In case you are not following what is this big commotion about “End of Net Neutrality”, here is a short summary. I also have picked my winners and losers in the ecosystem because of abolition of this rule.

For people unfamiliar with the basic concept of Net Neutrality, it refers to the policy that ensures internet service providers (ISPs) such as Verizon, Comcast, AT&T etc. to offer equal quality of service to all business seeking to leverage internet as its distribution medium. To illustrate, Comcast isn’t expected to cut a deal with Netflix for faster speed of delivering content compared to YouTube content. One must note that Net Neutrality has nothing to do with consumer pricing by the ISPs. As probably you have already seen, that the ISPs already charge higher prices to the consumer for better quality internet service.

I am not going to go into detail about the legality of the situation or even why and why not of Net Neutrality. This blog will analyze how the stakeholders in the ecosystem will be impacted by the abolition of Net Neutrality.

Let’s start of this analysis with the Internet Service Providers (ISPs). With the abolition of Net Neutrality, the ISPs will be allowed to offer different levels of service to the business that wants to ride on its backbone. As a consequence, they will introduce new and differentiated products in the market and their revenue will go up. This ability to control price and service will increase their bargaining power and they probably will make more money even for the current service that they offer in the market. This is a game changer for them.

Now let’s look at how video distributors such as Netflix will be impacted. Netflix has been openly critical about abolition of Net Neutrality. On one hand, more bargaining power for the ISPs may naturally mean less bargaining power for the video distributors. That may be the reason why Netflix does not support it. On the other hand, this ruling will severely constrict possibility of any new video distributor coming in the market. That will definitely benefit Netflix. The only problem is that, all ISPs such as AT&T, Verizon and Comcast are video distributions as well. As a result the benefit that Netflix will get because of less competition in the OTT space (Read broadband), will be nullified by the greater play by the ISPs as content distributors.

Among other video distributors, the one who has subscription or end user based revenue will gain more compared to the ad based service providers. Imagine the case of you tube. With billions of users and low value high volume videos, it might find it difficult to cut an economic deal with the ISPs. In contrast iTune which primarily deals with end user revenue could have easier opportunity to deal with ISPs for higher bandwidth. All in all content model riding on eyeballs will be negatively impacted.

For content creators/owners such as Studios and TV networks (Warner, Fox, Disney, NBCU, Sony), this is a mixed news. Lack of new entrants in the content distribution space will make the existing video distributors stronger. Also, more bargaining power to the ISPs even in the OTT space mean the revenue share of content owners could shrink. However, as explained in the earlier paragraph, the abolition of Net Neutrality may negatively impact the YouTube like business model of ad based revenue on non-premium media. That could mean that premium video will get a lift in the market. Another silver lining for the studios in this issue is that with Net Neutrality gone, content piracy could be badly hit. One can’t expect pirated content sites to cut a deal with Comcast for fast lane distribution.

For consumers, this is only a bad news. Abolition of Net Neutrality will drastically reduce the innovation and competition in the video distribution market. As a consequence we will see price rise for both content and access. However with content piracy gone, your computer might get less infected by computer virus (Just kidding)

To summarize, if you are an investor, go long on Comcast, AT&T and Verizon. Hold Disney and Turner. Sell your Netflix Shares and be ready for some austerity measures at home.