Moody's: FCC's privacy proposal would 'handicap' cable operators

A new FCC proposal to restrict collection of consumer data by Internet service providers will hurt the cable industry, a new report from Moody's said.

"We believe this proposal will have a negative impact on both fixed and mobile broadband providers," Moody's said in a report titled "FCC's broadband privacy proposal credit negative for linear TV and wireless providers."

"If approved, the ability to compete with digital advertisers such as Facebook (NASDAQ: FB) and Google (NASDAQ: GOOG) who are able to collect the same type of data from consumers who access their websites and those of others, will be severely handicapped in the future as the old guard ecosystem evolves to become more competitive," Moody's added.

The FCC proposal, announced last week, would require companies including Comcast (NASDAQ: CMCSA), Time Warner Cable (NYSE: TWC) and Charter Communications (NASDAQ: CHTR) to obtain customer permission before accessing and using their data. Such rules could have major implications for emerging revenue streams such as advanced advertising. 

"We believe this to be a long-term risk to the current TV advertising business model, as well as all broadband providers whom also have ad sales exposure to the present linear video ecosystem," Moody's said. "It would likely lead to greater pressure for individual networks and stations to go over-the-top (OTT) and abandon the more stable Pay-TV bundle."

The financial company added that another FCC proposal, one which would "unlock" the leased pay-TV set-top box to third-party operators such as Google, further complicates the agency's latest proposal.

"An open question is how this proposal may impact the FCC's other recent proposal regarding unbundling the provision of the set-top box from the ISP, which is also negative for broadband providers, and whether technology companies that wish to compete by selling set top boxes directly to consumers and also becoming a virtual pay-TV provider will fall under the same privacy consent constraints?" Moody's said.

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