Net Neutrality Ruling a Potential Nightmare for NFLX, Consumers

FCC loses net neutrality ruling, opening up prospect of tiered Internet service

    View All  
Net Neutrality Ruling a Potential Nightmare for NFLX, Consumers

Winners and Losers if Net Neutrality Ruling Sticks

The big winners will be the Internet service providers who will be free to experiment with different pricing and content delivery schemes. The cost of network expansion could be more easily pushed to customers and the Internet services that are driving the bandwidth requirements. Expect to see more products like AT&T’s Sponsored Data plan that allows content providers to pay for customers’ data usage (encouraging use of their product) — but in the home, as well as mobile.

On the surface, the ruling looks like a bad thing for any company or service that relies on the cheap, fast Internet connections. Netflix, YouTube, Facebook, Amazon (AMZN), Apple and Microsoft (not just for Xbox Live, but also for Skype) come to mind as immediate losers in this scenario.

But there’s a catch. These established player all have relatively deep pockets. They could likely afford to eat some additional cost to keep their service at current levels. It may or may not cost their customers more (depending on how much of that cost they choose to pass on), but they could leverage their financial strength to keep smaller competitors and startups from gaining traction.

In other words, if Google paid ISPs to make YouTube a high-speed, no-data-charge service, how would a potential future alternative hope to compete if U.S. viewers faced slower speeds, choppy video and the possibility of having to pay for the bandwidth consumed?

So the biggest losers out of all of this look to be consumers. Yes, there are possible carrots — again, the AT&T Sponsored Data plan. But overall, if the net neutrality ruling sticks, consumers are likely to be paying more for Internet access, one way or another. Or, their Internet experience will be degraded compared to what they have today. The potential for stifling of innovation and competition to existing services would also be a blow to consumers.

As the Wall Street Journal points out, net neutrality has a champion in the Obama administration, and the FCC might yet appeal the ruling. In the meantime, ISPs are scrambling to reassure customers they won’t take it on the chin — at least for now.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/01/net-neutrality-nflx/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.