Federal Appeals Court Ruling on Net Neutrality, If Upheld, Looks Like a Game Changer for High Speed Data Providers

On January 14, 2014, the news broke of a Federal Appeals Court ruling, which blocks the Net Neutrality rules of the U. S. FCC. If this ruling is upheld, then high speed data providers (Verizon, AT&T, Sprint, etc) can begin to capture much more value from their current plant in terms of larger profits.

I’ve posted my opinion of what appears to me to be curiously limited profits for providers of high speed data services. I based it on a combination of indicators. One of these is my observation of recent efforts by Verizon, the largest wireless data provider here in the U.S., to sell bandwidth. The other is what I refer to as wireless data customer “recycling”, which goes like this: The major U.S. high speed data providers each make what I consider to be overly aggressive offers to consumers. The consumers who bite on these offers are expected to simply shuffle from one provider to another for essentially the same service.

Does it make sense for Verizon, AT&T, et al to pay for the early termination charges consumers will incur by switching plans? Before this ruling I answered this question in the negative. The only justification for the cash sign-on bonus for consumers would have to be an effort to reduce competition in a market where high speed data is a mere commodity.

Please note the timing of the first sighting of this phenomenon — AT&T kicked it off after Sprint announced its interest in acquiring T-Mobile. Funny, I thought a few months ago AT&T wanted to buy T-Mobile, right? So wireless customer recycling, as I see it, is a fancy version of a very primitive “scorched earth” policy. Welcome to the new dark ages.

But this ruling will likely change everything, which I take to be very good news. For some reason most analysts are more concerned about the negative impact the ruling will have for businesses like Netflix, than they are taken by the brand new blue sky it opens for Verizon and its peers.

My dictum is the following: If no one can afford to put down the pipes required for all this high speed data, and operate a viable business from them, then the high speed data services are going to eventually go away, anyways. Therefore it’s better, overall, to make sure the providers are fed properly, or else the rest of the food chain (including Cisco, etc) will be hard pressed to make it through to the next meal. Netflix, Skype, etc are simply icing on the cake.

Ira Michael Blonder (https://plus NULL.google NULL.com/108970003169613491972/posts?tab=XX?rel=author)

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved

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