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Bernstein analyst downgrades cable stocks after FCC move

One investment analyst has downgraded his rating for cable stocks, saying the risk of regulatory uncertainty by the Federal Communications Commission dampens prospects for companies such as Comcast, Time Warner Cable and Cablevision.

Craig Moffett, an analyst at Bernstein Research in New York, changed his rating for the cable sector from “outperform” to “market perform,” a neutral rating that indicates he doesn’t think there is the growth potential he once perceived.

The issue, Moffett said in a research note, doesn’t have to do with current regulatory challenges facing the sector. But the FCC’s plan to reclassify broadband as a telecommunications service creates uncertainty over what that could mean down the line. Specifically, the agency could decide to reverse its plans to exempt carriers from price regulation and line-sharing rules, for example. The FCC said last week that it has never done so and doesn’t plan to go back on its word.

And Moffett said there could be spillover effects into cable’s voice and video businesses.

“Importantly, the regulatory issue here has nothing to do with 'net neutrality.' Instead, the issue is the collateral damage arising from reclassification in order for the FCC to have the authority to impose net neutrality,” Moffett wrote in a research note.

The rating change hasn't appeared to affect those companies’ stocks. Amid an overall market surge at midmorning Monday, Comcast is down 0.27 percent to $18.31; Time Warner Cable is up 1.8 percent to $50.36; and Cablevision is up 1.3 percent to $24.96.

By Cecilia Kang  |  May 10, 2010; 11:01 AM ET
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And so the enormous costs of the ill-conceived "net-neutrality" (otherwise known as "net-nationalization"), begin to rear their ugly heads. The monetary costs will pale in comparison to the opportunity costs of governmental intervention in one of the few areas of the economy it hasn't yet screwed up. The growth of the internet and its applications have sustained at unprecedented levels because of the lack of governmental interference; a reminder of the power of pure capitalism. Unfortunate that an administration running and governing in opposition to American history and values now seeks to kill off the few remaining examples of that power to dramatically transform lives and advance civilizations.

Posted by: UncomfortableTruths | May 11, 2010 5:33 AM | Report abuse

Don't worry, everyone. Everything's going to be okay because when you want something to thrive, then you obviously have to tax and regulate it, erect barriers to market entry, and let bureaucrats pick the winners.

Posted by: millionea81 | May 11, 2010 11:23 AM | Report abuse

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