Shares of cable TV and internet provider Comcast (NASDAQ: CMCSA) stock slipped 2.3%, falling exactly $1 in share price through 12:30 p.m. ET Thursday.
The stock appears to be reacting to breaking news that the Federal Communications Commission (FCC) just voted to create a rule requiring cable providers to state an “all-in” price on their service offerings, both on bills and when advertising to new customers, as The Fly reports.
What the FCC did
The FCC’s rule has been in the works for about a year. In a press release last year, the agency explained it is requiring telecoms to “state the total cost of video programming service clearly and prominently, including broadcast retransmission consent, regional sports programming, and other programming-related fees, as a prominent single line item on subscribers’ bills and in promotional materials.” CNBC reported last month that the rule just approved would basically encapsulate all of the above in a new binding regulation.
Now, the FCC says this rule is designed to help consumers comparison shop among cable companies, satcoms, and streaming companies so as to “reduce cost confusion,” and also “increase competition.”
What it means for Comcast
That’s the bit investors seem to be reacting to today — the increasing competition part — on the assumption Comcast will now need to lower its prices to better compete with Verizon Communications, AT&T, Charter, and so on (and that this will hurt Comcast’s profits).
But here’s the thing: Companies have experimented with all-in pricing before, as a customer-friendly move, only to find themselves outmaneuvered by less scrupulous rivals who would hide their fees among lowball rates. But the same rules that will now bind Comcast will also bind its competitors, keeping the playing field level. And if you ask me, on a level playing field, Comcast wins — as the biggest cable company by market cap, having the greatest ability to compete fairly on price.
Long story short, Comcast investors need not worry about this rule. Comcast’s profits are going to be just fine.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Comcast and Verizon Communications. The Motley Fool has a disclosure policy.
Why Comcast Stock Dropped Today was originally published by The Motley Fool