ETF Winners And Losers If FCC Repeals Net Neutrality

In a move to bolster deregulation in the telecom space, Federal Communications Commission (FCC) unveiled a draft to repeal the Net Neutrality regulation undertaken in the Obama era. The FCC is slated to vote on the proposed changes at its next monthly meeting on Dec 14.

The rules so far have prevented high-speed Internet service providers (I.S.P), from stopping or slowing down the delivery of websites. They also inhibited the companies from charging customers additional fees for high-quality streaming and other services, as per the source.

Below we highlight a few ETF winners and losers if the FCC rule is passed.

Winners

All ISPs along with several cable TV and telecommunications industry behemoths have been fervently opposing Net Neutrality. The Obama era move proved to be less profitable for these companies thanks to a deluge of prohibitions.

Abandoning of the discriminatory policy in turn results in lower investments in the high-speed broadband sector. In any case, "per a recent study by USTelecom, investment in broadband infrastructure declined from its peak at $78.4 billion in 2014 to $77.9 billion in 2015 and $76 billion in 2016."

Needless to say, such prohibition will make telecom ETFs winners.

Vanguard Telecommunications Services ETF VOX

The fund gives exposure to the telecom industry. Verizon Communications, AT&T and Level 3 Communications are the top three holdings of the fund. It holds 27 stocks in total and charges 10 bps in fees (read: ETFs to Watch on Telecom Earnings).

Fidelity MSCI Telecommunication Services Index ETF FCOM

The fund represents the performance of the telecommunication services sector in the U.S. equity market. Verizon Communications takes about 23.3% of the fund followed by AT&T (22.2%) and T-Mobile US (4.65%). The fund charges 8 bps in fees.

Losers

The announcement and the likely repeal of the rule is likely to put pressure on Internet-based companies like Google GOOGL and Amazon AMZN. Higher broadband prices and tolls for content could be imminent outcomes, as per an article published on usatoday.com. This is because content developers might have to pay higher sums to ISPs for high-speed data transfer.

Christian Dawson, executive director of i2Coalition, a group of Net infrastructure companies which includes Amazon and Google went on to explain that "this vote will negatively impact small and medium-sized Internet business, and has the potential to decrease jobs and economic growth system-wide", to the benefit of a very few large organization, quoted on usatoday.

Side by side, consumers may also be negatively impacted by this move as they might end up paying high charges.

So, a few Internet and consumer ETFs need to be watched out.

PowerShares NASDAQ Internet Portfolio PNQI

The underlying index looks to track the performance of the largest & most liquid U.S.-listed companies engaged in Internet-related businesses and that are listed on one of the three major U.S. stock exchanges. The fund charges 60 bps in fees. Internet software and services companies account for about 56.1% of the fund. Amazon.com, Netflix, Alphabet and Facebook are the top four holdings of the fund (read: Top-Ranked Tech ETFs to Buy on Facebook's Robust Q3).  

Global X Social Media Index ETF SOCL

The fund looks to track the Solactive Social Media Total Return Index. Tencent Holdings (11.3%), Twitter (10.3%) and Facebook (9.8%) are top three holdings of the fund.

iShares US Consumer Services ETF IYC

The fund looks to track the price and yield performance of the Dow Jones U.S. Consumer Services Index. Retailing (40.2%), Media (21.6%), Consumer Services (17.3%) and Food & Staples Retailing (12.79%) are the top four industries here (read: Amazon ETFs to Buy on Q3 Blowout Results).

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