FTC commissioners are:

Simons

Joseph J. Simons, nominated for chairman for the FTC, is a Republican antitrust lawyer who has taken a few trips through Washington’s revolving door, serving as chief of the FTC’s Competition Bureau, investigating mergers and anticompetitive conduct from 2001 to 2003 under President George W. Bush. During his tenure, the FTC mostly pursued high-profile cases that brought clear evidence of antitrust harm. Under Simons, the FTC blocked Libbey, Inc. from acquiring its chief glassware rival Anchor Hocking. Vlasic Foods International and Claussen Pickle found an unreceptive FTC for their merger, eventually also blocked. Simons was noted for investigating pharmaceutical companies that applied for misleading drug patents designed to delay the entry of cheaper generic versions of brand name pharmaceutical products. After his tenure at the FTC, Simons accepted a lucrative $1.9 million partnership at the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, which handles corporate mergers and acquisitions for corporate clients.

Wilson

Christine S. Wilson, a Delta Air Lines executive, is also a frequent flyer through D.C.’s revolving door. During the George W. Bush administration, she was chief of staff for then-FTC chairman Tim Muris. She also held three other significant corporate-public policy positions that advised companies and the U.S. government about antitrust matters. In 2011, Wilson accepted a high paying partnership at Kirkland and Ellis, a firm well-regarded for helping corporations successfully complete antitrust reviews of their mergers and acquisitions. Wilson’s latest employer was Delta Air Lines, which offered her an executive position in August 2016 as the company’s senior vice president for legal, regulatory, and international affairs. In addition to the $521,000 in distributions Wilson earned from her partnership at Kirkland and Ellis, Wilson accepted an undisclosed cash signing bonus, $136,000 in bonuses in 2017 from a management incentive plan, and a regular salary of $390,000. Wilson retains various amounts of unvested Delta stock and stock options that would normally be lost after leaving the company, but Delta apparently wanted to part with Wilson on the friendliest of terms, granting her pro rata compensation for the stock and waiving the usual requirement that an employee leaving so quickly after being hired should pay back 50% of their signing bonus.

Phillips

Noah Joshua Phillips served as chief counsel for Republican Sen. John Cornyn at the Senate Judiciary Committee. Before coming to Capitol Hill, Phillips was an associate at Steptoe & Johnson LLP in Washington and at Cravath, Swaine & Moore in New York. He focused on civil litigation.

Consumer Federation of America senior fellow Rohit Chopra is a Democrat and the only nominee with a long record of representing consumer interests and pushing for increased consumer protection and better oversight of financial services and products targeting consumers. Chopra was previously assistant director of the Consumer Financial Protection Bureau, where he oversaw the agency’s agenda on students and young consumers. He specialized in targeting the student loan industry for abusive practices and secured hundreds of millions of dollars in relief for student loan borrowers.

Chopra

Because of the unprecedented number of vacancies at the Commission, President Trump’s nominees could have an enormous impact on the direction of the FTC over the next several years. Traditionally, three of the commissioners belong to the current president’s political party and two belong to the other party.

Observers suggest the nominees are not atypical for a Republican president to nominate and some have served at the FTC before. None have attracted the kind of controversy that followed Makan Delrahim, Trump’s pick for head of the U.S. Department of Justice’s Antitrust Division. Most expect the Republican majority-led FTC will bend towards the interests of businesses unless there is clear and convincing evidence of significant consumer harm, especially in cases of mergers and acquisitions.

“Traditionally, Republican commissioners tend to be more lenient in merger enforcement on the marginal case, and we haven’t seen any evidence to indicate that [Simons] would depart from the traditional Republican posture,” said Mary Lehner, a partner with Freshfields and a former FTC attorney who also served as an adviser to two chairmen of the agency.

A major concern for some Democrats is that the FTC is now being tasked with protecting what remains of net neutrality, the open internet protocol that was swept away by the Republican majority at the Federal Communications Commission. The FCC reclassified internet service providers once again as “information services,” under Title 1 of the Communications Act. That transfers oversight back to the FTC — an agency not known for careful oversight of internet providers’ business practices.

At the hearing, Simons equivocated on how the FTC will deal with allegations of ISP abuse and signaled his concern that a Ninth Circuit court ruling found that telecommunications companies that also serve as common carriers (ie. telephone companies) are completely exempt from FTC authority.

Some Democrats interpreted Simons’ remarks as suggesting he could adopt a “my hands are tied” approach to ISP oversight, claiming that the FTC lacks the authority to keep an eye out for industry abuses.

Sen. Ed Markey (D-Mass.) seized on such comments, asking Simons to confirm if he believes the FTC specifically “lacks rulemaking authority” on net neutrality while the FCC, directly responsible for transferring net neutrality enforcement away from itself, “does have rulemaking authority to prevent blocking, throttling and paid prioritization by ISPs.”

Simons prevaricated in his answer, telling Markey, “We both have rulemaking, and they’re different types of rulemaking.”

Markey

“I’d want to talk to the general counsel’s office before I gave a specific answer to that, but I’m not entirely clear,” Simons said in response to a followup question pressing the issue.

“We are going to take the [statutory] authority we have and use it as best we can,” Simons told senators at the Senate Commerce Committee hearing. “I don’t know exactly what types of anti-competitive or deceptive and unfair practices may come up. If something comes up that we can’t reach under our statute, then I would certainly talk to you about a federal legislative fix.”

But observers note such a fix could take years, and the FTC often takes a year or more to complete investigations of alleged wrongdoing before starting to act.

Chopra, the lone Democratic nominee, agreed with Democrats that he also feared the FTC’s authority to act is uncertain, and that lack of certainty is likely to delay any enforcement actions. Chopra comments suggested the telecom industry is likely to use the Ninth Circuit court ruling to their advantage.

“I share a lot of the skepticism and concerns,” Chopra told the committee. “The FTC may face an unlevel playing field where some major market participants are exempt from the commission’s authority while others are subject to it.”

Blumenthal

Sen. Richard Blumenthal (D-Conn.) said that single Ninth Circuit court ruling could provide the telecom industry with a ready-made loophole to escape the FTC’s jurisdiction altogether. An ISP could acquire “a minor side business” like a small rural telephone company subject to common carrier rules and win blanket corporate immunity from FTC oversight. Although Simons said he would support striking the common carrier exemption from the Federal Trade Commission Act which defines the FTC’s authority, such a change could take several years to get through Congress and a well-funded telecom industry lobbying effort.

Phillips seemed impatient about the net neutrality debate which occupied a significant part of the hearing, characterizing it as a side issue worth sidestepping to focus on broader issues.

“We can’t allow contentious issues to distract us from the bread and butter of the agency […] looking out for children, veterans, the elderly and Americans generally,” Phillips said.

Aside from the net neutrality debate, the Republican nominees signaled their interest in the possibility of investigating large tech companies like Google, Amazon, and Facebook for antitrust activities. Republicans have been especially critical of Google, and some conservatives believe Twitter and Facebook exhibit political bias against them. The president has also frequently attacked Amazon and its CEO Jeff Bezos. Bezos owns the Washington Post, one of the many news outlets Trump said has been unfair to him. Trump has also accused Amazon of stiffing the government on sales taxes.

“Oftentimes companies get big because they are successful with the consumer, they offer a good service at a low price,” Simons said. “And that’s a good thing, and we don’t want to interfere with that. On the other hand, companies that are already big and influential can sometimes use inappropriate means — anticompetitive means — to get big or to stay big. And if that’s the case then we should be vigorously enforcing the antitrust laws.”

Another issue the FTC nominees promised to prioritize: online security/data breaches which expose consumers’ private information.

After spending millions to kill net neutrality, AT&T today called on Congress to pass a new national law protecting AT&T’s idea of a free and open internet by regulating internet websites like Facebook, Google, and Amazon.

Full page newspaper ads taken out in several nationally known newspapers proclaimed AT&T CEO Randall Stephenson’s support for the first “Internet Bill of Rights,” conceived by some of the same lawyers and lobbyists AT&T paid to destroy the FCC’s net neutrality rules put into effect during the Obama Administration.

“Congressional action is needed to establish an ‘Internet Bill of Rights’ that applies to all internet companies and guarantees neutrality, transparency, openness, non-discrimination and privacy protection for all internet users,” Stephenson wrote in the ad.

AT&T’s proposal would attempt to include content regulation of websites under the guise of fairness, claiming that while internet service providers are expected to treat all content fairly, large websites like Google and Facebook currently do not. Critics of AT&T’s proposal call that a distraction that has nothing to do with ISPs seeking the right to establish paid internet fast lanes and favoring partnered websites with exemptions from data caps or speed throttles.

