Analysts Say Video Services Legislation Would Negatively Impact Cable Stock Prices

Mar 14, 2006  •  Post A Comment

Legislation being drafted by Rep. Joe Barton, R-Texas, to ease the way for telephone companies to offer video services could hammer cable TV stocks because it appears it will leave cable at a competitive disadvantage in the marketplace, top financial analysts said Tuesday in Washington. “The price controls would from a Wall Street perspective be a disaster,” said Craig Moffett, VP and senior analyst at Bernstein Research, in an interview with TVWeek.

Added Aryeh Bourkoff, managing director of media-cable and satellite, entertainment equity and fixed income for UBS Investment Research: “Any sort of price regulation in any form is going to be difficult from an investment perspective.”

National Cable & Telecommunications Association President and CEO Kyle McSlarrow has publicly blasted Rep. Barton’s plan, which Mr. McSlarrow said would allow phone companies to bypass local regulation as they roll out TV services. At the same time, according to Mr. McSlarrow, cable TV companies would continue to be bound by local franchising obligations until a phone company got 15 percent of the TV subscribers in a cable operator’s market.

Another provision in Rep. Barton’s planned legislation would require, according to Mr. McSlarrow, cable TV operators to offer customers the same prices throughout their territories. That provision, according to Mr. McSlarrow, would bar cable companies from cutting prices in neighborhoods subject to phone company competition without also cutting prices in neighborhoods where the phone companies aren’t rolling out video.

“At least from what we’ve seen of the draft so far, they have some hair-raising provisions in them,” Mr. Moffett told TVWeek after testifying at a Senate hearing in which the subject of the House legislation was not addressed. “Specific conditions that would tie the hands of competition would be doubly unattractive because on the one hand it would tilt the playing field decidedly in favor of the telcos and at the same time it would be a very clear indication of just how badly overmatched the cable operators are in the legislative arena and would be a sign to Wall Street that things are likely to get worse before they get better,” Mr. Moffett added.