The Zacks Analyst Blog Highlights: Netflix, Facebook, Alphabet, Verizon Communications And Comcast

For Immediate Release

Chicago, IL – November 30, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Netflix Inc. (NASDAQ:NFLX) , Facebook Inc. (NASDAQ:FB) , Alphabet Inc. (NASDAQ:GOOGL) , Verizon Communications Inc. (NYSE:VZ) and Comcast Corp. (NASDAQ:CMCSA)

Here are highlights from Wednesday’s Analyst Blog:

Analyzing the Net Neutrality Debate from a Global Perspective

Net Neutrality, or an open-Internet atmosphere, is currently a hot subject of debate in the international telecommunications circuit. The idea that all data should be treated equally, regardless of its content, has resulted in arguments and counter arguments globally.

While one section is arguing that no one owns the Internet, or in other words, everyone owns it and therefore, no discrimination related to data traffic can be allowed, the other group is of the opinion that the move is draconian, over-reactive to genuine problems and could potentially disrupt telecom investment and innovation.

Internet has become the most essential and critical communication tool today. Net Neutrality has become such a controversial subject that The International Telecommunication Union (ITU), a specialized agency of the United Nations, has formed a group of experts to find out a balanced solution. Today, we will briefly discuss the Net Neutrality controversy from an international perspective. We will try to understand the issue with respect to the European Union, Japan and emerging markets like Brazil, China and India.

The United States of America

The 2015 Net Neutrality laws reclassified Internet as a public utility under Title II of the 1934 Communications Act instead of section 706 of the 1996 Telecom Act. This gives the FCC (Federal Communications Commission) increased control over the ISPs (Internet Service Providers).

Net Neutrality will prohibit ISPs from discriminating against applications. Earlier, these companies were allowed to restrict any device, application, service, or content from running on their respective networks. Major beneficiaries of Net Neutrality law were web-based content providers like Netflix Inc., Facebook Inc. and Google of Alphabet Inc. to name a few. (Read: FCC's Net Neutrality Rules: Who Benefits the Most?)

All ISPs, along with a number of cable TV and telecom industry bodies have been vehemently opposing Net Neutrality. The major argument against the directive is that ISPs have to spend several billion dollars to install and upgrade high-speed mobile/fixed- mobile broadband network.

Importantly, current FCC chairman Ajit Pai is a staunch Net Neutrality opponent. On Nov 21, Pai revealed a draft plan for a complete roll back of Net Neutrality. The FCC is set to vote on the proposed changes at its next monthly meeting on Dec 14. If FCC scraps Net Neutrality, major beneficiaries will be the ISPs like Verizon Communications Inc. and Comcast Corp. (Read: FCC Plans to Repeal Net Neutrality: Who Gains?)

Each of the six above-mentioned stocks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The European Union

In August 2016, the Body of European Regulators for Electronic Communications (BEREC), which represents all the EU's communications regulators, issued guidelines to its members to prohibit ISPs from blocking and slowing down Internet data flow. The BEREC stated that only a limited number of services will be able to ask for special treatment. This type of special treatment will be available only so long as it is not detrimental of others.

The new rules of BEREC also established consumers' right of free access and distribution of information and content, running applications and using services of their choice, so long they are not illegal. Digital rights experts have welcomed the rules. Telecom regulators of member countries were asked to assess “zero rating” practices on a case-by-case basis. Zero-rating refers to subscription packages in which use of a specific service would not be affected by data caps. ISPs that block, interfere with, or slow down services and apps should be banned.

Japan

Japan began addressing neutrality at a relatively early date. Japanese Ministry of Internal Affairs and Communications introduced Net Neutrality principles as an amendment to the “New Competition Policy Program 2010.” The policy requires that IP networks be accessible to content, to terminal equipment, and equally to all users, at reasonable prices. Net Neutrality also includes the concept of utilizing IP networks with the proper allocation of costs without discrimination.

“Guidelines for Bandwidth Control Operational Standards” are the rules and legal basis of Net Neutrality regulations. Additionally, a “Guideline for Packet Shaping” covers basic conditions for when packet traffic shaping is permitted, including measures to cancel heavy users’ contracts. Packet shaping should only be allowed in exceptional situations.

Brazil

In 2014, the Brazilian government passed a law to implement Net Neutrality ensuring equal access to the Internet and protecting the privacy of its users. Brazil’s National Telecom Agency has taken several steps to disallow ISPs from blocking, monitoring, filtering and analyzing the content of data packet. Any discrimination or degradation of traffic should be regulated in accordance with Net Neutrality law after consulting with the Internal Steering Committee and National Telecom Agency.

India

On Nov 28, 2017, the Telecom Regulatory Authority of India (TRAI) has come out in full support of Net Neutrality. In a nutshell, TRAI’s recommendations state that operator license be amplified to specify “explicit restrictions” on discrimination in Internet access based on content, protocols or user equipment. Per TRAI’s recommendation, practices like degrading the quality of content, blocking access or interfering with any content in a discriminatory fashion needs to be prohibited. ISPs must be barred from entering into any kind of agreement with anyone that encourages discriminatory treatment of content.

China

In contrast to the above-mentioned regions, the Net Neutrality story is completely different in China. While Chinese government claims that it follows Net Neutrality in the country, several experts have opined that the government frequently exerts great effort in manipulating the flow of information and prohibits viewpoints that criticize the government or stray from the official Communist party view. ISPs are owned and operated by the government, which allegedly has an iron grip on the content which is let out on Internet.

Bottom Line

Primary viewpoint of Net Neutrality proponents is that choice of content should be left to the consumer. No discrimination should be permitted in treating contents. An open Internet should be the backbone for product innovation in a free-market environment. On the other hand, the opponents of Net Neutrality argue that a light-touch regulatory measure will generate higher investment in the overall telecom industry. That will pave the way for web-based service providers to flourish. It is still not clear how mutually acceptable solution can be achieved.

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