Fitch believes there will be no immediate effect on the credit profiles of cable and telecom companies as the decision was not unexpected and it is a virtual certainty that the rules will be challenged in the courts, with the process taking two or three years to play out. While the rules are litigated, the most likely impact would be to lower investments by the major telecom and cable operators in potential new growth areas.
Fitch believes even if the rules were implemented immediately, there would be very little near-term effect on revenues or operating profits from existing services. If put firmly in place, Title II rules could ultimately change the way Internet traffic is managed as well as impact future revenue opportunities and business models.
Operators are concerned that this decision opens the door for much greater regulation of the Internet in the future. The FCC's order has refrained from enforcing numerous provisions of Title II and other regulations - known as forbearance - but could lead regulators to further ramp up regulation. For example, the order forbears from rate regulation, tariffs, and last-mile unbundling, but a future commission could decide to enforce the provision.
Negative aspects for investors in the long-term would include the potential for greater regulation of broadband services and the reduced opportunity to benefit from potential new business models.