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Why cable stocks surged after the FCC’s net neutrality proposal

35 points by Libertatea 12y ago

tootie 12y ago
Is this some sort of bizarro version of "buy on rumor, sell on news"?
- rhino369 12y ago
  Not even bizzaro IMO. Everyone knew this was coming and was priced in. When it wasn't as bad as it could be the stock price went back up.
  - bequanna 12y ago
    I think you're right. The sentiment analysis trading bot explanation is more fun, but, I believe that investors had priced in much more restrictive regulation and were simply relieved to finally have clarity.
    - rhino369 12y ago
      I think it was the possibility of more restrictive regulations.
dsr_ 12y ago
Huh. I thought the answer was obvious, so I'm wrong. My explanation: private monopolies are subject to being broken apart by the government. Government-regulated monopolies are not. Title II regulation means that Comcast and ATT-Time-Warner-AOL-Prodigy-Verizon will survive forever, and be profitable forever. Insanely profitable like a start-up? No, that's no longer possible, but it wasn't before, either.
- AnthonyMouse 12y ago
  Pretty much, yes. The telecoms protestations to Title II have very much the ring of "please Brer Fox, don't throw me into the briar patch." What they want most of all is to be totally unregulated and have no competition. But that isn't long-term stable. That's how you get everyone to hate you with such a passion that it causes everyone to get together and do something about it, and they have to know that. But if Title II and network neutrality will keep the public's rage at a simmer rather than a rolling boil then it means they don't have to worry about a stronger backlash like widespread construction of municipal fiber.
  - thirsteh 12y ago
    What, why? Google Fiber, municipal fiber, etc. will continue to exist and grow regardless of how broadband is classified. Title II doesn't mean "no competition."
    - AnthonyMouse 12y ago
      Think what it does to Google's incentive to expand Google Fiber if the law prohibits Verizon et al from doing the things Google is most afraid of them doing. Imagine how much harder it would be to get voter support for a bond issue to fund municipal fiber if the incumbent ISP can't (and there for didn't) degrade performance of popular websites to favor their own competing alternatives. People fix things that are broken. If network neutrality makes Verizon's network tolerable to everyone then support for expensive alternatives disappears.
      - sbov 12y ago
        Google has at least claimed net neutrality won't have any affect on their current or future plans for fiber rollout. Also, I think their incentives go beyond the throttling net neutrality is meant to prevent. Google makes more money the faster our connections are.
        AnthonyMouse 12y ago
        > Google has at least claimed net neutrality won't have any affect on their current or future plans for fiber rollout. We can distinguish between Google (the search engine) and Google Fiber (the ISP). What Google Fiber is saying is that network neutrality won't make their ISP business less profitable. That doesn't mean Google's search business is going to have the same incentive to continue providing a de facto subsidy for it in the form of new capital.
- kokey 12y ago
  The regulation also doesn't do price fixing. It sets additional standards, or what I refer to as 'quality fixing'. The effect is that prices go up and competition go down, but quality will at least be something people will complain about less.
- Shivetya 12y ago
  well that and they can pretty much suspend build out for years while raking in the bucks. eventually they might have to put more cable down but likely will get subsidies to do so
jader201 12y ago
tldr can be found in the last sentence: Which brings us back to Moffett's original point: Nobody knows what the heck is going on.
jMyles 12y ago
I have feared throughout this 'discussion' that Title II designation will mean more restrictions on the kinds of services that insurgent local networks (especially mesh networks) might provide. For example, it's not at all hard to imagine that this will mean that a local mesh network must provide the same level of access to foxnews.com that they do to local music content, despite the local content being far easier for the network to deliver. If anything, this might mean that this small number of large companies now faces less plausible insurgent competition. Although, for my part, I'm in favor of separation of network and state generally.
CyberDildonics 12y ago
If the proposal says nothing about video and decoupling it, then internet companies can still sell you TV and internet, effectively selling you data twice. But they will have competition they can't squash from netflix, youtube, amazon, hulu, and many other places. I would think this would be a net loss. What does it mean for competition between internet providers though?
wcarss 12y ago
