How will Trump impact US telecoms?

James Pearce
Published on:

With Donald Trump set to become President on 20 January, GTB looks at how he might shake up the US telecoms market

Donald Trump’s presidential election victory on Tuesday 8 November shook the world, but it also raised some questions for the US telecoms industry.

President-elect Trump will take his seat as the most powerful man in the world tomorrow (20 January), and he has already begun the process of putting together the team that will enact his policies and some of those named signal a change in direction from the outgoing regime.

The regulator, the Federal Communications Commission, has already seen a shake-up because of Trump’s election win, after Obama-appointed chairman Tom Wheeler, a Democrat, announced plans to step-down from his role. Ajit Pai, a senior Republican on the FCC, is being tipped as his replacement, at least on an interim basis.

Trump recently announced the team that will oversee the transition at the Federal Communications Commission (FCC), and it included three vocal opponents of net neutrality.

The President-elect himself has previously expressed a negative view of the laws that back a free and open internet, rather than allowing carriers to prioritise certain types of traffic. 

In 2014, he criticised his predecessor, Barack Obama, for supporting net neutrality. “Obama’s attack on the internet is another top-down power grab. Net neutrality is the Fairness Doctrine. Will target conservative media,” he tweeted in 2014.

It should come as no surprise, then, that the future 45th president of the United States has appointed Jeffrey Eisenach, Mark Jamison and Roslyn Layton, all vocal opponents of the policy, to the FCC transition team.

Eisenach has ties to both Verizon and the GSMA. He testified before the judiciary committee of the US Senate in 2014, saying the policy unnecessarily advantaged small companies rather than protecting consumers. “Net neutrality regulation cannot be justified on the grounds of enhancing consumer welfare or protecting the public interest,” he said. 

“The potential costs of net neutrality regulation are both sweeping and severe, and extend far beyond a simple transfer of wealth from one group to another. Legitimate policy concerns about the potential use of market power to disadvantage rivals or harm consumers can best be addressed through existing antitrust and consumer protection laws and regulations.”

Carrier boost

This could be welcome news for carriers, many of which have openly opposed the current regulations around net neutrality.

Verizon has seen some success, having the FCC’s 2010 rules tossed out with its court challenge in 2014, while AT&T and others are in the middle of appeals against court rulings upholding the current laws. 

But for content providers and OTT players, the news may be less welcome, as they have widely supported it.

Former Sprint lobbyist Jamison goes further, questioning the role of the FCC entirely. In an opinion piece he wrote for Tech Policy Daily in October, he questioned whether the FCC still had a role to play.

“Most of the original motivations for having an FCC have gone away. Telecommunications network providers and ISPs are rarely, if ever, monopolies,” he wrote. “If there are instances where there are monopolies, it would seem overkill to have an entire federal agency dedicated to ex-ante regulation of their services. A well-functioning Federal Trade Commission (FTC), in conjunction with state authorities, can handle consumer protection and anticompetitive conduct issues.”

“Republicans in both Congress and the FCC have expressed their antipathy towards Title II regulation,” said research firm MoffettNathanson in a note to investors after the election. 

“A Congressional roll-back of Title II was never a serious option in a Democratic Administration: President Obama made clear that he stood ready with a veto. With the risk of a veto now gone, a legislative remedy now not only looks possible, but likely,” said the note.

“It is likely ... that virtually every major FCC rule-making of the past four years will be undone.”

The positive sides

Trump’s election could offer some other positives for the telecoms industry in the US too, as he has promised to be extremely pro-investment, especially in infrastructure.

The issue of telecoms infrastructure, of 5G and the internet of things (IoT), barely surfaced during the election campaign against Democratic candidate Hillary Clinton, but Trump promised to spend “double” that of his rival rebuilding US infrastructure.

Most of this will be directed to rebuilding “highways, bridges, tunnels, airports, schools, hospitals”, according to Trump’s acceptance speech. 

“We are going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it,” he added.

Given that Trump has already appointed a lobbyist for Sprint and someone with ties to Verizon into his core team, it seems telecoms investment could be one potential avenue in which the next president will spend.

Trump has also received positive news in a commitment from Japanese tech giant SoftBank to commit $50 billion of its $100 billion+ investment fund into projects in the US. Trump instantly claimed credit, having held a conversation with SoftBank CEO Masayoshi Son prior to the announcement.

Trump tweeted: “"Masa said he would never do this had we (Trump) not won the election!"

Ovum analyst Luca Schiavoni said Trump’s policy around telecoms investment was a lot less clear than his rival’s would have been had she won.

“Trump announced his intention to pursue an ‘America’s Infrastructure First’ policy that supports investments in transportation, water, electricity, telecommunications, and security infrastructure, and any other pressing domestic infrastructure needs,” he explained in a blog. “However, he has not set out any specific targets related to broadband, and has not indicated the amount and means to funding any expansion and improvement of infrastructure. “By contrast, Clinton’s ‘Initiative on Technology & Innovation’ committed to ensure that, by 2020, 100% of US households would have been able to access ‘affordable broadband’ at speeds ‘sufficient to meet families’ needs,” he wrote. 

“To this end, the plan was to continue investing in the Connect America Fund, the Rural Utilities Service program and the Broadband Technology Opportunities Program.” 

Full technology range

Clinton intended to direct federal agencies to consider the full range of technologies as potential recipients (including fibre, fixed wireless, and satellite) while focusing on areas that currently lack any fixed broadband.

With the FCC likely to be de-fanged under Trump, net neutrality looking to be short-lived, and a pro-investment environment promised, it would appear Trump’s election could bring some positives for US telecoms companies.

They may not get everything their own way, however, given the billionaire’s initial reaction when AT&T’s proposed takeover of Time Warner was announced during the campaign.

When news of the $85 billion proposal first broke in October, both candidates expressed concerns, but Trump went further, promising to block the deal within his first 100 days in power, arguing it “concentrates too much power in the hands of too few.”

Despite this initial hostility towards the deal, Trump is understood to be generally pro-consolidation, and if his FCC team is a lot less hands-on, as expected, this could favour the deal. It remains to be seen how the incoming President views the Verizon takeover of Yahoo.

Eisenach has supported major media mergers, such as AT&T’s attempt to buy T-Mobile in 2011, where markets are competitive. That deal was ultimately stopped by a Democrat-led FCC.

Ovum’s Schiavoni said: “It is expected that a Republican administration, and in turn a Republican-orientated FCC, will be potentially more lenient toward mergers and acquisitions compared to the current FCC.” 

However, this may be less obvious in practice than it is in principle.

“For example, the positions taken by both candidates on a significant cross-market merger, such as the ongoing deal between AT&T and Time Warner, suggest that candidates were both mindful of competition concerns. Trump explicitly stated that he would not approve the deal, and opposed further consolidation in the media industry, stating that he would favour a breakup of the likes of Comcast and NBC. Clinton was more cautious, but her running mate stated that it was something regulators should certainly investigate.

“Nonetheless, it remains to be seen whether such statements will end up reflecting the stance of an administration once it takes power. Also, the AT&T-Time Warner merger is likely to fall within the powers of the FCC because Time Warner holds some broadcasting licences. Given that the deal is expected to be completed during 2017, it will be the current head of the FCC to decide on the matter. The US Department of Justice is also likely to review the merger.” 

Operator upgrades

US operators are already making plans for Trump’s inauguration. Both Verizon and AT&T announced significant network upgrades in Washington DC ahead of the ceremony, which is expected to attract more than one million people to the US capital.

AT&T is boosting LTE capacity by more than 400% in DC, as part of a $15 million investment. That involves boosting 20 cell sites, and launching seven Super Cell on Wheels solutions.

Verizon, meanwhile, announced a 500% increase to its LTE capacity, and the trial of new sel-optimising antenna technology, known as Remote Electrical Tilt (RET).