World Wide Wireless and Worried Telecoms
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In case you didn't hear about it, the Federal Communications Commission is considering a plan to provide high-speed wireless access for the entire country. This would allow users to plug in and connect to the Internet anywhere in the country at no charge (except maybe the taxes). Sounds nice, eh?
Or not, if you're a telecom or wireless provider. Why on Earth would anyone buy your services if it's available freely. Phone calls, Internet connectivity, movies, music, you name it … all provided by the government for your tax dollars and not by any crazy for-profit company. They're not going to take this lying down.
Disclosure, for a time I had an office in Goose Creek, SC where Google provided free Wi-Fi.
So it's a lobbying war. On one side the telecoms and ISPs. On the other big tech firms that believe it will encourage innovation and new technologies that will revolutionize modern life. Not that it hasn't been, though. Imagine that I'm writing this from Moncks Corner, SC for a firm in Alexandria, VA for an audience that reaches he entire world. Now try to imagine that 20 years ago. Not a chance.
Anyway, this is a piece of quietly big news. The type I try to bring you. So here are the sides, and the potential winners and losers.
Google (NASDAQ: GOOG)
The execs at Google think free Wi-Fi for everyone would be a great thing. I think, given a chance, they'd say it would diaper babies and walk dogs. Google, of course, makes money when people are online. The more people are online, the more money Google would make. I expect Google, which is riding high on a share price of $759 and a not-too-high P/E of 23.38, to make a real push. Tech companies have not always been good at playing the lobbying game, though. It'll be interesting to see how this plays out. On this issue: Winner.
Microsoft (NASDAQ: MSFT)
The titan of Redmond is another firm that seems to solidly believe that, when it comes to Internet connectivity, more is better. Microsoft is having an interesting time of it lately. I have great faith that the Surface is going to pay off and the new pricing plan for Office ($100/year subscription with 5 devices) is clearly targeted at Google Docs. Still, the two behemoths are on the same side in this debate. Microsoft's stock has, inexplicably to me, been soft for a year, being down about 10% of the last 12 months. But the firm did raise its dividend to 3.35% so they're confident. On this issue: Winner.
Amazon (NASDAQ: AMZN)
Unlike the other two, Amazon only really plays at being a tech company. It's really a suite of online stores with a sidelight in hardware with the Kindle. But the Kindle makes national Wi-Fi important to Amazon. With Wi-Fi everyone suddenly no one is ever outside the range of purchasing from Amazon for anything. It makes the firm's recent history of buying other stores almost prophetic. The one weakness Amazon has shown in the past is that people can't buy from it without being connected to the Internet somehow. If the FCC goes forward that all goes away. Normally, I'm the last one to push Amazon as I don't think the price is justified by the performance. But I can't say that this doesn't help the company. On this issue: Winner
AT&T (NYSE: T)
AT&T, with others, sent a letter to the FCC last month arguing against the idea of free Wi-Fi nationwide. Don't let anyone snow you; they're against it because it has the potential to make their competitive stance much weaker than it is right now. They would, instead, rather the government continued to sell the airwaves to telecom providers. Still, I can't say that AT&T hasn't looked good this year, the stock has been broadly up and the firm's recent earnings report was pretty good. Toss in a whopping 5.11% dividend and I think AT&T will come out well no matter what. Still, on this issue: Loser.
Verizon Wireless (NYSE: VZ)
Another giant telecom that's hoping it's not on the wrong side of history. Verizon's done well and looks to continue to do so. The firm's P/E is out of whack at 144+ but the trend is good and the dividend is also good. There's a lot here to like, including a recent upgrade from analysts. But it remains to be seen how well they'll be able to cope if suddenly they have to compete for customers with a free phone service via Wi-Fi. On this issue: Loser.
Intel is in an interesting position in this debate. It's not a telecom, it's a true technology firm … and it's one of the best. Still, they make a lot of the chips that are used in existing wireless systems and stand to take a hit if the market shifts under them to a different mode of communication. The firm has expressed concerns that broadening Wi-Fi coverage would crowd existing cellular networks and complicate coverage for all groups. That's big of them. This is another firm with a soft share price over the last year but a good dividend. In general, I like Intel and have for a long time. But they're on the wrong side of this one. On this issue: Loser.
Even if the FCC goes forward it's likely to be several years before government sponsored Wi-Fi goes live everywhere. But a smart investor should start examining the issue ahead of time, figuring out which way it's going to go, and make buys accordingly. In my opinion, which might not be yours, free Wi-Fi is coming, but a lot of money is going to be spent in Washington, DC before it happens. Keep an eye peeled.
Follow Nate on Twitter: @natewooley
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Nate Wooley has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Google, and Intel. The Motley Fool owns shares of Amazon.com, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!