MoffettNathanson: Net neutrality ruling could temper the pursuit of Yahoo by Verizon, AT&T

The FCC's net neutrality win in a Washington, D.C., federal appeals court could dampen the enthusiasm of Verizon (NYSE: VZ) and AT&T (NYSE: T) in their pursuit of Yahoo, according to MoffettNathanson.

The court upheld the Commission's legal authority behind the Open Internet Order, which defines rules for net neutrality. The decision was a clear blow to the mobile network operators and cable TV providers that brought the suit against the FCC, although the case will surely be appealed to the U.S. Supreme Court.

The court affirmed the FCC's move to reclassify both wired and wireless broadband services as Title II "telecommunications" offerings, making them subject to open internet rules mandating all internet traffic be treated equally.  In a note to investors, MoffettNathanson's Craig Moffett said that while the court's ruling regarding wired services was predicted, the support for reclassifying wireless services was not.

"Our informal view of consensus was that here, at least, the expectation was that the FCC would be overturned," Moffett wrote. "In short, the FCC won in a clean sweep…. No one could have expected an FCC victory as thorough as this one."

Both mobile and fixed-line internet service providers (ISPs) have consistently protested the FCC's reclassification, claiming that it gives non-ISPs an unfair advantage in the burgeoning world of digital marketing. Companies such as Facebook (NASDAQ: FB) and Google (NASDAQ: GOOG), for instance, aren't subject to the FCC's rules regarding net neutrality, unlike mobile network operators and cable providers.

The nation's two largest mobile carriers are reportedly among a handful of deep-pocketed players preparing for a third and final round of bidding for Yahoo's online assets. Verizon's second-round bid of roughly $3.5 billion was rumored to be topped by multiple bids in the range of $5 billion, but the carriers may rethink such potential investments in the wake of Tuesday's ruling.

"(O)ne wonders whether this ruling might give Verizon and AT&T pause in their pursuit of Yahoo," Moffett wrote. "Either's ability to monetize Yahoo's content through targeted advertising may now be impaired relative to non-ISP buyers. To the extent that the parties involved may have expected a DC Circuit reversal of at least the wireless portion of the FCC's reclassification, today's ruling could be viewed as a material change in circumstances."

Related articles:
Federal appeals court upholds net neutrality rules
Report: Verizon, AT&T preparing for final round of bidding for Yahoo
AT&T, Verizon vie for Yahoo as bids reportedly top $5B
Verizon well positioned as deadline arrives for Yahoo bids

Suggested Articles

A new order from FCC Chairman Ajit Pai would make 21.2 gigahertz of spectrum above 95 GHz available for unlicensed use across four frequency bands.

Verizon has announced plans to deploy standards-based 5G services in more than 30 U.S. cities this year.

Samsung is joining the O-RAN Alliance, the industrywide effort to integrate greater intelligence into the radio access networks of next-gen wireless systems.