Monday, November 10, 2014

President Obama's Net Neutrality Plan Crushes Cable Stocks

Shares of the largest pay-TV distributors, including pending merger partners Comcast and Time Warner Cable, spiraled downward Monday on news of the President’s plan.



Kevin Lamarque / Reuters



Rick Wilking / Reuters / Reuters


The biggest cable companies in the country did not have a good day Monday, as investors sent their shares plunging on news of President Obama's plan to give more oversight to regulatory agencies to enforce a "free and open internet."


Shares of Comcast, Time Warner Cable, Charter Communications, and Cablevision, which together rank as four of the top five largest cable providers in the country, all fell Monday. These companies also double as the nation's largest providers of broadband access, of course, and President Obama's proposal to reclassify the internet as a utility has huge ramifications for their businesses.


Comcast shares fell $2.20, or 4%, to $52.95. Shares of Time Warner Cable, which is seeking regulatory approval to merge with Comcast in a $45.2 billion deal, declined $7.10, or 4.9%, to $136.50.


Charter Communications was hit even harder, with its shares falling $9.75, or 6.2%, to $146.62. The stock of New York-centric operator Cablevision declined 32 cents, or 1.7%, to $18.60.


Shares of Verizon and AT&T, the other two big broadband providers, held up a bit better than their cable rivals. Verizon shares dropped only 14 cents, or 0.3%, to $50.72, while AT&T shares actually gained 21 cents, or 0.6%, to close trading at $35.12.


The declines came on a day when the New York Stock Exchange, Nasdaq, Dow Jones Industrial Average and S&P 500 all posted gains.


President Obama's proposal calls for allowing the Federal Communications Commission more authority to enforce regulations to keep the internet free and open, known in industry parlance as "net neutrality." It calls for preventing broadband providers like Comcast from charging websites a premium to deliver content faster or slowing down delivery — known as throttling — to squash demand.


"I believe the FCC should create a new set of rules protecting net neutrality and ensuring that neither the cable company nor the phone company will be able to act as a gatekeeper, restricting what you can do or see online. The rules I am asking for are simple, common-sense steps that reflect the Internet you and I use every day, and that some ISPs already observe," President Obama said in his proposal.


President Obama's proposal is just that, however, and ultimately the FCC, an independent agency, will vote on whether to adopt his measures or not.


Still, the issue is exceedingly important for cable companies since most of their growth resides in broadband adoption. Last year, for the first time ever, broadband subscribers outnumbered video subscribers at cable companies — Comcast recently disclosed that it will soon have more broadband subscribers than video subscribers, for instance.




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