Analyst says, Comcast-Time Warner Cable Merger Now Seems Less Likely

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Big cable just got knocked down a peg. Citing uncertainty over net neutrality regulation and an increasingly unpopular merger proposal between Comcast Corporation and Time Warner Cable Inc., a top-ranked telecommunications analyst Tuesday downgraded stocks for major cable companies from “buy” to “neutral.”

The reduced rating comes two weeks after Chairman Tom Wheeler of the U.S. Federal Communications Commission publicly threw his weight behind a plan to reclassify high-speed Internet as a public utility under Title II of the Communications Act, thereby subjecting Internet service providers to tougher regulations.

Even as the debate over net neutrality has accelerated over the last few weeks, cable stocks have proved surprisingly resilient. In part, that’s because the market may believe a Republican Congress — or a future FCC headed by a Republican appointee — will roll back Title II reclassification, Moffett said in an investor note. And even if Title II were to become a reality, the prevailing wisdom is that the FCC will provide exemptions to prohibit rate regulation, a process known as “forbearance.”

Moffett is not so sure. “At its core, Title II is about price regulation,” he wrote. “It would be naïve to believe that the imposition of a regime that is fundamentally about price regulation, in an industry that the FCC has now repeatedly declared to be non-competitive, wouldn’t introduce risk to future pricing power.”

 

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Source: International Business Times | Christopher Zara

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