The net neutrality repeal isn’t popular – but should investors be concerned?
There has been a huge outcry online following the repeal of the so-called “net neutrality” bill by the U.S. Federal Communications Commission. But should investors worry about the ramifications of the move? Depending what they invest in, not really. There are a few reasons for that: first, consumers are very unlikely to be hit with higher prices as a result; second, the big tech companies are really powerful; and third – well, net neutrality never really existed anyway.
FANG stocks have risen on the back of the net neutrality repeal
SOURCE: Yahoo Finance
One of the prime concerns consumers have is that they’ll suddenly have to pay more for the online services they enjoy. But this is unlikely: economic incentives will determine the extent to which internet service providers can hike prices, and they are unlikely to do anything which will rile up consumers. And, at least in the case of big companies like Google and Netflix, it would be a bold ISP that dared to squeeze them for cash. The current relationship between consumer, big tech, and ISP benefits everyone involved – there’s no reason it should be imperiled.
FANG stocks and their ilk have too much money and power to be bullied by even the biggest ISP. And from an investment perspective, the repeal of net neutrality actually makes them a safer bet than they were before. Newer, smaller, companies are the ones that will face hurdles getting top quality internet services. This means that established players like Netflix and Facebook actually become even harder to disrupt. Netflix’s CEO explained this prior to the decision, saying that the company wasn’t concerned this time around – it was now big enough to be a winner, rather than a loser, in a post-net neutrality world.
It’s also true that real net neutrality never existed anyway. Even before net neutrality was washed away, Netflix, Google, and other big traffic generators used exclusive “fast lanes” for internet service by linking their networks to ISPs in “peering arrangements”. This doesn’t mean the removal of the net neutrality bill will have no effect, but it does mean that it will have less effect than many of the net’s denizens imagine: the internet was never truly neutral in the first place.
The removal of net neutrality laws certainly changes the game when it comes to investing in technology stocks. But the companies that could be hit are new, small, start-ups. FANG, and their peers, are not only safe – they’re safer than ever before.
Dominion holds all four FANG stocks in its Global Trends Ecommerce Fund.
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