AT&T doesn’t inform readers of its own complicity in the “confusion” over net neutrality policies that have faced constant legal and political challenges from AT&T and other telecom companies. The telecom industry has furiously lobbied Congress and regulators to keep net neutrality from taking effect. Once it did, AT&T took the FCC to court to overturn the rules.

AT&T wants their own law for their own version of net neutrality.

AT&T’s campaign comes with some urgency as the company works to block states from enacting their own net neutrality laws to replace the rules abandoned by the Republican majority controlling the FCC. Despite assurances from FCC chairman Ajit Pai that the Commission would sue to pre-empt any state law that would re-establish net neutrality, AT&T and other large cable and phone companies prefer the regulatory certainty available from the quick passage of a federal law that would establish AT&T’s definition of net neutrality indefinitely. AT&T is also trying to rush passage with support from Republican congressional majorities and President Trump before the midterm elections threaten a Democratic takeover of the House, Senate, or both.

AT&T attempted to assuage customers of its good intentions by claiming it doesn’t block websites.

“We don’t censor online content. And we don’t throttle, discriminate, or degrade network performance based on content, period,” AT&T wrote (emphasis ours). But that claim opens the door to important loopholes:

1. Speed throttles, data caps, and zero rating do not impact network performance. They impact your ability to equally access internet content, something AT&T does not promise here.
2. AT&T only claims it won’t interfere with websites based on their content, but that was never the premise ISPs have used to demand additional payments from content creators. It isn’t the content ISPs are concerned with — it is the traffic those websites generate and, in the eyes of many net neutrality supporters, whether those websites compete with an ISPs own offerings. AT&T could have said it doesn’t throttle, discriminate, or degrade websites, period. But it didn’t.

AT&T alarmingly suggests that without predictable rules, next generation applications like virtual reality, telemedicine, and the Internet of Things will be threatened. Except that is not the message AT&T gives shareholders, arguing AT&T has robust capacity both now and into the future for next generation applications. AT&T has long promoted how lucrative it expects the Internet of Things marketplace will be.

Allowing the telecom industry to write its own “Internet Bill of Rights” met with harsh criticism from the consumer groups AT&T claims it wants to enlist in its efforts.

“Zero real net neutrality supporters are fooled by this,” wrote Fight for the Future executive director Evan Greer. “We had an Internet Bill of Rights. It was called Title II and AT&T’s army of lobbyists did everything in their power to burn it down.”

“AT&T’s hypocrisy knows no bounds,” said Free Press policy director Matt Wood. “Its phony bill of rights argument makes no sense based on the law, the policies, or the politics in play. AT&T’s head fake towards one-size-fits-all rules for all websites and content providers should fool no one. As soon as AT&T wants to stop lobbying against net neutrality, broadband privacy, and the other rights it has worked to kill at the Trump FCC and in this Congress, maybe people will stop laughing at desperate tactics like this. For now, all we can do is point out the company’s audacity in pretending that this hyper-partisan Congress can step in to fill the void of the net neutrality repeal by writing a new law tailor-made for AT&T.”

BEIJING — A recent decision by the United States’ Federal Communications Commission to repeal net neutrality, which are rules designed to prevent the selective blocking or slowing of websites, has wide-ranging implications for China, which never believed in net neutrality and banned hundreds of foreign websites. The decision could result in a major trade war involving Chinese telecom and Internet companies, which are interested in accessing the U.S. market, analysts said.

The move will allow American telecom service providers to charge differential prices for various services and even examine the data of their customers. Though this aspect has stirred controversy in the United States, the situation there is still very different from the realities in China.

“In China, the government is monitoring and controlling the networks whereas [in U.S.] it is, at least so far, it is telecommunication companies. At this point, the government does not have access, we know it does not have access to manipulating the flow of traffic in the U.S. Internet,” Aija Leiponen, a professor at Cornell University’s Dyson School of Applied Economics and Management, said.

The FCC decision could help U.S. telecom service providers offer high-priced premium services.

Trade war

But this would also open up an opportunity for U.S. service providers to charge high rates from foreign customers. At present, foreign companies can easily access the U.S. cyber market without facing the kind of resistance American companies encounter in China and elsewhere.

