|[January 15, 2014]
Fitch: Overturned Net Neutrality L/T Positive for Cable/Telecom
NEW YORK --(Business Wire)--
Tuesday's U.S. Court of Appeals decision on net neutrality, if it is not
appealed to the United States Supreme Court by the FCC (News - Alert), is a long-term
positive for cable and telecom providers that removes regulatory
restrictions on potential data services business models, according to
On Jan. 14, the U.S. Court of Appeals for the District Court of Columbia
Circuit vacated the anti-blocking and anti-discrimination portions of
The Federal Communications Commission (FCC) Open Internet (net
neutrality) Order, which had been issued in 2010. The order had
compelled broadband services providers, such as cable and telecom
operators, to treat all Internet traffic equally regardless of source.
The order had been appealed by Verizon (News - Alert) Communications Inc. (Verizon).
The Court did uphold the FCC's authority to regulate the broadband
providers' network management practices.
Operators now have greater freedom to experiment with new business
models, charging edge providers of content (such as Netflix) fees for
faster data services. The overturned net neutrality rules were
forwarding looking, essentially designed to prevent the carriers from
instituting practices considered restrictive by edge providers, rather
than curtailing existing products and services. Therefore, Fitch
believes the ruling's near-term impact on companies' operating profits
and cash flows will be minimal.
Fitch believes benefits are likely in the long term, as the removal of
the restrictions could pave the way for innovative products and services
while supporting continued broadband network investment. Potential
revenues from suppliers of bandwidth-intensive services, sch as video,
would provide such support, and share some of the costs for broadband
services currently falling on consumers and other end users. Many cable
and telecom companies will benefit, although Fitch notes that Comcast (News - Alert),
as part of the approval process to acquire NBCUniversal, agreed to
adhere to the rules through January 2018.
The FCC has not yet decided if it will appeal the court decision. If it
does not, the regulator will still likely have a role, along with
antitrust authorities and consumer protection agencies, in corralling
anti-competitive behavior or abuses. Alternatively, the FCC could decide
to reclassify broadband services as telecommunications services subject
to common carrier regulation under Title II of the Communications Act,
as amended. Prior decisions by the FCC had classified broadband services
as information services under Title I of the act.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit
market commentary page. The original article, which may include
hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com.
All opinions expressed are those of Fitch Ratings.
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