Big cable operators took a punch to the solar plexus this morning, at least as far as Wall Street is concerned. MoffettNathanson Research’s Craig Moffett — a regular among Institutional Investor‘s annual list of top cable analysts, and a longtime industry supporter — downgraded Comcast, Time Warner Cable and Charter to “neutral.” With “cord cutting risks mounting, and with regulation clouding the path forward in broadband, it seems to us to be time to take some chips off the table,” he says.

Comcast Time Warner CableTheir high stock prices haven’t fully reflected the fact that the video business grows wobblier by the month — especially as companies including Dish Network, Sony, HBO and CBS introduce so-called over-the-top streaming alternatives — the analyst argues. Network owners need to make up for revenue losses as their ratings fall, and advertisers find less expensive opportunities to hawk their wares online. So even though none of the individual offerings is “likely to set the world on fire,” the fact that programmers are beginning to offer limited support for OTT  “is a change from the content industry’s previously unified stance in defense of the status quo.”

That could be meaningful, especially if lots of consumers find satisfactory alternatives to the costly pay TV bundle. Cable and satellite execs often dismiss subscriber dissatisfaction, pointing to the recent slowdown in customer losses. But that likely reflects the growth in home ownership as the economy improves. Meanwhile subscribers order fewer video services, while programming costs rise. As a result, since 2013 “video gross profit has begun to contract meaningfully at all the major cable operators.”

Net Neutrality signThat might not be a problem for the companies if they can keep raising broadband prices, especially by replacing all-you-can-eat offerings with metered rates. But “that avenue may no longer be open” — especially once the FCC reclassifies the Internet as a regulated communications service, part of its net neutrality initiative — Moffett says. Even though FCC chairman Tom Wheeler disavows price regulation, that could change over time. “If someone complains that the rate being charged is ‘unjust and unreasonable,’ can the FCC dismiss the case without hearing it?” Moffett asks.

The FCC’s case that broadband is becoming a monopoly or oligopoly that needs to be regulated also raises doubts that the agency and Justice Department will approve Comcast’s planned acquisition of Time Warner Cable. “To be sure, we still believe the deal is more likely than not to be approved,” Moffett says. “But we are cutting our probability of approval (again) to 60/40 from 70/30, to reflect these stiffening political headwinds.”