What Policies Matter to Telco’s Success: Supply Side or Demand Side? Or Something Else?

[A New Street Research note reprinted here with permission of the author.]

AT&T CEO John Stankey recently said, “I’ve never seen federal policy this supportive of market-based investment in advanced networks.” That statement raises multiple interesting investor related questions about what does, and does not, support investment in advanced networks, including the relative importance of those policies that drive supply and those that drive demand, and how government is treating advanced networks versus networks that have lower cost structures but also involve lower performance metrics. In this note I provide some history and raise those questions so that investors can evaluate the broad spectrum of policies that help predict and determine the financial performance of AT&T and others in the sector in the years to come.

This admittedly long note[1] seeks to assist investors as described above, by examining four subjects:

• The history of the relationship between government policy and deployment, which, while complicated, demonstrates that companies invest most in deploying advanced networks when there is a threat to existing services or an opportunity for to drive revenues due to new services but that policies often debated in the context of investment may have no impact at all;

• The supply side policies, particularly taxes, permitting, and copper retirement can affect deployment, but so can other policies such as immigration which can negatively affect the already problematic workforce shortage in construction;
• The demand side policies, often overlooked in communications policy debates, can affect the economic return on investment by decreasing population growth or undercutting the social safety net reducing the ability to pay for large market segments; and

• The policy advocacy environment, in which the consensus view among business leaders is that the most effective lobbying strategy is one that is loud in praise of favored policies, silent where the policies are problematic and, above all, to stay out of the range of fire, causing executive comments to reflect that tactical calculus, not truth.

History

The relationship between government policy and deployment is complicated.[2] In this short history, I review examples of policies that did, and did not, affect deployment to provide a backdrop for understanding how policies might shape investment decisions going forward.

The 1992 Cable Act Program Access Rules. The purpose of the Cable Act was to address a popular uprising against rising cable prices. But it had the unintended consequence of driving broadband deployment.

• The Act included the Program Access Rules, which required cable channels owned in part by cable networks to be sold on non-discriminatory terms to cable network competitors, particularly Direct Broadcast Satellite (DBS) providers.
• That struck fear into the hearts of the cable industry as DBS had a lower cost structure and a more favorable regulatory environment. That would likely result in DBS taking significant market share in the linear television programming delivery market.
• Cable responded by accelerating its efforts to create a new revenue stream through providing internet access, done through the joint ventures of @Home[3] and RoadRunner.
• This in turn forced the telephone companies to replace their dominant dial-up service with digital subscriber lines (DSL). While the telephone companies had developed the DSL technology in the 1980s and it provided superior bandwidth speeds, the phone companies preferred offering the dial-up service as dial-up provided a superior economic return due to customers buying additional phone lines to have both voice and internet access services at the same time.

The Telecommunications Reform Act. The fundamental idea of the 1996 Telecommunications Act was to enable competition between all communications networks.

• This, in combination with the rise of internet applications, led to a huge increase in deployment.
• From 1996 to 2000, annual investment in telecommunications networks in the US grew from $55 billion to $118 billion.[4]
• Then the CLEC[5] and fiber market crashed and by 2003 the capital investment went back to $57 billion.
• While the CLECs never recovered, the fiber was eventually bought and served as the backbone for the internet giants of today.
• The number has never been as high as in the wake of the Act but in the first Trump Administration it averaged in the high approximately $80 billion, while in the Biden era it averaged approximately $93 billion.

The National Broadband Plan and Google Fiber.

• In 2009, when the National Broadband Plan (NBP) team began its work, it noted that the average download speed was approximately 4Mbps.[6]
• Further, Wall Street did not like the Verizon plan, launched in 2005, to deploy fiber-to-the-home (called FIOS) and telco fiber deployment efforts had largely ended.
• At that point cable had the superior broadband product, and market share, in most markets.[7]
• The NBP team saw the situation as resembling a prisoners dilemma; that is, if both cable and the telcos trusted each other not to invest in faster networks, they would both be better off, with cable capturing the premium segment and the telco DSL product capturing the value segment, and both reducing the need for cap ex, thereby increasing free cash flow.
• The NBP team saw a danger for the US as other advanced countries were broadly deploying gigabit capable fiber-to-the-home.
• Discussions on that topic led to Google deciding to create Google Fiber, which served, in the parlance of game theory, as a defector, forcing the telcos to either deploy fiber or for their wireline service to become obsolete.
• This led to an increase in fiber deployments by all the telcos.
• This has also led to the providers moving from a model, pre-Google Fiber, in which scarcity drove earnings, to one in which abundance is a principal selling point to the consumer and the most profitable model for the enterprise.[8]

Net Neutrality. The policy that was often cited as the biggest deterrent to advanced network deployment was the debate over “network neutrality,” the idea that networks should carry all traffic on a non-discriminatory basis with no blocking, no throttling, or unreasonable paid prioritization.

