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Where FCC's net neutrality vote matters: Analysts
After all the debate over net neutrality, the Federal Communication Commission's vote to regulate service providers in accordance with the open Internet policy changes very little, according to Daniel Ernst, equity analyst at Hudson Square Research.
"I don't think anything changes," he said in a "Squawk Box" interview, noting that Comcast (NASDAQ: CMCSA) agreed to abide by the principles of net neutrality when it purchased CNBC-parent NBCUniversal.
The irony of the rule is that it might pave the way for the successful merger of Comcast and Time Warner Cable (NYSE: TWC), Ernst said.
"If your fear of a larger, bigger, badder Comcast is that we can't regulate them, now we have regulation. So there's no legal reason to withhold the merger," he said.
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As expected Thursday, the FCC voted 3-2 along party lines to adopt the Obama administration's plan to regulate Internet providers under Title II of the 1934 Communications Act.
Net neutrality is the policy of treating all Internet traffic equally, rather than blocking or imposing "tolls" on access to faster service.
Enshrining net neutrality in FCC rules gives the agency the ability to regulate the providers like telephone line operators. Among other things, the FCC will be able to prevent providers from blocking legal websites, slowing down traffic to specific sites or allowing faster access to other services, such as Netflix (NASDAQ: NFLX) or Amazon (NASDAQ: AMZN) Instant Video.
Telecommunications and cable companies are unlikely to spend less on infrastructure investment, Ernst said. He noted that the companies spent $44 billion to acquire new wireless spectrum during an FCC auction in January.
"They wrote that check full knowing that this was coming," he said.
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The outcome is a "shot in the arm" for the technology sector because it blocks service providers from charging companies to reach customers more quickly through so-called "fast lane" connections, David Garrity, founder of GVA Research, told "Squawk Box."
"That obviously benefits not only the established players on that side of the business, but potentially also a lot of the venture capital and start-up activity that is going to rely on the Internet," said Garrity, an advisory board member for a late-stage venture capital start-up co-investment fund.
Net neutrality proponents claim differential pricing will make it harder for new companies to compete with large tech firms, who could pay for access to fast lanes and therefore offer a better user experience.
Because the FCC will not enforce a Title II provision that allows it to regulate the cost of service, the vote does not control the sector as much as some people have feared, Garrity said. Critics say bureaucrats could later decide to impose that part of Title II on Internet service providers.
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The one aspect of the vote that gives Ernst pause is the politics.
"The fact that actually Obama did influence the shift to Title II makes you say, "Well OK, does he actually have influence over the [Department of Justice]? If he wants to block this, is it possible?'" Ernst said, referring to the widely anticipated legal challenges to the FCC's decision.
In November, President Barack Obama urged the FCC to adopt stronger rules based on net neutrality.
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Some who opposed applying Title II to Internet service providers have said Obama influenced the FCC, whose chairman, Tom Wheeler, is appointed by the president, though the agency is supposed to function independently.
Ernst speculated that a future Republican-dominated FCC could overturn Thursday's decision.
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