I imagine there's a possibility that algorithmic-trading bots may have just seen an uptick in news about these organizations and through a frenzy of general "activity" drove the prices up. That signal might have led other, more sane bots and people to make moves. This would be similar to the idea raised in this Atlantic article[1], that news of "Anne Hathaway" movie releases causes upticks in "Berkshire Hathaway" stock. Perhaps there's also some sentiment analysis in there -- a lot of people sounding happy and optimistic in articles about Comcast may be read as a signal to buy. 1 - http://www.theatlantic.com/technology/archive/2011/03/does-anne-hathaway-news-drive-berkshire-hathaways-stock/72661/ http://www.theatlantic.com/technology/archive/2011/03/does-a...
- digi_owl 12y ago
  In other words, the reverse of a flash crash?
sdfjkl 12y ago
I bought some shares at an IPO as a long term investment a few years ago and held onto them since. For shits and giggles I subscribed to the RSS feed for this ticker on Google Finance. This feed contains a lot of stock ratings and "buy/sell/hold" advice from various analysts. After comparing this to the actual stock value for a few years in a completely unscientific process with a far too small sample, I've come to the conclusion that either these guys don't have a fucking clue about where stocks are going to go next or are ineffectually trying to manipulate the market. I kept the RSS subscription to remind me of this.
deleted 12y ago
[deleted]
remarkEon 12y ago
"In short, the markets are responding favorably because price regulation is off the table, at least for now." Has Wheeler ever seriously suggested this? This seems like needless speculation. My understanding was that Wheeler's proposal specifically omits that authority.
- rob_lh 12y ago
  I think the President's proposal specifically omitted that too. The larger point made in the article about general misunderstanding of the implications of net neutrality seems accurate but may prove specious. My fear is its a bet on oligopoly. Assuming investors are ignorant is convenient, but it may be a situation where many investors were avoiding that industry because of the regulatory uncertainty. Part of that uncertainty could be the possibility of the government encouraging competition. In fact, this legislation defines how they can operate the networks but does nothing to change the oligopoly of vendors or the barriers to entry new competitors might face. An investor, then, could reasonably view this as the entry point to an established oligopoly without the fear of future government regulation disrupting that, at least over the next decade or so.
zaroth 12y ago
"What shareholders feared the most was the FCC swooping in to tell Internet providers what prices they could and couldn't charge to consumers — and the proposal currently doesn't call for that." Well, currently we don't actually know what the proposal calls for. It would be nice if we could read the full proposal, and not just the talking points in an editorial. Personally, I'll wait till the document becomes public [1] before drawing any conclusions. [1] - https://twitter.com/AjitPaiFCC/status/563724099906568193 https://twitter.com/AjitPaiFCC/status/563724099906568193
- wtallis 12y ago
  There's enough unambiguous information in the 4-page summary for it to definitely be good news for incumbent ISPs provided it is at least a little bit accurate. The summary makes it clear that there won't be unbundling or rate approval, and there will be a QoS loophole of unknown severity. That's enough news to justify investors taking action.
datashovel 12y ago
Anytime I see a stock surge in price with no explanation behind it, generally I get the feeling it's big investors with alot of money in a stock who want to exit. With a surge generally that's when "dumb money" enters, and precisely when "smart money" is exiting. Another explanation could be that the market is interpreting the move as "more regulation == less competition".
- gweinberg 12y ago
  Doesn't make sense. Smart money getting out will drive prices down, not up. It may be that dumb money is replacing smart money, but you have to be beyong "dumb" to think smart moneyn getting out is a good reason to get in.
  - datashovel 12y ago
    I guess everyone has their own theories. I'm happy to know you've been successful with yours.
eli 12y ago
I would have assumed because the market dislikes uncertainty.
bjornsing 12y ago
I can't help thinking of that for me most unexpected aspect of Wheeler's announcement: that wireless will be subject to the same net neutrality rules as wired. Could that have something to do with it?
maxsilver 12y ago
It doesn't seem that complicated to me. The stocks were down because people thought Title II might be happening. (rate regulation, tariffs, last mile unbundling). But it's not. Wheeler claims he's going to re-define (modernize) Title II, so it's no longer contains the useful pieces (rate regulation, tariffs, last-mile unbundling). Since these monopolies are now being blessed by the Feds, there's almost-zero risk that these providers will ever loose money. The stock jumped to reflect this.

