Why Verizon’s Deal to Buy AOL Is More About Competition Than You Think

NEW YORK (TheStreet) -- As many of the nation's largest telecom service providers have voiced opposition to net neutrality, Verizon Communications' (VZ) $4.4 billion acquisition of AOL (AOL) raises questions about the future of the Federal Communications Commission's rules on how data are delivered over the Internet to consumers.

Telecom industry analysts and experts say, however, that the pending marriage of Verizon and AOL isn't likely to have a detrimental effect on the FCC's efforts to ensure the equal treatment of data, video and other services that travel along the nation's broadband networks.

Net neutrality refers to the concept that Internet service providers should give equal treatment to all data coming over their networks, and not discriminate or charge different rates for users. This has been a hot-button issue over the last few years as consumers use broadband Internet access to stream content from providers such as Netflix (NFLX) to their mobile devices and televisions. In March, the FCC published its Open Internet order rules designed to protect net neutrality.

Mobile and broadband carriers such as Verizon are facing no shortage of competition. Customer turnover, or churn, remains an issue as wireless-service companies make offers to gain new customers and retain current ones. Offering differentiated content is seen as one method of attracting consumers. Verizon, for example, has a deal with the National Football League to stream games over mobile devices on Verizon's network. 

As such, the deal between Verizon and AOL may be of greater concern to the companies' rivals than to those worried about the issue of net neutrality.

"This appears to be more a response to Google (GOOG) (GOOGL) and T-Mobile (TMUS) competitive threats, and the net neutrality angle is a stretch," said Rob Enderle, of the Enderle Group. "However, you can certainly imagine that Verizon will give its own properties preferential treatment over its own networks. This means that the coming wave of 4K streaming content from AOL will look far better on Verizon than on any other service."

Among the reasons that Verizon has given for purchasing AOL is improving its position in the market for mobile video and advertising. And AOL's advanced technology for delivering video and selling ads fits in with Verizon's plans to launch its own mobile-focused video service this summer.

"I can't imagine that removing net neutrality supporter AOL from the equation would have that great of an impact on the FCC's rules [on net neutrality]," said Bill Menezes, a principal research analyst with Gartner. "That's not to say there are not things Verizon may try to do with its content services that theoretically could go against the FCC's idea of net neutrality, but I don't think the assets it's getting with AOL are directly relevant to that."

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