Saying they're subsidizing the content delivery businesses of Akami (Nasdaq:AKAM), Limelight (Nasdaq:LLNW) and Level 3 (Nasdaq:LVLT), Comcast (Nasdaq:CMCSA) has asked them all to pay fees to them.
Kaufman said, "On November 19, Comcast informed Level 3 that it would charge it a recurring fee to transmit online video content to Comcast subs. The request followed a November 11 announcement from Level 3 that it was selected as the primary content delivery network (CDN) for Netflix. Comcast also requested fees from Akami and Limelight for similar over-the-top (OTT) services and came to commercial agreements. However, Level 3 balked at the request, and instead accused Comcast of anti-competitive business practices, charging the request violates the principle of net neutrality, and asking the FCC to block the Comcast/NBCU deal. Comcast argues that it has made an investment to enable these services and it should not be forced to subsidize someone else's business."
Kaufman made several other observations:
1) Comcast's actions put the concept of Net Neutrality to a test. Comcast's demands from Level 3 clearly violate the principals of net neutrality. That being open and equal access to all Internet content. However, the commercial model for achieving this goal remains elusive, particularly when juxtaposed against the FCC's other mandate of increasing broadband penetration, and importantly, the legal framework for defining and enforcing these principles is virtually nonexistent;
2) Aggressive stance signals comfort with regulatory environment. Comcast is a relatively conservative organization. We believe Comcast's aggressive stance with Level 3 is a signal that it is comfortable with the regulatory treatment of both the proposed NBCU deal and the FCC's upcoming proclamation on net neutrality;
3) The ability to charge for last-mile access would enhance cable's position...If Comcast is successful in seeking a fee from Level 3, the CDN will likely be forced to push this cost back to Netflix, or other OTT content providers, effectively ending the economic advantage of OTT distribution.
Kaufman maintains a "Buy" rating on Comcast, which closed Tuesday at $20.04, falling $0.17, or 0.87 percent. Kaufman has a price target of $25 on them.
No comments:
Post a Comment