• In my work advising Wall Street from 2012 to today, I saw little, if any, market impact of the adoption, then rejection, then adoption, then rejection of net neutrality rules by successive FCC’s led by Democrats and Republicans.[9]
• I agreed with the then Verizon CFO who told an investor conference in 2014, at a time when the FCC was debating applying Title II to internet service providers to be able to mandate net neutrality rules, that, as the New York Times reported “the company’s plans for future investment in its networks would not be affected even if the FCC decides to begin regulating Internet access as a utility.”
• The CFO further said “I mean to be real clear, I mean this does not influence the way we invest…I mean we’re going to continue to invest in our networks and our platforms, both in wireless and wireline FiOS and where we need to. So, nothing will influence that.”
• As an indicator of the lack of importance of the issue to the investment community, in 2023, when the FCC was again getting ready to adopt such rules, Title II and Net Neutrality were not mentioned by a single ISP on any 2023 investor calls or at other investor conference appearances following these calls. As far as I  can tell, no analyst asked any question about or related to the upcoming FCC proceeding.
• Correlation does not imply causation but the fact that the Biden era (which adopted Net Neutrality rules) featured capital investments averaging more than 10% higher than the first Trump Administration (which eliminated them) suggests to us that the rule did not drive investment in one direction or another.
• Similarly, California has a net neutrality law, yet I have not seen a differential in network investment strategy in that state than in states that do not have such a law.

Summary of Key Lessons from Previous History. I think the key lessons from that history are:

• Companies invest in deploying advanced networks when there is a threat to existing services (as demonstrated with the cable response to DBS and the telco response to Cable DOCSIS and Google Fiber) or an opportunity to drive revenues due to new services (such as Cable's DOCSIS investment and the investment boon following the 1996 Act and the rise of the internet.)[10]
• The policy that was most discussed in DC in terms of its impact on investment—net neutrality—had little impact in terms of capital investments.

Trump Administration Policies Affecting the Supply Side

There have been several policies during Trump 2.0 that arguably affect the supply side of investments in advanced networks.[11] These include:

Investment Tax Credits.

• The biggest impact is the investment tax provision of the One Big Beautiful Bill (OBBB).
• The OBBB introduces significant changes to 100% bonus depreciation, making it permanent for most property acquired after January 19, 2025.
• The 100% bonus depreciation gave telecom companies an incentive to accelerate capital investment in fiber networks as such investment will reduce taxable income.
• I think Stankey’s primary point relates to the tax provisions[12] which no doubt will drive an increase in fiber deployments.[13]

Copper Retirement.

• The Carr FCC has created a more favorable regulatory environment for copper retirement. (LINK)
• As I have discussed elsewhere, the environment could provide an incentive for fiber deployment in some markets as companies buying telcos in less densely populated markets now have the confidence that they will be allowed to make decisions about whether to replace the copper with fiber or fixed wireless on the basis of the likely economic return on investment rather than a regulatory preference. (LINK)
• That in turn could accelerate new deployments.
• But in terms of what kinds of networks are deployed, the companies are now more likely to deploy fixed wireless in more markets and fiber in fewer markets than they would have under the prior copper retirement regime.[14]

Permitting Reform. The FCC and the Administration are undertaking several steps that they argue will speed deployment by reducing the time and cost of permitting.

• In April, President Trump issued an Executive Order (EO) designed to accelerate permitting, primarily by limiting environmental reviews and increasing the use of technology. The EO mentioned several specific kinds of projects eligible for the accelerated permitting but, curiously, broadband was not among them.[15] (LINK)
• The FCC has started the process of crafting rules that the Chairman believes will lower the cost and accelerate the timetable for deploying wired and wireless networks.
• The FCC is likely to adopt new rules though I expect the rules to be challenged in court by numerous parties, including state and local governments.
• Further, the item notes that “we continue to be advised that deployment projects are getting stuck in red tape on the state and local level.”[16] I am sure there are problems but the description suggests to us that there is a capacity problem at the state and local level which AI and other software might prove a more effective solution than continuing litigation with state and local governments.
• But again, Stankey would be correct in pointing to the FCC’s efforts in trying to accelerate deployment, even if they have not yet borne fruit.