“I think it (FCC decision) has an impact potentially for Chinese technology companies that want to do business in the U.S.,” said Benjamin Cavender, a senior analyst at the Shanghai-based China Market Research Group (CMR). “You are asking about companies like Alibaba or Tencent, what this means for them in the U.S. markets– and I could very possibly see this being used as a trade war tool–and the U.S. government saying, ‘Look, we are going to restrict access to companies to our ISPs and force them to pay a lot of money.”

U.S. telecom companies are getting increasing integrated with content providers and might look at foreign players as a source of serious competition. They might go further and even consider blocking some foreign players, including Chinese Internet giants, he said.

“I can also see this happening that they (Chinese Internet firms) just get completely blocked because of the U.S. using this more as a trade tool trying to get more access to the Chinese market because if you are a U.S. technology company you are working at a great disadvantage in the Chinese market. I do see this being used as a trade tool,” Cavender said.

The point is about applying pressure on China to open up its Internet market to American players in exchange for similar treatment in the United States. Washington has usually avoided this kind of tit-for-tat game, but the situation may be changing under the Trump administration, analysts said.

“They (U.S. telecom companies) could at some point say, ‘Look, if you want to have confidential, fast access to the U.S. you have to kind of allow us to do the same thing, allow us to invest more heavily in Chinese firms.’ I could see that happening,” Cavender said.

Moral high ground

China has been advocating the idea of ‘Internet sovereignty,’ which allows governments to create boundaries in cyber space and block foreign sites that it perceives as potential threats to security. Proponents of ‘open Internet’ have been protesting against the idea of ‘Internet sovereignty.’

The Obama administration lobbied and argued with China for nearly a decade to open up Internet access for American companies like YouTube, Twitter and Netflix. It was an important aspect of the annual strategic economic dialogue between the two countries.

The FCC decision coupled with the controversy over alleged cyber spying by Russia is a moral boost of support for China’s online restrictions, which include a ban on major sites like Google, YouTube and Twitter. The moral high ground enjoyed by the United States under the past administration may be at risk, analysts said.

“Even democracies are beginning to think about the need to regulate content. So the Chinese, you know, might take a little comfort in that,” James Lewis, senior vice president of the Center for Strategic and International Studies in Washington, said. “When you look at Europeans talking about blocking each other’s content, when you look at the U.S. talking about blocking Russian political warfare, the Internet cannot be the wild west that it’s been for a couple of decades. So, everyone’s moving in this direction and I guess the Chinese can take comfort from that.”

Meanwhile, Chinese experts are protesting a new bill introduced in the U.S. Congress that would prevent branches of the U.S. government from working with service providers that use any equipment from two Chinese companies, Huawei and ZTE, for security reasons.

“This (prejudice towards Chinese companies) seems like a problem that can’t be solved, at least not in the short term,” Liu Xingliang, head of the Data Center of China Internet, told the Global Times newspaper in Beijing.

At the same time, “Chinese firms can’t give up the U.S. market and just focus on smaller countries if they want to really achieve their global goals,” Liu Dingding, an independent tech expert told the paper.

Reported by: Saibal Dasgupta, VOANews

Western New York

In a recent survey of 2,000 residents living in Erie County (Buffalo), N.Y., it was clear almost nobody trusts their internet service provider, and 71% were dissatisfied with their internet service.

Seventeen years after many western New York residents heard the word “broadband” for the first time at a 2000 CNN town hall at the University of Buffalo, where then U.S. Senate candidate Hillary Rodham Clinton called for increased federal funding for high-speed internet, many upstate residents are still waiting for faster access.

The Buffalo News featured two stories about the current state of the internet in western New York and found it lacking.

Erie County Executive Mark C. Poloncarz blames internet service providers for serving up mediocre broadband, and no service at all in some parts of the county he represents.

“It’s been put in the hands of the private sector, and the private sector has, for whatever reason, elected to not expand into particular areas or not increase speeds in particular areas, putting those areas behind the eight ball,” he said.

Poloncarz effectively fingers the three dominant internet providers serving upstate New York – phone companies Verizon and Frontier and cable company Charter/Spectrum. He argues that companies will not even consider locating operations in areas lacking the most modern high-speed broadband. The digital economy is essential to help the recovery of western New York cities affected by the loss of manufacturing jobs and the ongoing departure of residents to other states.

