Cable stocks took a broadside hit Wednesday after President Obama stumped for more competition among broadband providers — including having his regulators press for changes in laws that will allow more states to provide municipal Internet services.
Obama, in a coordinated push that included a 3½-minute YouTube video and a visit Wednesday to Cedar Falls, Iowa, said many foreign cities — including Seoul, Hong Kong and Tokyo — have “really fast access to the Internet.”
The president said some smaller US cities — like Cedar Falls — also have high-speed broadband because their residents banded together to build an Internet infrastructure that now boasts a broadband speed of 1 gigabit per second.
“Unfortunately, we also got a bunch of US cities that aren’t on par,” Obama said, identifying Los Angeles, New York and Washington, DC, as broadband slowpokes with offerings that top out around 500 megabits.
Obama said fast, inexpensive Internet access is necessary to compete on a global stage.
It didn’t take long for investors, the cable industry and at least one Wall Street analyst to react to Obama’s Internet access plan.
On Wall Street, investors ran from cable stocks, pushing down the value of the pay TV providers by 2 to 4 percent.
Cable’s principal trade association issued a statement in response to the White House initiative, reminding Americans its industry has already invested $230 billion to build broadband networks reaching 93 percent of US homes.
The National Cable & Telecommunication Association also noted that 12 states rank among the 20 fastest regions of the world — despite Obama’s contention the US hasn’t kept pace.
“Rather than chase false solutions, government policies should be directed at overcoming barriers to adoption and extending the reach of broadband to places yet unserved,” said NCTA CEO Michael Powell, the former Federal Communications Commission boss.
While cable analyst Richard Greenfield of BTIG regards broadband as “the key driver of the investment thesis in cable today,” he’s reluctant to embrace White House measures to foster competition as a means to drive down prices and speed up delivery.
“The cloud over cable stocks will be exacerbated by attacks coming from the White House, FCC actions and through the court system,” Greenfield wrote in a Wednesday update.
Obama said he will ask the FCC to override laws in 19 states that now bar them from offering broadband to allow such development.
The NCTA is expected to fight any move by Obama to change those laws.
One unexpected voice could slow Obama’s plan. In the Twittersphere, one person poked at Cedar Falls’ touted broadband referendum — saying it was not affordable to all people.
Cedar Falls Utilities offers its customers that 1 gigabit per second for a monthly charge of $135 just for broadband. TV service costs extra.
