This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Comcast Wins All the Battles but Risks Losing the War Against Internet Core

Stocks in this article: CMCSA GOOG NFLX TWC T VZ CTL TST YHOO RAX

NEW YORK (TheStreet) -- Comcast (CMCSA)  seems to win all the battles when it's really losing the war.

The war in question is between the Internet Core, represented by Google (GOOGL) and Netflix (NFLX), and the Internet Edge, represented by companies such as Comcast and Time Warner Cable (TWC) as well as the phone companies AT&T (T), Verizon (VZ), and CenturyLink (CTL).  

Internet Core companies operate by sending bits out of a data center and therefore are more nimble and with lower costs than Internet Edge companies, which manage the actual connections and the physical network needed to run them. While such concepts can be a blur for customers who can buy content from both, Edge companies are finding it more and more difficult to get paid for the transmission of content. 

Comcast certainly won another battle this quarter. Revenue was up 3.5%, cash flow was up 7%, operating income was up 10.7%, and earnings per share were up 16.9%, beating analyst estimates at 76 cents per share.

Read More: Here's the Biggest Takeaway From Apple's Solid Earnings

The stock rose and now trades at a Google-like price-earnings multiple of 19.4. But the casualties of the ongoing war were also disclosed with Tuesday's release. The number of video customers kept falling with a drop of 144,000 to 22.46 millions. The number of Internet-only customers rose by 203,000, but these accounts have lower Average Revenue per User than video accounts. 

The net neutrality fight is over who pays for bits that travel from the core companies to the edge ones. Under the traditional doctrine of "peering," bit traffic is designed to be two-way as in a traditional phone call, or the sender of bits is supposed to pay for use of the recipient's network. The Federal Communication Commission (FCC) has been trying to find a way to enforce peering rules in an age where people want video streams and think their Internet Service Provider (ISP) bill pays the full costs of delivery, which it does not. Millions of people complained against the FCC proposal fearing that it may put an end to the "open Internet age," but what the regulator is trying to do is simply have core companies paying for the "last mile" delivery.

This is especially important when it comes to edge networks, which cost more to maintain and upgrade than core networks. To upgrade a core network you may have to run a new fiber line, or you may just have to upgrade the electronics in a data center so that the fiber between centers recognizes more "colors" and thus has more capacity. To upgrade an edge network you have to run trucks -- most edge networks still lack fiber to the home that could be remotely upgraded. Maintenance also means costly truck runs.

Read More: Apple's Ho-Hum Quarter Is a Set-Up to Its Biggest Product Launch Ever

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs