This Ruling Could Cost Comcast Millions

By Markets Fool.com

This week Comcast Corporation got a big, fat "no" from the state of Oregon, after the media juggernaut applied for a tax break for its gigabit internet in the state.

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The ruling came from the state's Department of Revenue and overturns a previous ruling by Oregon's Public Utility Commission that said Comcast qualified for the tax breaks.

Under the state's tax laws, companies have to pay a property tax for data-transmission services, which is based, at least in part, on the value of the company's brand (that doesn't seem difficult to calculate at all!).

An exemption from the law was created in order to lure Alphabet's Google in bringing its ultra-fast 1 Gbps Google Fiber to Portland -- and Comcast wanted in on the break.

The ruling could end up costing Comcast tens of millions of dollars in taxes, according to The Oregonian.

Gigabit internet stifled for everyone

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What's interesting about the ruling is that even Google was denied the tax break, which was the very reason why it was created.

So while this could certainly hurt Comcast's wallet, it doesn't necessarily mean Google will have an advantage in the gigabit market in Oregon.

Of course, it's still worse for Comcast because it already has gigabit service in Oregon, so it will have to pay the taxes unless it wins an appeal.

What's Comcast going to do?

Comcast has't said whether or not it will appeal. But the ruling only stands for a year, so it's possible the company could try again later to seek the tax break.

All of this matters because of the increasing competition in the gigabit internet space. Speeds of one gigabit are about 100 times faster than average home broadband speed in the U.S., and Google's expansion of its Fiber service is forcing internet providers to both increase their speeds and drop their prices.

Google charges just $70 per month for 1 Gbps upload and download speeds, and now Time Warner Cable, Comcast and others match both speeds and pricing in cities where Fiber is present.

Gigabit internet connections will hit 10 million by the end of this year, according to Deloitte, and 70% of those will be residential connections. By 2020, the firm expects the number of connections to climb to 50 million to 100 million worldwide.

I say all this because Comcast having to pay tens of millions in taxes not only hurts the company as it expands further into gigabit internet services, but it does so at a time when traditional internet providers are being challenged like never before.

Google is taking its Fiber internet service seriously, even if it is a slow rollout. Comcast and other traditional internet providers will begin to feel even more pressure from Google as the tech giant expands its service across the country.

Comcast might be able to pay the taxes without a problem, but as Google grows into a formidable internet foe, it's likely Comcast would rather spend that money expanding its internet services.

The article This Ruling Could Cost Comcast Millions originally appeared on Fool.com.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). 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.