How Wireless Carriers Would Be Affected By The Plan To End Net Neutrality

The FCC has released the final draft of its plans to dismantle the net neutrality regulations of the Obama era, which require internet service providers (ISPs) to treat all online traffic equally, without giving preference to certain online services or content. The proposal, which is set to go to vote on December 14th, is likely to benefit ISPs such as Comcast and Charter as well as wireless carriers, such as Verizon (NYSE:VZ) and T-Mobile (NASDAQ:TMUS), potentially allowing them to open up new revenue streams and promote their own content. In this note, we take a look at how the major telecom players could benefit from the proposal.

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Under the new proposal, internet providers would be allowed discriminate against Internet traffic in some cases, effectively allowing them to block, throttle, and prioritize content, as long as they notify their customers – though most ISPs have stated that they do not intend to do so. Under the new regulations, ISPs would be re-classified as information services instead of public utilities, and the oversight responsibility for internet providers would include the FTC and the FCC.

Opening Up New Revenue Streams For Carriers

The new regulations could potentially open up new revenue streams for internet service providers and wireless carriers, as they could form alliances with media and other internet companies to offer their services at higher speeds and quality. Moreover, these companies could potentially slow down rival services to encourage greater use of the websites that are paying them. One area that providers are likely to initially target is streaming video. Video accounts for a bulk of internet traffic, and the return of unlimited wireless plans has resulted in a surge in video-related consumption, with ARPU remaining capped, without any overages. By charging video services such as Hulu and Netflix to deliver a smooth experience, wireless carriers could partially offset the costs of catering to growing data traffic.

Carriers Can Favor Affiliate Content 

Moreover, wireless carriers have also been promoting their own media and distribution services, with growth in their core business slowing down. With the end of net neutrality rules, carriers such as AT&T (NYSE:T) and Verizon could favor their affiliates’ content (DirecTV Now and go90) on their respective wireless services. Moreover, if AT&T’s acquisition of Time Warner is allowed to go through (the deal is currently headed to court after the Department of Justice sued to block the merger), the repeal of net neutrality rules could allow the combined company to bundle and promote its content with its wireless and broadband services in multiple ways.

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