35 points by Libertatea 12y ago

tootie 12y ago

Is this some sort of bizarro version of "buy on rumor, sell on news"?

rhino369 12y ago
Not even bizzaro IMO. Everyone knew this was coming and was priced in. When it wasn't as bad as it could be the stock price went back up.
- bequanna 12y ago
  I think you're right. The sentiment analysis trading bot explanation is more fun, but, I believe that investors had priced in much more restrictive regulation and were simply relieved to finally have clarity.
  - rhino369 12y ago
    I think it was the possibility of more restrictive regulations.

dsr_ 12y ago

Huh. I thought the answer was obvious, so I'm wrong. My explanation: private monopolies are subject to being broken apart by the government. Government-regulated monopolies are not. Title II regulation means that Comcast and ATT-Time-Warner-AOL-Prodigy-Verizon will survive forever, and be profitable forever. Insanely profitable like a start-up? No, that's no longer possible, but it wasn't before, either.

AnthonyMouse 12y ago
Pretty much, yes. The telecoms protestations to Title II have very much the ring of "please Brer Fox, don't throw me into the briar patch." What they want most of all is to be totally unregulated and have no competition. But that isn't long-term stable. That's how you get everyone to hate you with such a passion that it causes everyone to get together and do something about it, and they have to know that. But if Title II and network neutrality will keep the public's rage at a simmer rather than a rolling boil then it means they don't have to worry about a stronger backlash like widespread construction of municipal fiber.
- thirsteh 12y ago
  What, why? Google Fiber, municipal fiber, etc. will continue to exist and grow regardless of how broadband is classified. Title II doesn't mean "no competition."
  - AnthonyMouse 12y ago
    Think what it does to Google's incentive to expand Google Fiber if the law prohibits Verizon et al from doing the things Google is most afraid of them doing. Imagine how much harder it would be to get voter support for a bond issue to fund municipal fiber if the incumbent ISP can't (and there for didn't) degrade performance of popular websites to favor their own competing alternatives. People fix things that are broken. If network neutrality makes Verizon's network tolerable to everyone then support for expensive alternatives disappears.
    - sbov 12y ago
      Google has at least claimed net neutrality won't have any affect on their current or future plans for fiber rollout. Also, I think their incentives go beyond the throttling net neutrality is meant to prevent. Google makes more money the faster our connections are.
      - AnthonyMouse 12y ago
        > Google has at least claimed net neutrality won't have any affect on their current or future plans for fiber rollout. We can distinguish between Google (the search engine) and Google Fiber (the ISP). What Google Fiber is saying is that network neutrality won't make their ISP business less profitable. That doesn't mean Google's search business is going to have the same incentive to continue providing a de facto subsidy for it in the form of new capital.
kokey 12y ago
The regulation also doesn't do price fixing. It sets additional standards, or what I refer to as 'quality fixing'. The effect is that prices go up and competition go down, but quality will at least be something people will complain about less.
Shivetya 12y ago
well that and they can pretty much suspend build out for years while raking in the bucks. eventually they might have to put more cable down but likely will get subsidies to do so

jader201 12y ago

tldr can be found in the last sentence: Which brings us back to Moffett's original point: Nobody knows what the heck is going on.

jMyles 12y ago

I have feared throughout this 'discussion' that Title II designation will mean more restrictions on the kinds of services that insurgent local networks (especially mesh networks) might provide. For example, it's not at all hard to imagine that this will mean that a local mesh network must provide the same level of access to foxnews.com that they do to local music content, despite the local content being far easier for the network to deliver. If anything, this might mean that this small number of large companies now faces less plausible insurgent competition. Although, for my part, I'm in favor of separation of network and state generally.

