Will Obama Rescue Netflix After Congress Rejects Net Neutrality?

Back in December, the FCC decided, in a 3-2 vote, to take it upon itself to regulate broadband internet access, also known as "Net Neutrality" - in other words the FCC essentially decided to give itself the authority to impose rules that bar Internet providers from blocking or "unreasonably discriminating" against Web content, services or applications. As previously explained: "That means Time Warner Cable can't take payments from Google to make YouTube come over the network faster than Hulu. Comcast, [which recently bought 51% of NBC-U], is also forbidden from favoring its own content over others'."  The biggest winners were broadband video content distributors who have rapidly become the biggest traffic hogs on the Internet. Names such as Netflix come to mind. So it came as a bit of a shocker that late this afternoon, while everyone was staring at the countdown clock to government shutdown, that House republicans, in a 240-179 vote, "pushed through a measure disapproving the Federal Communications Commission's rules" - in other words rejecting Net Neutrality, and throwing broadband video companies for a loop. Since the triple play companies such as Comcast have become increasingly concerned about the encroaching threat that is Netflix, it is almost guaranteed that if indeed the House vote passes the Senate, where a similar measure has 39 co-sponsors, and becomes law, then Netflix already razor thing cash flow margins are about to get "razor thinner" as the triple plays extract their pound of flesh. There is one out, though: an Obama veto: per Reuters, "the White House said on Monday that President Barack Obama's advisers would recommend that he veto any such resolution." Which begs the question: will Netflix' momo longs have Obama to thank for the continuation of the most ridiculous move in stock market history, or will the fairy tale promptly come to an end.

From Reuters:

The FCC's rules, approved in late December, banned Internet service providers from blocking traffic on their networks, while allowing providers -- such as Verizon, Comcast Corp (CMCSA.O) and AT&T Inc (T.N) -- to "reasonably" manage their networks and charge consumers based on usage.

Republicans argued in House debate that the FCC's rules needlessly impose government regulation on the Internet.

"The FCC has never had the authority to regulate the Internet," said Republican Representative Cliff Stearns.

House Republican Leader Eric Cantor called the House's vote "an important step to bring down the FCC's harmful and partisan plan to regulate the Internet."

Democrats argue that the FCC rules are needed to curb the growing market power of large service providers.

Disapproving the FCC rules "would give big phone and cable companies control over what websites Americans can visit, what applications they can run, and what devices they can use," said Democratic Representative Henry Waxman.

Democratic Representative Anna Eshoo called the Republican push against the FCC's rules "an ideological assault on a federal agency and its ability to provide basic consumer protections."

While we don't want to handicap the outcome, we are confident that if Netflix' workforce was at least slightly more unionized that while Netflix creditors' may have to be worried, equity could surely sleep soundly, known Obama has their back (in an inverse case of Bernanke "having" the middle class' back).