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Moffett Downgrades Rating on Cable Operator Stocks

Sanford Bernstein analyst Craig Moffett has downgraded his rating on cable operator stocks from "outperform" to "neutral" in the wake of FCC Chairman Julius Genachowski's announcement last week that the FCC would try to pin at least some of its Internet regulation powers to Title II common carrier regs.

Moffett, who at press time was on his way to Los Angeles for the cable show, said in a report Monday (May 10) that he was downgrading Comcast, Time Warner and Cablevision stocks, and the entire sector for that matter. He said that the
specter of price regulation of broadband service under Title II "cuts to the heart" of the bull case for cable stocks, which is that the industry "wins the cable wars."

The fact that the FCC has said it won't forbear the "just and reasonable" rates Title II regulations "opens the door" to
broader regs, he argues.

Moffet says the issue is not network neutrality, but instead what he calls the "collateral damage" from the reclassification the FCC is undertaking to insure it has the authority to impose network neutrality. That collateral damage would include the video and voice elements of the vaunted triple-play bundle.

Moffet's gloomy prediction for reclassification drew an immediate response from the supporters of network neutrality. Free Press policy counsel Chris Riley said he had trouble understanding Moffet's "apocalyptic predictions," and called any collateral damage imaginary, and said that the FCC would be supplying some of the predictability that markets like.