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The Downstream Dominoes in the Net Neutrality Outcome

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The net neutrality ruling offers a few effects to analyze.

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Editor's note: The following article was originally published in real time on Minyanville's Buzz & Banter. For a free two-week trial and access to over 30 market professionals or to learn more, please click here.

Someone just asked me if the net neutrality ruling (see Verizon Wins Net Neutrality Court Ruling Against FCC) will make pipe companies such as Verizon (NYSE:VZ) and Level 3 Communications (NYSE:LVLT) suddenly worth a lot more. I've been pondering this quite a bit, and here are some thoughts -- not necessarily consistent or connected:
  • The short answer to the question is "probably," however...
  • I'm still not convinced net neutrality is dead.
  • If the FCC puts a stake into net neutrality for good, I'm also not sold on the idea that the pipe owners will have that much pricing power, or that such pricing power will be long-lasting.
  • If pipe owners do get a revenue windfall -- and considering that the bulk of these pipe owners own the "core" -- will they finally loosen up their capex? If yes, that should be a huge boon to the Cienas (NYSE:CIEN) and Infineras (NASDAQ:INFN) of the world.
  • Where does Akamai (NASDAQ:AKAM) sit in this equation? On the one hand, it qualifies as a "data hog" so it could see an upcharge and increase in costs; on the other hand, it makes the distribution of content over its "data" inventory much more efficient than if its customers were to do it themselves (distribution of content from the edge of the network is much less expensive than if the data has to travel long distances across the core). So would it mean that demand for its services will also increase?
  • If pipe providers need to distinguish between content in order to price it differently, isn't this the pot of gold at the end of the Deep Packet Inspection plays, such as Allott (NASDAQ:ALLT), Procera Networks (NASDAQ:PKT), and to a lesser extent, F5 Networks (NASDAQ:FFIV)?
Any thoughts from readers in the business would be greatly appreciated and certainly shared with the Minyanville community.

See also: AT&T Spits on Net Neutrality, Denies Doing So

Twitter: @FZucchi



Positions in INFN PKT
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