Loss of Employees for Network Deployment

• A key bottleneck for fiber deployment is a capable workforce. As the Wall Street Journal reported recently, “the rush to build (broadband networks) is hitting a human bottleneck, particularly among workers who can piece together the fiber networks at the heart of the technology. Some jobs take months of training or an artist’s attention to detail; others require the physical strength and stamina to climb telephone poles in summer heat. Crews can’t hire fast enough, and when they do, workers often are poached by competitors dangling higher wages.”
• Further, a Pew analysis of Broadband Equity Access and Deployment (BEAD) Program plans found workforce shortages cited by 41 states and D.C. as a major risk to broadband deployment.
• A 2024 study commissioned by the Fiber Broadband Association (FBA) warned of an expected shortage of 28,000 workers on the construction side and 30,000 on the technician side between now and 2030. 
• The Administration’s immigration policies likely have increased those shortages.
• Immigrants are about 27% of the U.S. construction workforce, and as high as 37–49% in states/metros like New York and New Jersey.
• Training a fusion splicer or lineman takes months to years, and rural projects cannot easily import labor because telecom workers are geographically immobile.
• Further, intensified ICE worksite enforcement—inspections, audits, and raids—adds operational risk for construction and infrastructure firms.
• That FBA study, in anticipation of BEAD funding flowing to the states, also concluded that “Bottlenecks associated with the unprecedented injection of federal and state money into the broadband market will choke and slow the process in unplanned and unanticipated ways.”

Support for lower performance networks.

• While Stankey focused his remarks on “advanced networks” it is also true that the Trump FCC and Department of Commerce have helped on the supply side for networks that provide an inferior performance but nonetheless have cost structures that make them viable in certain markets.
• By that, I mean spectrum-based networks, including mobile, fixed wireless, and satellite. I don’t know if Stankey meant those networks as well, as each has been advancing in their performance, though all are significantly behind fiber in terms of what they can deliver.
• Still, the Trump Administration has taken various actions to improve the investment environment for those services.
• As I have discussed in numerous notes, the Department of Commerce changed the BEAD rules in multiple ways that helped satellite broadband providers, particularly Starlink.
• The FCC assisted SpaceX in gaining access to spectrum that it had petitioned the FCC take away from EchoStar.
• The FCC ruled in favor of SpaceX related to an interference issue that allowed SpaceX to increase its level of interference with others. That improves SpaceX’s prospects for various competitive services. The FCC did so in a way that was unusual in placing the burden on the party being interfered with to prove harmful interference rather than the interfering party proving lack of interference.[17] (LINK)
• The FCC assisted AT&T in gaining access to spectrum from EchoStar that AT&T has said will assist its efforts to offer fixed wireless services.[18]
• The widespread presence of satellite and fixed wireless broadband services in less densely populated areas provides an economic disincentive to deploy fiber in those markets.

Trump Administration Policies Affecting the Demand Side

I think that readers well understand that the market for premium broadband services, however one wants to define them, is well saturated. That is, in households with what I would think of as the top 20%, nearly all have access to and can afford advanced networks. So, from an investor perspective, it is important to understand how polices will affect the demand side, but the relevant demand side is about lower income households, not higher income households. These policies include:

Impact of the K Economy. One of the most prominent metaphors for the current economy is that it is a K economy in which the wealthy segments are improving their position while the economics for lower income segments are worsening.

• As a US Bank report indicated, income inequality now stands at a 60-year peak.
• The report also found that the number of Americans considered to be middle class shrank from 61% in 1971 to 51% in 2023, with the share of both lower-income and higher-income Americans growing larger.
• In terms of consumer spending, Moody’s found that total relative “outlays” — a broad measure of spending and nonmortgage payments — by U.S. consumers in the top 20% hit multidecade highs last year while the other 80% tumbled to new lows.
• A similar set of data shows that the top 10% of US earners now reflect a record 49% of all consumer spending. This percentage has risen by +13 points over the last 30 years, marking a dramatic shift in spending power. At the same time, the bottom 80% of earners represent just ~37% of total consumer expenditures, down 11 percentage points since 1995.
• The January 2026 University of Michigan's Index of Consumer Sentiment found record-low confidence among those lacking a college degree while the Conference Board in January found that consumer confidence “fell by 9.5 points to 65.1, well below the threshold of 80 that usually signals a recession ahead” and reached a low last seen in 2014.
• The impact of those economic trends for AT&T’s broadband services is likely to be negative.
• It will lead to some who today are buying higher priced services to switch to lower priced services, some buying lower priced services to cut their fixed services and rely solely on mobile, and others to fall behind on payments.
• To be clear, some of those trends predate the Trump Administration. But I think it is fair to say the Administration policies have not slowed the trends and have likely accelerated them.[19]

Loss of social services for lower-income households.

