While many of the new president’s government appointments have been garnering considerable attention — one of the more influential for a large swath of the U.S. economy and stock markets is barely registering with the media.
And the irony is that the media itself is directly impacted by the newer Chairman of the U.S. Federal Communications Commission — Ajit Pai.
Ajit Pai is a very sharp and focused fellow. Armed with an undergraduate degree from Harvard and a Juris Doctor from the University of Chicago – his career has been well crafted. Starting in the Federal Court system and the Justice Department for anti-trust enforcement Ajit got to know first-hand how to work with or against government when it comes to business and the stock market.
And specifically, Ajit worked on telecom companies as it related to proposed mergers and acquisitions.
This was a great training as got the attention of Verizon Communications Inc. (NYSE:VZ), which swiftly hired him as he helped the company deal with a host of projects to advance its footprint around the US as it keeps trying to bolster its stock value.
Then back to government – this time with the FCC. And now Ajit is the new Chairman of the FCC. The Commission is made up of five commissioners appointed by the President. Currently there are two vacancies – but with Ajit in charge there are three commissioners that can vote and pass rules, regulations and a multitude of approvals for communications and media from broadcast to broadband and beyond impacting many companies in the stock market.
Ajit is very important for his recent colorful statement: “We need to fire up the weed whacker and remove those rules that are holding back investment, innovation and job creation.”
Specifically, he is laser-focused on rolling back the so-called net neutrality rules that bar telecom and internet companies from favoring content providers. And specifically, he wants to avoid tasking internet service providers from being known as “common carriers” like land line phone companies. He argues that if telecom companies can’t cut deals with content and other users of communications networks that the incentive to invest will be lacking.
The FCC had continued to defend the net neutrality under the departed last chair Tom Wheeler. But that’s set to change.
And facilitating the move will be the two current FCC members service under Ajit. Mignon Clyburn has made some passive mention of some of the benefits of neutrality as it was the stated policy of the last president. But many in the industry see her as willing to cut deals with the telecom industry.
And Michael O’Rielly is very opposed to net neutrality and any mention of common carrier designation.
And given the direction of Ajit — the other two vacant seats should be safe with expected favorable appointees.
The pending winners of the change-up in FCC leadership should be the leaders in wireless and wired internet service.
AT&T Inc. (NYSE:T) armed with its Directv unit is already giving preference to its own content flowing through its wireless networks — the new FCC will only encourage the company not only to ramp up its own content — but to reach out to other content companies as it seeks to improve its stock price.
Verizon and its stockholders are sitting awfully pretty with Ajit. The company is trying to buy Charter Communications Inc. (NASDAQ:CHTR) and its Time Warner Cable assets. Verizon would expand its network reach with the deal – and it would set it up to perhaps best roll out the next generation of wireless data called 5G which ideally requires a strong wired network that Charter’s network would provide.
T-Mobile US Inc. (NASDAQ:TMUS) is always looking for a deal. And with the FCC – Dish Network Corporation (NASDAQ:DISH) is being rumored to be the right dealmaker that would nicely fit together much like the AT&T-Directv deal.
Another dealmaker – Sprint Corporation (NYSE:S) just off of its coop with the music content streaming company Tidal Streaming (private) is like T-Mobile — looking to become a bigger player or as part of a larger merger. It’s mega investor — Softbank Corporation (OTCMKTS:SFTBY) of Japan could further step up to arm Sprint to capitalize on the pending FCC deregulations which could drive its stock higher.
And Comcast Corporation (NASDAQ:CMCSA) is salivating over getting out from under the cloud of net neutrality.
The losers potentially might end up being the users of a neutral wired and wireless internet. Alphabet Inc (NASDAQ:GOOGL) — from its search to its YouTube assets live and breathe on an open internet.
Amazon.com, Inc. (NASDAQ:AMZN) is another that can’t breathe without internet access for its streaming and retail as well as its cloud services.
And streaming content providers such as Netflix, Inc. (NASDAQ:NFLX) and Scripps Neworks Interactive Inc. (NYSE:SNI) will be worried about how much that they might need to pay internet service companies to avoid being slowed to a crawl on internet access.
Bottom line, the FCC is set to give more power to networks and less to the content companies which if completed will drive service providers’ stocks higher while content companies’ stocks lower.
As of this writing, Neil George did not hold a position in any of the aforementioned securities.
