Why Net Neutrality Is Good for Comcast
So what if Thursday’s net neutrality vote by the FCC isn’t that big a deal for Comcast?
But could the conventional wisdom be wrong?
Despite the outcry, however, nothing about the way companies like Comcast and Verizon currently do business will change, at least in the near term. No ISP actually offers a “fast lane” for premium content, nor do they block or slow down certain websites. Financially, the specter of regulation hasn’t had much of an impact, either. A group of telecommunications CEOs sent the FCC a letter in May warning that governmental overreach could have an “investment-chilling effect.” But as Tim Wu pointed out in the New Yorker Thursday, stocks for broadband providers actually jumped after Mr. Wheeler first announced net neutrality rules on Feb. 4, and they’ve stayed high.
This is all par for the course when it comes to regulating communication, says Chip Pickering, CEO of COMPTEL, a lobbying group for Internet content providers, in a phone interview. He argues that the biggest telephone and cable companies have always opposed regulations that would create a more competitive field, from the breakup of AT&T in the 1980s to the overhaul of the Telecommunication Act in 1996. “Incumbent [companies] always oppose it,” he says, “but in every case their values increased and their services got better.” In five years, he argues, companies like Comcast and Verizon will have benefited as much as start-ups.
Yet the moment that Tom Wheeler announced his plans for strong net-neutrality rules, on February 4th, broadband stocks jumped, and they have stayed buoyant. This has confused experts. Craig Moffett, whom I consider to be the smartest telecom analyst around, was forced to blame the market. “I think it just shows you that the market doesn’t really understand these issues,” he said.
The theory of the wisdom of crowds suggests that the markets have noticed something: the broadband industry hates net neutrality, but its existence has always had a huge and unnoticed upside. Selling broadband is a great business: Moffet has pointed out that the margins are north of ninety-seven per cent. Stated simply, a strong net-neutrality rule locks in the status quo for the most profitable part of the cable industry’s business.
“If your fear of a larger, bigger, badder Comcast is that we can’t regulate them, now we have regulation. So there’s no legal reason to withhold the merger,” the equity analyst at Hudson Square Research said in a “Squawk Box” interview.
This will take a while to shake out. But Comcast was already pretty successful. There’s no reason the company can’t still be successful going forward.
Follow @JoelMMathis on Twitter.