Poloncarz

An important part of Gov. Andrew Cuomo’s statewide broadband improvement initiative is prodding Charter Communications and its predecessor Time Warner Cable to do a better job offering faster internet speeds and more rural broadband expansion. The New York Public Service Commission, as part of its approval of Charter’s acquisition of Time Warner Cable, extracted more concessions from the cable giant than any other state. Among them is a commitment to expand the cable company’s footprint into adjacent unserved areas by 2020 to reach at least 145,000 homes and businesses now outside of Charter’s service area.

Last week, the cable company told the PSC it was ahead of schedule on its expansion commitment, now reaching 42,889 additional households and businesses, which is above its goal of 36,771. It has two years left to add at least another 102,111 buildings.

Charter also recently increased broadband speeds to 100 Mbps for 99% of its customers in New York and has committed to boosting those speeds to 300 Mbps by the end of next year.

But where Charter does not provide service, broadband problems come courtesy of western New York’s biggest phone companies – Verizon and Frontier. In Erie County, a broadband census found a lack of service in parts of South Buffalo, the far West Side and East Side of Buffalo, as well as in parts of every town in the county except in the prosperous communities of West Seneca and Orchard Park. Verizon FiOS can be found in a handful of well-to-do Buffalo suburban towns, but not in the city itself or in rural parts of the region.

Verizon spokesman Chris McCann said the company had no further plans to expand FiOS service in upstate New York, and stopped announcing additional expansions in 2010. In the rest of its service area, Verizon supplies DSL service as an afterthought, and has made no significant investments to improve or expand service. Frontier Communications, which is the dominant phone company in the greater Rochester region, also provides service in some other rural western New York communities, but its DSL service rarely meets the FCC’s minimum speed definition to qualify as  broadband.

Rep. Collins

Both phone companies have no plans for significant fiber optic upgrades that would boost internet speeds. There is little pressure on either company to begin costly upgrades. In rural communities, both companies lack cable competition and in more urban areas, both have written off their ongoing customer losses to their cable competitor. That leaves towns like North Collins in a real dilemma. Poloncarz told the newspaper residents frequently park in the town library parking lot at night to connect to the library’s Wi-Fi service, because they lack internet service at home.

A political divide has opened up between area Democrats and Republican officials on how to solve the rural broadband problem. Democrats like Poloncarz are exploring solving the rural internet problem with a county-owned fiber network that would be open to all private ISPs to assist them in expanding service. He is joined by Erie County legislator Patrick Burke, who thinks it is time to spend the estimated $16.3 million it will take to build an “open access network” across Erie County.

“There are literally geographic dead zones, and it’s unnecessary,” said Burke, a Buffalo Democrat. “There’s no excuse.”

Poloncarz is more cautious and told the newspaper he will only propose the idea if he is convinced it will solve the problem, but is willing to continue studying it.

Republicans from the western New York congressional delegation believe deregulation and other incentives may give private companies enough reasons to begin upgrades and expansion.

Rep. Chris Collins, a Clarence-area congressman with close ties to the Trump White House, defended FCC Chairman Ajit Pai’s recent decision to eliminate net neutrality. Pai was born in Buffalo.

Collins argues net neutrality only raised the cost of business for ISPs, and being rid of it would inspire cable and phone companies to boost investment in 105 exurban and rural towns in his district, which covers eight counties and extends from the Buffalo suburbs east to Canandaigua, 80 miles away. More than 65% of those areas are under-served because DSL is often the only choice, and at least 3.3% had no internet options at all.

Rep. Tom Reed (R-Corning) has just as many internet dead zones in his district, if not more. Reed represents the Southern Tier region of western New York in a district that runs along the Pennsylvania border from the westernmost part of New York east nearly to Binghamton. Much of recent broadband development in this part of New York comes as a result of Gov. Cuomo’s state-funded broadband expansion initiative, not private investment.

Reed has a record in Congress that is better at explaining the rural broadband dilemma than solving it.

“In a rural district, there are areas that are just physically difficult to serve,” Reed shrugged.

Collins’ hope that the banishment of net neutrality will inspire Frontier, Verizon, and Charter to use their own money to expand into the frontiers of western New York seems unlikely. Gov. Cuomo’s plan, which uses public funds to help subsidize mostly private companies to expand into areas where Return On Investment fails to meet their metrics has had more success.

But the rural broadband debate has been accompanied by a fierce pushback among upstate New Yorkers against the Republican-controlled FCC and elected officials like Collins who support the recent gutting of net neutrality. A backlash has developed in his district, and some have accused Collins of aiding and abetting a corporate takeover of the internet.