• As discussed above, the OBBB improved the cost structure for companies like AT&T investing in deploying networks.
• But it also reduced the social safety network for low-income households.
• For example, Federal spending for the Supplemental Nutritional Assistance Program (SNAP) is slated to fall by $287 billion over the next ten years.
• Additionally, reductions in subsidies for health insurance under the Affordable Care Act and changes to student loan programs will also mean low-income households will spend more on essentials such as food, heating, healthcare, and education.
• The Congressional Budget Office (CBO) estimates[20] that households in the lowest 10 percent of the income distribution will experience a decrease in household resources of $1,600 per year (or 3.9%), and the next lowest decile will experience a reduction of about half that. This would suggest that the lowest 20 percent of U.S. households will lose $1,200. This is an average annual effect for the years 2026 through 2034.
• Broadband adoption expert John Horrigan analyzed those impacts and concluded that 5.6 million households would lose broadband service.[21]
• Importantly, he also noted that the “entirety of OBBB’s negative impacts for low-income households will not be felt next year, but over a number of years, as the CBO and Yale models make clear. This means that subscription losses of 5.6 million are not likely to show up in a single national survey measuring broadband adoption.”

Loss of population growth due to immigration policies.

• Immigration is not only a key source of labor. It is also a source of increased market demand.
• As our New Street colleagues discussed back in 2025, “immigration was driving almost all of the population growth in the U.S., and that immigration has been running at like 3 times the normal rate.”
• As they also noted, “as immigration slows, broadband market growth will slow also” and “deportations may have a small impact, but lower immigration could have a much larger impact.”
• Their report suggested that due to where immigrants tend to congregate, “Comcast and Charter are most exposed, followed by AT&T.”
• The immigration impact on population growth in the U.S. is now at zero.
• In combination with other inputs, as Bloomberg reports, the U.S. “is flirting with its first ever population decline.”

No policy for affordability for low-income households.

• In the spring of 2024, New Street estimated that AT&T had 1.2 million customers who paid for their service with the Affordability Connectivity Plan (ACP).
• The ACP has now expired.
• AT&T is offering low-income customers a variety of plans to keep them connected, saying that the commitment is worth $3 billion.[22]
• I don’t know how to calculate the precise cost to AT&T of ACP’s expiration. My point, however, is that if AT&T is allocating $3 billion to assist low-income customers, it is an indicator that would have been better for AT&T if the ACP program were continued.
• There are no signs that the Trump Administration is interested in reviving the ACP.

What is better for business: a government that responds to flattery or one that responds to facts?[23]

• Positive reinforcement is always a common and appropriate lobbying strategy.
• In that regard, Stankey’s comments are not surprising.
• Just as common, and appropriate, is criticism of government policies that are problematic for a company.
• In that regard, Stankey’s silence on various issues, such as immigration, which hurts his company in multiple ways, might seem surprising, but it is common among business leaders in this era.[24]
• Indeed, as I wrote before the 2024 election, I anticipated that robust policy debates and free markets would be undercut by the “market for Trump’s affections.”
• And I can understand in the short term, given AT&T’s business interests in such things as FirstNet, its recent expanded deal with the Department of Homeland Security, its recent no-bid contract with ICE for “data analytics and support services,” and other federal contracts, AT&T’s leadership might believe articulating praise is a lower cost and lower risk strategy than the alternative.
• I will let history determine whether that proves, in the long run, to be a wise business strategy.[25]
• Our point for investors is that they should not confuse Stankey’s comments as reflecting a comprehensive analysis of the full spectrum of government policy affecting the total impact on AT&T’s network deployments or the economic prospects for his company. 
• Rather, it reflects the common view of business that these days, the most effective lobbying strategy is one that is loud in praise of President Trump, silent where the policies are problematic, and, above all, to stay out of the range of fire. That is, CEO comments should be interpreted as a function of tactics, not truth.

Bottom Line [26]

In seeking to put Stankey’s comment in context, the history of modern communications is that competitive threats and new revenue opportunities are the primary driver of investments in upgraded or new networks. Other policies, such as taxes, permitting reform, and liberalized copper retirement can incrementally support investment, but progress there can be undercut by policies that cause labor shortages, increased labor costs, and delays. Often overlooked are supply side policies that can negatively affect the economics of large market segments, causing them to search for lower quality and lower priced options. So, his comments, like those of other business leaders, should be seen as a tactic to advance an agenda rather than an effort to fully describe the impact of a policy.

Blair Levin is the Policy Advisor to New Street Research and a nonresident senior fellow at Brookings Metro. Prior to joining New Street, Blair served as Chief of Staff to FCC Chairman Reed Hundt (1993-1997), directed the writing of the United States National Broadband Plan (2009-2010), and was a policy analyst for the equity research teams at Legg Mason and Stifel Nicolaus. Levin is a graduate of Yale College and Yale Law School.

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