CyberDildonics 12y ago

If the proposal says nothing about video and decoupling it, then internet companies can still sell you TV and internet, effectively selling you data twice. But they will have competition they can't squash from netflix, youtube, amazon, hulu, and many other places. I would think this would be a net loss. What does it mean for competition between internet providers though?

wcarss 12y ago

I imagine there's a possibility that algorithmic-trading bots may have just seen an uptick in news about these organizations and through a frenzy of general "activity" drove the prices up. That signal might have led other, more sane bots and people to make moves. This would be similar to the idea raised in this Atlantic article[1], that news of "Anne Hathaway" movie releases causes upticks in "Berkshire Hathaway" stock. Perhaps there's also some sentiment analysis in there -- a lot of people sounding happy and optimistic in articles about Comcast may be read as a signal to buy. 1 - http://www.theatlantic.com/technology/archive/2011/03/does-anne-hathaway-news-drive-berkshire-hathaways-stock/72661/ http://www.theatlantic.com/technology/archive/2011/03/does-a...

digi_owl 12y ago
In other words, the reverse of a flash crash?

sdfjkl 12y ago

I bought some shares at an IPO as a long term investment a few years ago and held onto them since. For shits and giggles I subscribed to the RSS feed for this ticker on Google Finance. This feed contains a lot of stock ratings and "buy/sell/hold" advice from various analysts. After comparing this to the actual stock value for a few years in a completely unscientific process with a far too small sample, I've come to the conclusion that either these guys don't have a fucking clue about where stocks are going to go next or are ineffectually trying to manipulate the market. I kept the RSS subscription to remind me of this.

deleted 12y ago

[deleted]

remarkEon 12y ago

"In short, the markets are responding favorably because price regulation is off the table, at least for now." Has Wheeler ever seriously suggested this? This seems like needless speculation. My understanding was that Wheeler's proposal specifically omits that authority.

rob_lh 12y ago
I think the President's proposal specifically omitted that too. The larger point made in the article about general misunderstanding of the implications of net neutrality seems accurate but may prove specious. My fear is its a bet on oligopoly. Assuming investors are ignorant is convenient, but it may be a situation where many investors were avoiding that industry because of the regulatory uncertainty. Part of that uncertainty could be the possibility of the government encouraging competition. In fact, this legislation defines how they can operate the networks but does nothing to change the oligopoly of vendors or the barriers to entry new competitors might face. An investor, then, could reasonably view this as the entry point to an established oligopoly without the fear of future government regulation disrupting that, at least over the next decade or so.

zaroth 12y ago

"What shareholders feared the most was the FCC swooping in to tell Internet providers what prices they could and couldn't charge to consumers — and the proposal currently doesn't call for that." Well, currently we don't actually know what the proposal calls for. It would be nice if we could read the full proposal, and not just the talking points in an editorial. Personally, I'll wait till the document becomes public [1] before drawing any conclusions. [1] - https://twitter.com/AjitPaiFCC/status/563724099906568193 https://twitter.com/AjitPaiFCC/status/563724099906568193

wtallis 12y ago
There's enough unambiguous information in the 4-page summary for it to definitely be good news for incumbent ISPs provided it is at least a little bit accurate. The summary makes it clear that there won't be unbundling or rate approval, and there will be a QoS loophole of unknown severity. That's enough news to justify investors taking action.

datashovel 12y ago

Anytime I see a stock surge in price with no explanation behind it, generally I get the feeling it's big investors with alot of money in a stock who want to exit. With a surge generally that's when "dumb money" enters, and precisely when "smart money" is exiting. Another explanation could be that the market is interpreting the move as "more regulation == less competition".

gweinberg 12y ago
Doesn't make sense. Smart money getting out will drive prices down, not up. It may be that dumb money is replacing smart money, but you have to be beyong "dumb" to think smart moneyn getting out is a good reason to get in.
- datashovel 12y ago
  I guess everyone has their own theories. I'm happy to know you've been successful with yours.

eli 12y ago

I would have assumed because the market dislikes uncertainty.

bjornsing 12y ago

I can't help thinking of that for me most unexpected aspect of Wheeler's announcement: that wireless will be subject to the same net neutrality rules as wired. Could that have something to do with it?

maxsilver 12y ago

It doesn't seem that complicated to me. The stocks were down because people thought Title II might be happening. (rate regulation, tariffs, last mile unbundling). But it's not. Wheeler claims he's going to re-define (modernize) Title II, so it's no longer contains the useful pieces (rate regulation, tariffs, last-mile unbundling). Since these monopolies are now being blessed by the Feds, there's almost-zero risk that these providers will ever loose money. The stock jumped to reflect this.