The markets took a beating yesterday; a one percent correction that even saw broadband stocks like Comcast (-1.09%), T-Mobile (-1.01%), and Sprint (-1.74%) take a hit. Ironically, while Verizon and AT&T were down also, (-.42% and -.75%, respectively), their decreases were smaller. I guess at first blush due to their market dominance as wireless carriers and, when compared to T-Mobile and Sprint, also have a wire-line and data business to provide revenue.
Ironic that as these broadband stocks were taking a beating along with the rest of the market that the House Energy and Commerce Committee yesterday listened to testimony on how to get more broadband deployed in what’s left of the 21st century. GOP members were harping on the benefits that tax credits could provide to private providers of broadband infrastructure while Democrats were skeptical as to how much incentive tax credits would provide to a private player to roll out broadband infrastructure into rural areas.
Based on yesterday’s market performance and traders opining that President Trump’s increasingly doubtful ability to get corporate tax cuts through Congress in light of a pending failure to get rid of the Affordable Care Act has a negative impact on markets, it should be increasingly doubtful that looking to tax credits for broadband providers may be in doubt as well. Congress can’t even agree that broadband is as much an infrastructure play as building a highway to nowhere.
Should anyone have been surprised at the markets reaction to a fading “Trump trade?” Some members of the Republican Party have been balking at the idea of a trillion dollar infrastructure plan. They wanted to know how is going to pay for the plan. Ironically while some GOP members on the House commerce committee touted tax credits for broadband deployment, more of their members are cringing at the notion of additional tax expenditures after promising their constituents that they would be fiscally responsible.
Even if the GOP decided to risk increased stimulus spending, such a spending bill may not appear until 2018. Sounds like Speaker Paul Ryan would be willing to lose a couple seats in the 2018 midterms in exchange for the multiplier effects that may ripple through to 2020 from a 2018 spending plan.
Meanwhile Democrats aren’t too keen on public-private partnerships. Some Democrats made this clear during yesterday’s House commerce committee meeting and a larger bunch of their fellow Congressional Democrats are making the same noise about the Trump administration’s public-private proposals as well. Their fear: that the cash will go to corporations and not meet the needs of consumers.
Regarding infrastructure, what government action would be best? I think when it comes to broadband, the best infrastructure play would be to allow broadband providers to identify the markets they can serve best. This benefits the consumer by ensuring she receives well thought out, reliable service. A hands-off, purely private play also benefits investors because broadband providers will be mindful of best management practices when it comes to investing firm capital.
I can’t tell you where markets will go from here, but I expect that when it comes to infrastructure, firms that do not provide public goods, like broadband, will recover faster than other infrastructure-providing firms. Broadband providers don’t need tax payer approval to provide the “tolls” on their networks necessary for generating revenues.