The Federal Communications Commission says it plans to vote to roll back net neutrality regulations that were implemented during the Obama administration. Telecom and media investors will be watching the vote closely, but a net neutrality rollback may not have much of an impact on large internet companies like Netflix, Inc. (Nasdaq: NFLX).
The net neutrality rules were implemented to prevent ISPs from blocking customer access to certain websites or manipulating website and streaming service speeds. Repealing net neutrality regulations would put more power in the hands of ISPs such as Comcast Corp. (CMCSA), Verizon Communications (VZ) and AT&T (T).
Without net neutrality rules, ISPs are free to charge companies like Netflix higher fees for faster service speeds. ISPs could also provide even faster speeds for their own services. AT&T, for example, has its own Netflix streaming competitor, DirecTV Now. Dish Network Corp. (DISH), Sony Corp. (SNE) and other companies with their own streaming services may have a tough time convincing ISPs to provide their competing services with top-tier speeds.
But while Netflix and others could be destined to pay higher fees, the real losers could be smaller internet companies that can’t afford to pay for faster speeds.
Earlier this year, Netflix CEO Reed Hastings said net neutrality isn’t particularly important for companies the size of Netflix.
“It’s not narrowly important to us because we’re big enough to get the deals we want,” Hastings said. Instead, Hastings said net neutrality would have been a critical issue for Netflix 10 years ago.
Height Securities analyst Nils Tracy says large internet companies like Netflix, Facebook(FB) and Alphabet (GOOG, GOOGL), all of which have campaigned in favor of net neutrality, should be mostly immune to its repeal at this point.
“[Over-the-top] providers with large capitalizations … should be able to fend off predatory paid prioritization by ISPs through the strength of their content and the economic clout of their subscriber numbers,” Tracy said earlier this year. “On the other hand, new market entrants and smaller OTT providers will be at risk of increasing overhead due to the possibility of ISPs requiring paid prioritization.”
The decision to rollback net neutrality rules is likely already priced…
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