“The hysteria and narrative that this will kill the internet is blatantly false,” responded Collins. “Internet service providers have said they do not increase speeds for certain websites over others, and I have signed onto legislation that would make such a practice illegal.”

Some of America’s top telephone and cable companies will likely pay little, if any federal taxes as a result of the passage of a Republican-sponsored tax cut plan, while some may also receive generous “refunds” based on depreciation-related expenses and future investments the companies would have made with or without changes to the tax code.

For several years in the last decade, companies with significant infrastructure expenses often did not spend a penny in federal taxes thanks to generous loopholes and incentive programs designed to encourage corporations to invest in new equipment, research, and development. The new Republican-sponsored tax cut is expected to provide a windfall of tax savings for every corporation in the country, but telecom companies are expected to do especially well with a combination of a lower corporate tax rate and the GOP’s failure to fulfill a commitment to close many of the tax loopholes and incentives that were originally designed to get companies spending during the Great Recession.

No provider has promised customers lower rates as a result of the billions of additional dollars the companies are expected to keep in the bank starting next year. In fact, there are early signs that much of the anticipated windfall will be returned to shareholders in the form of increased dividend payouts and accelerated share buyback schemes that reduce the number of shares available for sale, boosting both the sale price of the stock and executive bonus compensation tied to the price performance of the stock.

Despite that, companies including AT&T and Comcast are cranking up their PR machines to get on the good side of the Trump Administration, suggesting the new tax cuts will directly benefit middle class employees at both companies.

AT&T’s capex increased $1.1 billion to $11.2 billion for the first six months of 2017 without the tax cut legislation.

AT&T announced it would pay a one-time $1,000 bonus to its workers and invest an additional $1 billion in network upgrades as a direct result of the tax cuts.

However, a closer look reveals AT&T’s commitments to boost compensation came not as a result of the tax cut but instead from nearly a year of hard negotiations with the Communications Workers of America (CWA), one of the biggest unions representing AT&T workers.

The CWA argued that AT&T needed to follow-through on the Republican Party’s promise that passage of the tax cuts would result in higher wages for the middle class.

“Republicans, including the president, said the average household would get $4,000 under this tax plan,” CWA spokesperson Candice Johnson told The Daily Beast. In November, CWA officials began to demand $4,000 raises for AT&T workers promised by the GOP. “This bonus came out of that conversation. It’s a start, and we’re going to keep holding our leaders accountable.”

Instead of $4,000 more a year for AT&T workers as a result of the tax cut bill, the union’s influence achieved a $1,000 one time bonus and an average salary bump of 10.1%. Without pressure from the union, many AT&T employees and union officials believe AT&T would have offered little, if anything to its employees as a result of the tax cut.

AT&T’s Christmas Bonus will cost the company a fraction of the amount it risks losing if its $109 billion merger deal with Time Warner, Inc., does not survive an antitrust review by the Justice Department and the courts. The Justice Department announced its opposition to the merger. The connection between AT&T’s press release, which plays into the Trump Administration’s talking points about the tax cut law, and AT&T’s need for a friendlier response to its merger deal by administration officials, was not lost on Crane’s Chicago Business:

By now, companies have learned the art of crafting the type of upbeat, largely symbolic press releases our president loves, with enough big numbers to get them on the White House’s good side. If this time around that also means some extra money in workers’ pockets, all the better. But some of these announcements come across as more gimmicky than others, and it’s not hard to wonder if there are also other motives at work.

AT&T is angling to overcome regulatory objections to its $109 billion merger with Time Warner Inc. and either way, needs to invest in the U.S. to build out its fiber-optic cable and 5G networks. Analysts estimate AT&T’s net income will be close to $14 billion this year.

AT&T’s commitment to spend up to $1 billion additional dollars next year as a direct result of the tax cut is recycled old news, critics charge, because AT&T previously announced the same $1 billion commitment in early November. Regardless, the extra spending is a small fraction of AT&T’s overall capex budget.

In 2016, at the height of so-called “investment-killing net neutrality,” AT&T exceeded its 2016 capex forecast, spending $22.9 billion — $900,000 more than it expected. In 2017, AT&T announced it expected to spend $22 billion again this year, primarily on its wireless network and wired business solutions. The other major former Baby Bell – Verizon Communications, spent $17.1 billion in 2016 and expected to spend up to $17.5 billion this year.

