Warren Buffett buys Verizon stake amid net neutrality debate

As the U.S. Federal Communicatons Commission opens debate on new net neutrality rules, one of the world’s most influential investors is betting that internet service providers are a good investment.

Warren Buffett’s Berkshire Hathaway Inc. has bought 11 million shares in Verizon, the U.S. biggest cable and ISP company, an SEC filing revealed Thursday. The investment is valued at about $530 million US.

Berkshire Hathaway’s filing showing its holding at the end of March also reveals it sold stock in General Motors and DirecTV and boosted its stake in Wal-Mart.

Meanwhile billionaire hedge fund manager John Paulson bought 8.7 million shares in Verizon. Buffett, Paulson and billionaire George Soros already own stakes in Comcast.

Verizon stock is lower than it was this time last year, but still up 2 per cent today after the FCC proposed rules Thursday that may let internet service providers charge content companies for faster and more reliable delivery of their traffic to users.

Verizon and Comcast, which already have deals with bandwidth hog Netflix to pay for quicker access to users, will be big beneficiaries of the new rules.

The principle of net neutrality is that all internet traffic – from a YouTube download to someone’s personal blog – travels at the same speed.

Netflix has taken a position that it shouldn’t have to pay for preferential treatment, but still agreed earlier this year to a fee for direct access to networks, allowing for improved streaming video for customers.

The FCC's proposal tentatively concludes that some pay-for-priority deals may be allowed, but allows 120 days for public comment on how to regulate such deals.

Among the questions it will deal with is whether "some or all" such deals should be banned and how to ensure paid prioritization does not relegate some traffic to "slow lanes."

FCC chair Tom Wheeler has said he would consider any attempts to throttle traffic by carriers (ie. To slow down speeds for customers who don’t pay) to be prohibited.

But after a U.S. appeals court struck down old net neutrality rules in January, it is unclear what powers the FCC has to prevent throttling.

The FCC has said it would require ISPs to provide a "baseline level of service to their subscribers."

But companies such as Verizon and Comcast would be able to ask for fees from companies like Facebook, Google, and Microsoft for faster delivery of their traffic.

FCC officials have said they hope to have new rules in place by the end of the year. They’ve already fielded more than 22,000 comments on the issue.

Critics say abandoning net neutrality would stifle internet-driven creativity and put a high price on innovation, entrenching the power of established internet companies and hurting start-ups.