FCC’s Net Neutrality Ruling Is Immaterial to ISP Stocks

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The Federal Communication Commission’s net neutrality ruling is a really big deal, but as profound as the new regulations are, nothing is going to change from an investor’s perspective.

Business ManThat’s just as well, though.

The FCC’s new regulations require that all internet services providers treat all data equally. They can’t charge a provider of streaming videos higher rates for faster download speeds, for example.

Not only does that level the playing field — richer web businesses would otherwise be able to offer faster service than, say, startups — but it’s also good news for consumers.

After all, if a website you subscribe to has to pay your ISP a fee to ensure a smooth experience, you can bet that extra cost is going to be added to the price of a subscription.

Let’s be clear about the consequences: By affirming net neutrality, the FCC prevented the possibility of an ugly internet future; it didn’t rectify a wrong. The net neutrality ruling doesn’t really change the status quo.

With the exception of Netflix, Inc. (NASDAQ:NFLX), a notorious bandwidth hog, ISPs for the most part weren’t throttling traffic anyway. Wisely, they didn’t want to alienate anyone, especially when the net neutrality debate was in full swing.

Yes, the ruling creates winners and loser, but only in a strategic sense. Since the pay-for-bandwidth problem didn’t really exist yet, we’re not going to see any effect on content providers’ bottom lines.

That said, here’s a look at some of the biggest winners and losers from the FCC’s ruling on net neutrality:

Net Neutrality Winners: Any company that serves streaming media

Most of the biggest names in consumer tech are breathing a sigh of relief over the net neutrality ruling. Apple Inc (NASDAQ:AAPL), Google Inc (NASDAQ:GOOGL), Amazon.com (NASDAQ:AMZN) and Netflix in particular are among the biggest winners. After all, they’re all in the business of delivering TV shows and movies over the internet, and those files tend to be enormous. That puts them in the no-win position of either eating the extra cost for faster service or passing it on to customers.

Consumers

Anyone who uses broadband is the really big winner from net neutrality. Ordinarily, you would expect the market to create an equilibrium between service and price, but that can’t happen in this case. That’s because, like electricity or gas, most people don’t have much of a choice when it comes to broadband.

ISPs already charge customers higher rates for faster broadband. That speedy service wouldn’t do much good if the ISP is throttling some of the most popular websites. Consumers most likely would have been hit with higher subscription fees from streaming services, too.

Startups

No one knows where the next Facebook Inc (NASDAQ:FB), Netflix or Google is going to come from, but one thing that’s for sure is that it would be a lot harder to compete if startups were stuck with slow service.

Rich, established companies would have no problem paying ISP’s to be on the fast lane of the internet, but lots of small startups can’t. It’s hard to see how a new service could survive, much less thrive, if surfers became frustrated with how slow it loads and streams.

Net Neutrality Losers: Any company that delivers broadband service

It used to be that cable companies delivered cable TV and telecommunications companies offered phone service. Today, however, they’re highly dependent on delivering high-speed internet connections as internet service providers.

It would be nice for shareholders if Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), Verizon (NYSE:VZ), AT&T (NYSE:T) and the rest could charge higher prices for heavy broadband users. Hey, moving all that data quickly ain’t free.

Net neutrality means that means cable companies and telecoms have to eat the costs associated with the exponential growth of data — especially mobile data. Their networks have to get bigger and faster to meet increasing demand, and some of that cost always gets passed on to consumers. But at least consumers won’t have to pay again when they subscribe to content providers.

Since ISPs were abiding by net neutrality already, nothing really changes in the financial statements of cable companies, telcos or content companies. Heck, in many cases, shares in cable and telecoms actually traded higher despite the bad news.

That suggests the market wasn’t counting on incremental revenue generation if the net neutrality ruling went the other way. Most content companies enjoyed an up day in the market after the ruling was made public, but we’re talking about moves of less than 1%.

If the market was truly worried, it would have told us through stock prices. The loss of net neutrality would have meant something to all these players operations at some point. Thankfully, investors don’t have to find out.

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

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Article printed from InvestorPlace Media, https://investorplace.com/2015/02/fcc-net-neutrality-cable-telecom-stocks/.

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