AT&T’s promise to spend an additional $1 billion is a token amount, especially when considering the tax cut savings likely to be won by phone companies like AT&T and Verizon. From 2008-2015, AT&T paid an effective federal tax rate of just 8.1%, according to the Institute on Taxation and Economic Policy. It will pay considerably less under the Republican tax law, potentially saving the company billions. During the same period, Verizon paid absolutely zero federal taxes during many of those years, and in fact won a refund from the IRS because of network investments and depreciation-related savings. Because the GOP did not close many of the corporate loopholes the politicians initially promised would be ended, many telecom companies could once again pay little, if any federal tax, and may secure hefty refunds.

Source: Institute on Taxation and Economic Policy

Comcast’s $1,000 Christmas Bonus and $50 Billion Spending Commitment

Not to be outdone, Comcast has also promised a $1,000 one time Christmas bonus for its employees as a result of the passage of the GOP tax measure, along with a commitment to spend $50 billion on its business over the next five years:

Based on the passage of tax reform and the FCC’s action on broadband, Brian L. Roberts, chairman and CEO of Comcast NBCUniversal, announced that the company would award special $1,000 bonuses to more than 100,000 eligible frontline and non-executive employees. Roberts also announced that the company expects to spend well in excess of $50 billion over the next five years investing in infrastructure to radically improve and extend our broadband plant and capacity, and our television, film and theme park offerings.

Roberts

Comcast’s spending on its theme parks acquired from NBCUniversal has been especially bullish, with Roberts announcing earlier this year nearly $2 billion in spending  in 2017. In fact, Comcast’s capex spending has trended higher year after year, especially after its acquisition of NBCUniversal. In 2014, the company spent $7.2 billion on capital investments. In 2015, as net neutrality rules took effect, Comcast raised investments to $8.1 billion. In 2016, the capex budget fell slightly to $7.597 billion in 2016, but was forecast to reach $8.445 billion in 2017. Ars Technica reports that from the fourth quarter of 2016 through the third quarter of 2017, Comcast spent $9.4 billion on capital investments.

Much of that spending has been to pay for its X1 set-top box, theme park upgrades, and scaling up its broadband infrastructure to handle faster internet speeds. Earlier in 2017, Comcast also boosted its commitment to spend billions on buying back shares of its own stock, which will benefit shareholders and company executive compensation plans.

As the industry marches towards fiber upgrades and DOCSIS 3.1 deployment, Comcast’s capex forecast without the tax cuts would like come very close to Roberts’ $50 billion estimate over the next five years, assuming the company spent a reasonable average of close to $10 billion annually. Roberts said he “expects” spending at that level, but did not commit to it formally, so there is no penalty for overestimating investment numbers.

AT&T earlier noted predictions about capital investments always relate to actual need at the time and the company doesn’t spend money it does not need to spend.

“There is no reason to expect capital expenditures to increase by the same amount year after year,” AT&T said at the time. “Capital expenditures tend to be ‘lumpy.’ Providers make significant expenditures to upgrade and expand their networks in one year (e.g., perhaps because a new generation of technology has just been introduced), and then focus the next year on signing up customers and integrating those new facilities into their existing networks, and then make additional capital expenditures later, and so on.”

But there are political upsides to making no-strings-attached investment predictions anyway.

Comcast’s share repurchase program also allows the company to boost dividend payouts to shareholders.

Issuing a favorable press release that dovetails with the Trump Administration’s tax cut plan could buy Comcast goodwill from the administration as the company faces calls from Congress to extend merger deal conditions and restrictions on its 2011 acquisition of NBCUniversal. Those conditions are scheduled to expire in September 2018.

Jon Brodkin notes that telecom companies frequently tie their spending plans to regulatory matters going in their favor:

When ISPs are asking the government for a specific policy change—such as the repeal of a regulation or a tax break—they are quick to claim that the desired policy will lead to more investment.

AT&T, for example, announced last month that it would invest “an additional $1 billion” if Congress passes tax reform. With the tax reform now passed by Congress, AT&T said yesterday that it will move ahead with that $1 billion increase.

But neither one of those AT&T announcements said what the exact level of investment would have been if the tax bill wasn’t passed.

And in 2010, AT&T told the FCC that capital expenditures are based on technology upgrade cycles rather than government policy. At the time, AT&T was asking the FCC for a favor—the company wanted a declaration that the wireless market is competitive, a finding that can influence how the FCC regulates wireless carriers.