Telecom Stock Roundup: FCC Receives Record-Breaking Comments On Net Neutrality

Though most of the major telecom stocks lost value over the last week, the sector witnessed a number of important events.

The U.S. telecom regulator, Federal Communications Commission (FCC), recently closed the window for comments and replies after receiving 22 million comments on Net Neutrality rules. The regulatory body will examine these suggestions before taking a final call. However, the FCC Chairman Ajit Pai is yet to announce a deadline for finalizing the rules. Notably, the FCC voted 2-1 in favor of starting the process of unwinding the Net Neutrality rules in May 2017.

U.S. telecom giant Verizon Communications Inc. (NYSE:VZ) has strengthened its targeted advertising tool, – Verizon Select, with rewards program called Verizon Up. However, the rewards will be available only after customers provide their web-browsing history, app usage and location data. Per The Wall Street Journal, Verizon will use these data to "personalize the rewards and deliver targeted advertising as its customers browse the web."

Leading cable multi service operator and media giant Comcast Corp. (NASDAQ:CMCSA) has reportedly started testing the integration of YouTube on its X1 video platform. However, the company did not reveal the number of markets and customers involved in the test. In February 2017, Comcast unveiled a deal with Alphabet Inc. (NASDAQ:GOOGL) to include YouTube in its Xfinity-branded, X1 set-top boxes. The announcement came shortly after the cable company initiated the integration of Netflix Inc. (NASDAQ:NFLX) in its X1 set-top box.

Leading wireline service provider Telephone and Data Systems Inc. (NYSE:T) has signed an agreement to acquire Mead, CO-based K2 Communications LLC., a provider of broadband, video and voice products to residential customers. However, financial terms of the agreement have been kept under wraps. The deal is subject to regulatory approval at both federal and local levels. Telephone and Data Systems carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Leading wireless chipset manufacturer, Qualcomm Inc.’s (NASDAQ:QCOM) subsidiary, Qualcomm Technologies, has unveiled a new chipset — the C-V2X (Cellular Vehicle-to-Everything).The 9150 C-V2X chipset is compatible with 4G and budding 5G cellular standards to send messages between vehicles and infrastructure.C-V2X will compliment Advanced Driver Assistance Systems sensors like cameras, radar etc. It will be available for commercial testing in late 2018.

Meanwhile, discontinuation of legacy voice services and Ethernet services has become a growing trend in the wireline segment of the telecommunication industry.Verizon is reportedly seeking permission from the FCC to discontinue its four-legacy interstate DS0 services in multiple New York wire centers. These four legacy interstate special access services include Voice Grade Service, WATS Access Line Service, Digital Data Service (DDS) and DIGIPATH Digital Service II.

Another U.S. telecom behemoth AT&T Inc. (NYSE:T) has also reportedly appealed to FCC to shut down its legacy Ethernet services - GigaMAN and DecaMAN, citing weak interest and the migration of customers to newer dedicated service lines.

Read the last Telecom Stock Roundup for Aug 31, 2017.

Recap of the Week’s Most Important Stories

1. Net neutrality implies an open-Internet atmosphere which will prohibit ISPs (Internet Service Providers), especially the telecom and cable TV operators, from discriminating against applications. In order to control the flow of bandwidth-consuming applications such as video streaming, the ISPs have been discriminating against several web-based contents and applications. In a historic decision, the FCC had approved Net Neutrality rules, on Feb 26, 2015, after a majority vote. (Read more: FCC Gets 22 Million Comments on Net Neutrality: What Next?)

2. The “Verizon Up” reward program will offer customers credits that can be used for a wide range of perks, ranging from phone upgrades to free Uber rides, concert tickets and access to movie premieres. Customers will receive a credit for every $300 spent on their monthly Verizon wireless bill. Each credit will generate one reward although there will be rewards which do not need credit. (Read more: Verizon Boosts Targeted Advertising With Rewards Program)

3. As of second-quarter 2017, about 55% of Comcast’s residential video subscriber base was on its X1 platform. Meanwhile, Comcast is also expanding footprint across Canada with its X1 services. The company recently added Videotron Ltd. to the list of those having licensed its X1 platform. Videotron will use the X1 platform to power a new IPTV (Internet Protocol TV) service. (Read more: Comcast Starts YouTube App Trial on X1 Platform)

4. The merger with K2 will add more than 1,200 service addresses to the adjacent Berthoud and Johnstown serving areas of TDS Broadband division. The company entered this area in 2013 with the purchase of Baja Broadband. K2 is Telephone and Data Systems’ fourth acquisition in 2017. Earlier this year, the company acquired Crestview Communications, Sun Prairie Utilities and InterLinx Communications. All three acquisitions have strengthened the company’s fiber-based broadband networks. (Read more: Telephone and Data Systems to Buy K2 to Strengthen Broadband)

5. Qualcomm has come up with a C-V2X reference design, which embraces the 9150 C-V2X chipset with integrated Global Navigation Satellite System facility and an application processor running the Intelligent Transportation Systems V2X stack and a Hardware Security Module. This new chipset is designed to improve road safety, and enhance autonomous driving and connected services as well as reduce traffic congestion. (Read more: Qualcomm Unveils Cellular Vehicle-to-Everything Chip)

Price Performance

The following table shows the price movement of major telecom players in both the last week and last six months.

In the last five trading sessions, share price movement of major telecom stocks was negative. AT&T (3.49%) and Verizon (3.30%) declined significantly while Charter Communications (NASDAQ:CHTR) (4.03%% witnessed a remarkable gain. Meanwhile, price performances of most of the major telecom stocks were mixed in the last six months. Among the stocks that gained substantially are America Movil (38.39%), Charter Communications (24.42%) and Comcast (10.02%) while AT&T (12.68%) and DISH Network (NASDAQ:DISH) (10.00%) lost significantly in the same time frame.

What’s Next in the Telecom Space?

Premier wireless industry event - Mobile World Congress Americas - will debut Sep 12-14, 2017 in San Francisco at the Moscone Center. In addition to a general introduction, the convention will focus on the Internet of Things (IoT), the state of wireless hardware and how policy will shape the next generation of the wireless industry. The event will be the biggest wireless-industry trade show in the United States.

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