AT&T lays out why DirecTV merger is good for consumers
Though Comcast鈥檚 merger with Time Warner Cable has dominated headlines this year, it isn鈥檛 the only major telecommunications merger the Federal Communications Commission is facing.
Last month AT&T announced a plan to buy DirecTV for $48.5 billion. Obviously, one of the nation鈥檚 largest telecom companies purchasing a major satellite TV company has regulators concerned, and the FCC and Department of Justice are currently taking a look at the deal. This week AT&T laid out why the merger would be good for the American consumer, but that doesn鈥檛 mean there aren鈥檛 lingering questions.
, AT&T says that the merger with DirecTV will actually allow competition in the cable market to flourish, because it would allow AT&T and DirecTV, two smaller cable companies, to compete with cable giants such as Comcast and Time Warner Cable (which could soon become one major cable behemoth).
More specifically, AT&T says that since DirecTV only offers satellite services and not broadband, DirecTV will be crushed by the larger cable companies. AT&T pointed out that most customers purchase their cable plans 鈥渂undled,鈥� meaning that they get a comprehensive package of TV, Internet, and phone. With the merger, AT&T says DirecTV could offer that option and compete with larger companies that handle all of these services.
On the other hand, AT&T says it doesn鈥檛 have the market influence it needs to provide a bundle that can compete with larger cable companies. It says that with DirecTV鈥檚 satellite services, it can lower the price of its cable bundles, therefore also forcing the price of Comcast and/or Time Warner Cable鈥檚 bundles.
"Each company cannot provide on its own what consumers increasingly demand: an integrated and efficient bundle of high-speed broadband and high-quality video from a single provider,鈥� AT&T said in the filing.
Overall, AT&T does have fewer Internet and cable subscribers than Comcast, but it makes significantly more revenue: last year, it made $128.8 billion in revenue while Comcast made $64.7 billion. Comcast鈥檚 executives have said that regardless of merger outcomes, cable bundle prices would not go down, or even increase slower.
The major concern is where AT&T and DirecTV鈥檚 markets overlap. AT&T operates in 22 states, a smaller number than Comcast and Time Warner Cable, and the company says that this makes it more difficult to compete with these two cable giants. If the merger goes through, AT&T and DirecTV would have access to more than 48 states and would expand broadband access to mostly rural areas. The FCC and Department of Justice are likely to have questions about whether this improves competition or just extends AT&T鈥檚 reach.
AT&T also says it will abide by the 2010 net neutrality rules (the ones that were thrown out in a January court decision) for at least three years after the merger.
The merger is subject to questions and approval by the FCC and Department of Justice. If it goes through, it will likely be finalized by May 2015.
