Wednesday, December 1, 2010


With the disclosure a few moments ago that the FCC has no problem with pricing mechanisms that charge based on broadband usage this puts significant pressure on companies that provide content to end-user web surfers.  In other words, when you are at home and use Netflix to order a movie you buy that content and then funnel it done the electronic superhighway to your computer or internet tv.

The present situation is that Netflix sends that big load of data to you and it uses the infrastructure of your internet provider like AT&T, Comcast, or other ISP.  As that big bundle of data comes through, Netflix simply sends it off and the carrier absorbs the cost of delivering that to the user.  Of course as more folks begin using BluRay players and Netflix this places larger and larger infrastructure demands on your internet service provider who isn't necessarily getting more revenue for your greater use of its bandwidth.  The added volumes also impact their ability to provide great service.

The FCC ruling today means that Comcast and others probably have the ability to charge those internet content providers for the amount of data they are sending onto the ISP's highways.  Netflix is a great idea if it only costs $10 a month, how great of an idea is it if Netflix is going to cost $30 a month as they will need to pass these toll charges on to consumers.

Here is a snapshot of NFLX right now.  Shorting at $202.50 and I have a stop at $206.00.  The chart has been impressive going pretty much straight up.  All bubbles burst and this is probably the catalyst.  A drop to $163.00 is quite possible with some churning at $179.