Stocks of Internet providers fell in afternoon trading after the FCC said it would move forward with proposed net neutrality rules, sparking fears that increased regulation would stifle investment.
The declines happened amid widespread drops in NASDAQ, S&P, Dow Jones Industrial Average and NYSE caused by fears the debt crisis in Greece would spread to global markets.
Shares of cable companies were hit hardest. Clearwire investors Time Warner and Comcast saw their stock fall 8.11 percent and 5.83 percent, respectively, by 2:15 p.m. Central.
Wireless providers weren’t hit quite as hard but saw widespread declines in share prices.
Stock of AT&T, Verizon, Sprint and T-Mobile USA parent Deutsche Telekom all slipped more than 3 percent in afternoon trading. U.S. Cellular parent TDS saw its share price fall more than 5 percent, continuing a downward trend which began this morning when the company said it would delay reporting its first-quarter results due to accounting errors going back to 2007.
The only bright spots among wireless providers were Clearwire and MetroPCS, whose recent positive earnings results offset the impact of the FCC’s announcement to rise more than 6 percent and 4 percent, respectively.
In a research note, Bernstein Research analyst Craig Moffett characterized the FCC’s proposal as the “nuclear option,” saying it will have a “profoundly negative impact on capital investment.”
“To the extent that reduced network investment increases network congestion (particularly if these regulations apply to wireless networks), then the implications for downstream equipment and applications providers are also negative, inasmuch as the user experience can be anticipated to degrade,” he said.
PRTM analyst Dan Hays said the FCC may treat wireless broadband differently from wireline broadband when it comes to enacting net neutrality legislation.
Hays cites a statement today from FCC Chairman Julius Genachowski that the agency would “recognize and accommodate differences between management of wired networks and wireless networks, including the unique congestion issues posed by spectrum-based communications.”
“His comments seemed to indicate that the FCC was looking at wireless and wireline somewhat equally but it was encouraging to see the FCC acknowledge that there is a different dynamic in spectrum-enabled services,” Hays says. “It’s a strong admission that they may have to allow for some unique practices.”
Shares of wireless telecommunication companies recovered slightly by the end of trading, with AT&T, Verizon, Sprint and Deutsche Telekom posting declines in stock prices of around 2 percent.
