Weekly Pay-TV Notes: Court Sets Accelerated Net Neutrality Complaints Timeline, Comcast’s NBC Loses Miss USA and Miss Universe

The pay-TV industry saw significant activity this week, with an Appeals Court setting an accelerated timeline for reviewing net neutrality complaints by the Internet service providers (ISPs). As the controversial net neutrality rules have now taken effect, the ISPs are in danger of being prosecuted under them. Consequently, the ISPs want the court to resolve the matter quickly and an accelerated schedule comes as good news. The FCC’s decision to regulate the Internet like a utility could ultimately lead to the commission controlling the tariffs charged to the end user, leading to a loss in revenues for the ISPs. As pay-TV revenues are already declining, a potential stagnation in Internet revenues will be immensely damaging. In other news, Comcast’s NBC will not be able to broadcast the Miss USA and Miss Universe contests after it terminated its business relationship with Donald Trump. These are two of the biggest events in the beauty pageant industry and NBC will find it difficult to find suitable replacements in the same genre.

Appeals Court Sets Timeline For Reviewing Net Neutrality Complaints

The U.S. Court of Appeals for the D.C. Circuit has put in place an accelerated schedule for accepting briefs from the companies challenging the FCC’s new net neutrality rules. ^[1] The companies will have to file an opening brief by July 30th. This is good news for Time Warner Cable (NYSE:TWC), Comcast (NASDAQ:CMCSA), AT&T (NYSE:T), Verizon (NYSE: VZ) and other ISPs involved as they want a quick decision on the matter. A federal appeals court recently refused to stay the implementation of the new net neutrality rules, even though they were being challenged in court. ^[2] As the rules have now taken effect, the ISP’s are in danger of being prosecuted under them. Hence, they would want the court to resolve the matter quickly. Under the accelerated schedule, final briefs will be due October 13 and oral argument could be scheduled before the end of the year.

The ISPs are mainly up in arms about the Title II reclassification, which classifies broadband as a utility and gives additional powers to the FCC. High speed Internet has remained the leading growth factor for companies such as Comcast and Time Warner Cable for quite some time now. There is a boom in demand for broadband in the U.S., due to a growing need for speed and connectivity. The use of multiple devices and higher penetration of smartphones are also boosting the overall demand. If the FCC’s decision to regulate the Internet like a utility ultimately leads to the commission controlling the tariffs charged to the end user, the companies will lose their pricing power and will not be able to raise subscription fees. As pay-TV revenues are already declining, a potential stagnation in internet revenues will be immensely damaging. This is the primary reason the ISPs are vehemently opposing the rule.

Time Warner Cable’s stock gained around 1% over the truncated week through Thursday. We currently have a price estimate of $183 for Time Warner Cable. For the year 2015, we estimate revenues of $23.8 billion, in line with the consensus estimate, and EPS of $7.38, compared to a consensus estimate of $7.33.

NBC Will Lose Miss USA & Miss Universe As A Consequence Of Dropping Trump

Comcast‘s (NASDAQ:CMCSA) broadcasting network, NBC, has put an end to its business relationship with presidential candidate Donald Trump. ^[3] The network made its decision in light of the recent derogatory remarks about immigrants made by Trump. The decision comes at a cost as NBC will not be able to broadcast the Miss USA and Miss Universe contests, two of the biggest events in the beauty pageant industry. The last editions of Miss USA and Miss Universe brought in 5.5 million and 7.6 million viewers respectively for NBC. ^{[4] [5]} The events will likely move to a different network and NBC will find it difficult to find suitable replacements in the same genre.

Comcast’s stock gained around 1.75% over the truncated week through Thursday. We currently have a price estimate of $64.8o for Comcast. For the year 2015, we estimate revenues of $72.25 billion, compared to consensus estimate of $72.3 billion, and EPS of $3.31, in line with the consensus estimate.

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1. Court Sets July 30 for First Net Neutrality Briefs, June 30, 2015, Broadcasting & Cable [↩]
2. UPDATE 2-Court declines to suspend U.S. net neutrality rules, June 11, 2015, Reuters [↩]
3. NBC is ending its business relationship with Donald Trump, June 29, 2015, Business Insider [↩]
4. TV Ratings Sunday: NBA Finals Dominate, Miss USA Up, Tony Awards Steady, ‘Cosmos’ Finale Down , June 9, 2014, TVbytheNumbers [↩]
5. Ratings: Miss Universe Pageant Surges to Hand NBC a Win, January 26, 2015, The Wrap [↩]