SAN FRANCISCO (USA TODAY) - Netflix may be exposed to higher costs in the wake of
a major court decision that voided rules governing Internet access
known as net neutrality.
On Tuesday, the U.S. Court of Appeals for
the DC Circuit struck down FCC rules requiring Internet Service
Providers, or ISPs, to be neutral in their restrictions on bandwidth.
The move means ISPs will be allowed to charge content providers based on
how much bandwidth they use, according to Michael Pachter, an analyst
at Wedbush Securities.
"This ruling will impact those websites
that transmit the most data, so sites that stream video content
(particularly in high definition) will potentially feel the most
significant impact," he added in a note to investors.
the leading streaming video provider on the Internet and regularly
accounts for a notable chunk of the data flowing across the web, so Wall
Street expects the company to be exposed to extra costs from this
Netflix may face an incremental $75 million to $100
million in annual content delivery costs to cable companies for access
to their residential customers who are streaming Netflix content, George
Askew, an analyst at Stifel Nicolaus, estimated in a note to investors
Netflix shares fell 3.2% to $327.11 in early afternoon trading on Wednesday.
ruling may also be an opportunity for Netflix. The company might be
able to obtain preferential treatment by paying to ensure that its
videos stream faster and in higher fidelity than competitors, Wedbush's
However, it is more likely that profit-seeking ISPs
will try to extract as much money as they can from websites like
Netflix that use up a lot of bandwidth, the analyst added.
most likely that ISPs would seek to extract a set fee per gigabyte (GB)
of data transmitted; if we are right, the result would be more costly
for Netflix than the status quo, with little or no incremental benefit,"
"It is impossible to predict how this will play
out in dollar terms, but directionally, it should mean higher payments
by Netflix and/or higher payments by Netflix subscribers," he concluded.