Like many of you, I stream a fair amount of video over the
Internet. This past summer I canceled cable, installed a high-def
antenna on my roof for local channels, and purchased a Roku. We
get more than enough content to keep my wife and I entertained.
And the price is great since we just pay for what we watch, which
isn't a lot.
But the price for
online video streaming
services (think Netflix, YouTube, Amazon Instant Video, etc.) may
be going up.
That's because the U.S. Court of Appeals in Washington ruled
that the FCC's net neutrality rules had no basis in federal law.
The idea of "net neutrality" is that all telecom customers should
have equal access to bandwidth and should all pay the same rate
for the same service, regardless of the amount of data downloaded
Internet service providers (ISPs), including Verizon (
and Comcast (
), disagree. They think bandwidth hogs (Netflix and YouTube
account for half of U.S. downstream Internet traffic during peak
periods) should have to pay more since they consume more.
This court ruling clears the path for ISPs to hit up streaming
services for more cash, based on how much video they stream.
Whether or not that will happen is unclear as of yet.
There are two schools of thought here. One side thinks it
would be silly for an ISP, say Verizon, to charge more since a
streaming service like
could just say "no." If it did, Verizon customers would arguably
get poorer service, and might consider leaving Verizon. In
effect, Verizon's attempt to charge Netflix more could
On the other hand, Verizon spent millions of dollars on this
case. There is probably a reason, and that reason could easily be
that it expects it could get 5% to 10% revenue growth by charging
the data hogs. At least that's what Wedbush Securities Analyst
Michael Pachter believes, according to the
I don't know exactly how this will turn out, but I do know one
way to play it.
Allot Communications (Nasdaq: ALLT)
is an Israeli company that develops technology specifically
designed to help ISPs manage bandwidth use.
Allot manages mobile networks and tracks wireless activity.
It's great business around much of the world. But not here in the
U.S. where net neutrality laws mean that ISPs have had to treat
all traffic equally. That has limited Allot's ability to do
business with Verizon and AT&T, among other ISPs. It
does a lot of business overseas where net neutrality laws don't
It's much more likely that ALLT will now do more business in
the U.S. While nothing is guaranteed, removal of the net
neutrality dark cloud certainly opens up a lot of
I've held ALLT in my
advisory service for several years now, in part because I
anticipated this day. The stock is up 260% since I recommended
it, and I expect this development opens the door to another leg
higher. It is a big catalyst for the stock, which is why I've
recommended investors keep holding it.
This story isn't getting a ton of play in the major media
outlets yet, but you can bet that it will if and when online
video streaming companies like Netflix are hit with a higher
bill. I expect the next two quarterly reports will shed some
light on how Allot sees the U.S. opportunity. I rate the stock as
a "Buy" right now.
The One Stock to Own in 2014 - The Year Mobile Takes
On Dec. 31, something incredible happened. For the first time
in history, the majority of Internet traffic originated from NOT
from PCs or desktops - but from mobile devices including
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over. And even though the biggest player in mobile, Apple, is
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already on the move. So, before this stock moves any higher, read
our latest report for all the details:
Click here for the full story