Spectrum Policy ‘Critical’ to Continued U.S. Leadership in Telecom Innovation, AT&T CEO Says

Policymakers need to ensure the U.S. maintains its “preeminent position” as the driver of telecom technology innovation by maintaining it as a friendly environment for capital investment, AT&T CEO Randall Stephenson said Sunday during an event at the University of Colorado in Boulder. “What keeps me awake at night is, five years from now, is that still the case?” he said at the Silicon Flatirons event. “Five years from now, are Chinese companies going to be driving the standards, are top Chinese companies going to be driving the technological innovation in this industry? … I think we as a country do not want that."

Spectrum policy is “critical” to bolstering innovation -- and the U.S. has “gotten this one right so far,” Stephenson said. The U.S. spectrum ownership model operates on an “indefinite” time frame, meaning an entity can own spectrum it purchases for as long as it wants so long as it puts the spectrum to use, he said. “That is a recipe that’s just ripe for exploitation, it’s ripe for people to want to invest,” Stephenson said. That stands in sharp contrast to India, where the spectrum ownership model has been a “disaster,” he said. The European model is better than India’s, but it licenses spectrum out for a finite period of time, at which point it will be re-auctioned, Stephenson said. “You've gone out and put a few billion dollars into this spectrum … and in eight to 10 years, you're going to have to turn around and re-purchase it again,” he said. “How aggressively are you going to invest in that asset?"

The level of government regulation of telecom and tax policy are also important factors, Stephenson said. “What we have demonstrated as an industry is with the right framework of regulation … you have seen investment pour into these industries like nowhere else in the world.” If a government doesn’t “get tax policy right, you're effectively taxing capital,” Stephenson said. “One must concede that if you tax capital gains and dividends high, that’s a higher cost of capital. And higher cost of capital results in lower capital investment."

The U.S. should not hold back on adopting pro-Internet Protocol transition policies because of concerns raised by rural telecoms, Stephenson said. “Everybody better be getting fast onto the world of IP,” he said. “We can’t sit here as a country and hold onto policies that cause us to hold onto obsolete technologies and expect to keep this forerunning position in the globe in terms of technology and innovation.” The FCC is considering AT&T’s deregulatory test bed proposal, which would gauge the effects of eliminating ILEC obligations (CD Jan 30 p2). That proposal is part of AT&T’s “Project Velocity IP” plan to invest $14 billion in the IP transition by the end of 2014 (CD Nov 8 p11). “We're committed and convinced that the world of data is going to be where everything moves,” Stephenson said. “If you don’t have a competitive broadband product into a home or into a business, then you ought to get out of business."

AT&T “didn’t execute well” in its dealings with regulators during its failed purchase of T-Mobile USA, Stephenson said. AT&T was forced to end the 2011 deal amid a Justice Department lawsuit and opposition from the FCC (CD Dec 20/11 p1). “I wouldn’t say it was a bad decision, but it was a decision that didn’t go the way I wanted,” Stephenson said.