Wedbush: Net Neutrality Developments Could Be A Positive For Netflix, Amazon

In a report published Monday, Wedbush analyst Michael Pachter commented that the latest net neutrality developments are "positives" for both Netflix, Inc. (NASDAQ: NFLX) and Amazon.com, Inc's (NASDAQ: AMZN) Instant Video.

On February 26, the FCC adopted "strong" net neutrality rules to protect the open Internet through "bright-line rules" that ban blocking, throttling, and paid prioritization by Internet providers.

Pachter noted that the developments positively impact Netflix, which has seen increasing streaming delivery expenses in recent quarters resulting in part from payments to Internet Service Providers to maintain or improve the performance of its streaming capabilities. The analyst added that it is "likely" that Amazon also experienced similar increases in delivery expenses.

However, Pachter stated that he expects the new rules will be modified or overturned by legislation, given the Republican majority in Congress. If this were to occur, Netflix shares will be "negatively impacted," while shares of Amazon will also be "negatively impacted" but at "a lesser extent."

"Ultimately, we don't expect a Republican Congress to accept greater government regulation of the Internet, and we expect a legislative solution addressing the FCC's actions," Pachter concluded.