Analyst downgrades cable stocks

Cites possible broadband price regulation

NEW YORK - Sanford C. Bernstein analyst Craig Moffett downgraded his rating on cable operators and all the major stocks he covers in the sector to "neutral" Monday, citing possible stricter broadband price regulation.

The comments, ahead of the NCTA Cable Show in LA this week, came after a cable stock decline last week after the FCC said it would reclassify broadband access as part of its national broadband plan.

He downgraded cable giants Comcast Corp. and Time Warner Cable, as well as Cablevision Systems to "neutral" and pointed to the FCC's broadbrand plan.

"The bull case for cable stocks is a simple one: Cable wins the broadband wars," Moffett said. "But the prospect for broadband price regulation cuts to the heart of that thesis."
He added: "Nothwithstanding the FCC's promises of forbearance, the plan to apply Section 201 (b) - mandating "just and reasonable rates" - opens the door to broader price regulation and thereby fundamentally alters the equation for cable."

Meanwhile, UBS analyst John Hodulik upgraded TW Cable shares to "buy," calling the FCC regulatory "fears overblown" and its broadband solution "more industry-friendly than had been anticipated."
"Improvements in the economic and competitive environment and the reacceleration of the industry's two highest-margin product lines - broadband and advertising - bode well for industry fundamentals over the next several quarters," he said.
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