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Facebook, Google, Amazon May Be Caught Up In Netflix Regulatory Flap

Netflix ’s ( NFLX ) revelation that it has reduced the quality of video streaming to the wireless customers of AT&T ( T ) and Verizon Communications could complicate Web regulatory issues for Internet giants such as Alphabet ’s ( GOOGL ) Google, Facebook ( FB ) and Amazon.com ( AMZN ), says a Guggenheim Partners analyst. Netflix last week fessed up to throttling video to AT&T and Verizon ( VZ ) customers for several years, but not to the wireless subscribers of Sprint ( S )or T-Mobile US ( TMUS ). Netflix says it lowered video quality to protect its own customers from exceeding the monthly data caps of AT&T and Verizon. Sprint still offers unlimited data plans while T-Mobile typically slows network speeds rather than imposing overage fees, said a report. Paul Gallant, an analyst at Guggenheim, says Netflix’s policies do not violate federal “net neutrality” rules, which bar Internet service providers from throttling, blocking or prioritizing Web traffic. The rules apply only to ISPs, not Internet firms, noted Gallant. The Federal Communications Commission in February, 2015 expanded net neutrality rules to wireless networks for the first time. A federal court is expected to rule on a legal challenge to the FCC’s new net neutrality rules in April. “Getting ‘caught’ doing this may put Netflix on its heels in Washington at a time when important (Internet) policies like interconnection pricing and zero rating are fluid and could go either way,” said Gallant. T-Mobile and Comcast ( CMCSA ) have adopted video policies referred to in the telecom industry as “zero rating” because streaming does not count toward monthly data caps and there are no payments involving content partners. FCC chairman Tom Wheeler has pushed for competition between Internet video providers, also called over-the-top (OTT), and the pay-TV industry. “ISPs have long complained that they are being unreasonably singled out for regulation within the Internet ecosystem. This Netflix report may highlight for government officials the leverage possessed by large Internet companies,” added Gallant. “Slowing streams to specific wireless (users) implies a range of steps a large edge provider could take to disadvantage an ISP relative to its competitors. With video becoming a rising priority of Internet giants like Google , Amazon, and Facebook , the issue of interconnection fees and zero-rating services will remain important battlegrounds — with the current FCC actively supporting OTT-based competition.” Image provided by Shutterstock .

Comcast X1 Promotions Seen Boosting Q1 Video Additions

Aggressive promotions by Comcast ( CMCSA ) tied to its rollout of Xfinity-branded TV services and X1 set-top boxes will boost first-quarter video subscriber additions, says a bullish Macquarie Research research report. Analyst Amy Yong forecasts that Comcast, the nation’s No. 1 cable TV firm, will post a net add of 32,000 video customers in Q1, compared with an 8,000-subscriber loss in Q1 2015. At a Morgan Stanley conference on March 1, Comcast CEO Brian Roberts signaled  that the company could have a strong Q1. Comcast has been promoting X1 “double-play” bundles that offer TV and broadband for $80 monthly, plus taxes and fees, and triple-play packages that include phone services and start at $90 monthly, says the Macquarie analyst. “We are increasing our Q1 video net add assumptions to 32,000 from (minus) 1,000 on the back of recent commentary,” wrote Yong. “Management continues to reinvigorate the product set by rolling out X1 double/triple play starting at $80 per month and $90 per month, respectively. Other current initiatives include Xfinity Internet+ Premium Streaming for $45 per month.” Comcast stock was flat in morning in the stock market today , near 60. Comcast shares are up 6% in 2016 but are down 8% from their all-time high of 65, touched last July. Worries that Comcast will spend big to buy airwaves in a government auction of radio spectrum have been a stock overhang. Comcast has an IBD Composite Rating of 88 out of a possible 99, putting it among the top 12% of all stocks on such metrics as sales and earnings growth. Comcast lost 36,000 video subscribers in 2015, but it gained 89,000 in Q4, marking its best quarter in nine years. The gains have come despite continued cord-cutting by young adults, who have shifted to Internet video from providers such as Netflix ( NFLX ). Some 30% of Comcast’s video customers — more than 7 million — were using X1 set-top boxes as of Jan. 1. By year-end, Comcast expects at least half of its 22 million video subscribers will be using Internet-ready X1 set-top boxes in their homes. The X1 entertainment platform provides access to live broadcast, on-demand video and DVR-stored content. DVR-stored content is in the Internet cloud, not the set-top. Analysts say that Comcast has put a lot of work into developing a cloud-based TV channel guide and user interface, a voice-controlled remote, programming recommendations, on-screen sports app and social media features for sharing video. Amazon.com ( AMZN ) last week said that it would resell Comcast services at a new online cable store. “On the promotional side, we see the deal with Amazon.com as another creative distribution outlet,” added Yong.

Netflix Says It Cuts Mobile Video Quality For AT&T, Verizon Customers

Netflix ( NFLX ) has been reducing the image quality on AT&T ( T ) and Verizon ( VZ ) wireless networks for years, the streaming media giant told the Wall Street Journal . Netflix has been limiting streaming on AT&T and Verizon mobile systems to 600 kilobits-per-second, far slower than today’s top speeds, to “protect consumers from exceeding mobile data caps.” The company said it’s been doing this for years, but hadn’t previously disclosed the policy. Netflix doesn’t throttle speeds on T-Mobile ( TMUS ) and Sprint ( S ) networks, telling the WSJ that those companies traditionally have had more customer-friendly policies. When T-Mobile and Sprint customers hit data caps, the companies typically slow network speeds vs. imposing overage fees. T-Mobile’s CEO last week had said that AT&T and Verizon customers get lower-quality Netflix streams.