AT&T's Already Happily Tap Dancing Around Its DirecTV Merger Obligations

from the ye-olde-merger-condition-two-step dept

If you’ve followed the telecom sector for any amount of time, you’ve probably noticed that the merger conditions affixed to its rotating crop of mega-mergers are usually hot garbage. Frequently the ankle-height goals are proposed by the companies themselves, and are usually something the companies planned on doing anyway. Telecom companies also know full well that regulators historically can’t be bothered to check their math on such promises, letting them essentially trot out a rotating crop of feel good, but totally hollow “obligations” before they get to work laying off redundant employees and raising rates.

It’s a win-win relationship of dysfunction, where giant companies get to grow ever larger, and regulators score cheap political points for “toughness” thanks to a media that can’t be bothered to actually read the fine print of such deals, lest readership get bored.

When Comcast was pushing for its 2011 acquisition of NBC Universal it crafted a new wrinkle in this old story. It proposed offering $10, 5 Mbps broadband to low-income homes if regulators signed off on the deal. And while regulators were happy to promote this as yeoman’s work in bridging the digital divide, it didn’t take long before low-income families began protesting in the streets, pointing out the plan was hard to find, hard to qualify for, and difficult to sign up for. Still, Comcast’s “Internet Essentials” plan has been a PR bonanza, with the cable giant holding an endless barrage of PR junkets advertising its selfless altruism.

To get regulators to sign off on its $69 billion DirecTV acquisition, AT&T proposed a similar $10 low-income broadband program it calls “Access.” Under Access, low-income homes can get discounted, slow DSL service for an unspecified limited time — provided they are in AT&T territory, have no outstanding debt with AT&T, and have at least one resident who participates in the US Supplemental Nutrition Assistance Program (SNAP). Under the program, users can get 5 Mbps or 10 Mbps DSL for the $10 price point, or 3 Mbps for $5 a month, which certainly sounds promising.

But the National Digital Inclusion Alliance this week issued a report noting that the company oddly omitted homes that can only get speeds of 1.5 Mbps. Given ISPs’ tendency to refuse to upgrade many low-income areas, this naturally exempted a significant number of inner city applicants that might otherwise qualify for the service:

“You might think we’re talking about a few isolated rural areas here. Think again. According to data published by the FCC from its Form 477 surveys of providers, AT&T’s fastest reported download connection for VDSL (its current version of Digital Subscriber Line service) was 1.5 mbps or less for households in about 21% of all Census blocks in the cities of Cleveland and Detroit. Those blocks are mostly in inner-city neighborhoods with many low income households.”

In a city like Cleveland, where AT&T has had little competitive incentive to upgrade its low-income urban networks, you’re ultimately talking about a significant number of the poorest communities being unable to get speeds much faster than 1.5 Mbps:

So the group asked AT&T if they wouldn’t mind, you know, actually offering the discounted service to these slower-lines, and found their request flatly refused:

“About two months ago, NDIA contacted senior management at AT&T and proposed a change in the program to allow SNAP participants living at addresses with 1.5 Mbps to qualify for Access service at $5/mo. Yes, we know we were asking for the minimum speed to be lower than it should be, but paying $5/mo is better than paying full price and in many neighborhoods, both urban and rural, Access is the only low-cost broadband service option.

I’m sorry to report that, after considering NDIA’s proposal for over a month, AT&T said no. ?AT&T is not prepared to expand the low income offer to additional speed tiers beyond those established as a condition of the merger approval.”

That shouldn’t be too surprising. These low-income programs sound great upon shallow inspection, but once you’ve weeded out consumers that already have service, or owe their phone or cable company money (kind of common when you’re struggling to pay the bills), you’ve already eliminated a huge swath of qualified applicants. AT&T apparently thought they could shave off another few million qualified households countrywide by refusing to provide service to its slower 1.5 Mbps DSL customers, hoping nobody would notice.

Of course, it’s possible that AT&T will buckle should this story gain some mainstream media attention (unlikely), and promote its inclusion of 1.5 Mbps as just another generous act of altruism in the company’s neverending quest to protect the poor.

AT&T’s other “major” DirecTV merger condition was that it would deploy fiber to millions of additional homes, but as we’ve long noted, the company has a long history of fiddling with numbers to falsely inflate its deployment projections for such services. When it comes to fiber deployments, AT&T’s often just lighting up some existing, already buried fiber at high-end housing developments, then crowing in a rotating crop of press releases that it has “launched” yet another market — despite the fact that few can actually get the service.

After more than a generation, AT&T is the master of the merger condition two-step, having effectively tap danced around conditions affixed to most of its previous acquisitions, including BellSouth. For that deal, AT&T promised stand alone DSL at a discounted rate, then went out of its way to hide the offer from consumers. Regulators often don’t bother to fact check or enforce such flagrant middle fingers after the fact since it would be an admission that the conditions — and the mega-mergers they help prop up — quite often actively harm the consumers regulators are supposed to be looking out for.

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Companies: at&t, directv

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Comments on “AT&T's Already Happily Tap Dancing Around Its DirecTV Merger Obligations”

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Anonymous Coward says:

Telecom companies also know full well that regulators historically can’t be bothered to check their math on such promises, letting them essentially trot out a rotating crop of feel good, but totally hollow “obligations” before they get to work laying off redundant employees and raising rates.

I don’t think its the math Tim!

When your job requires its…. you know the rest.

Keep asking for that regulation… it’s working oh so well! Studies show how stupid and lazy the people are and how easily they and their money are soon parted.

clemahieu (profile) says:

Trust in central planning is always a letdown.

Billions of products in free markets are delivered and improved each day since there’s a profit incentive for being better than your competitors.

This central planning debacle is failing even the most rudimentary promise not even a year from its inception.

Again, focusing at the state level at removing monopolistic laws (a problem created by government) will open up the industry to free market benefits.

Ox says:

I live in rural Georgia, and have been at this address for the better part of 16 years. The only service we’ve ever had out here is dial up, landlines and Satellite T.v. and mobile. The only way to get Internet here is using mobile [cell phone/mobile broadband device]. DirecTv sent an ad last year advertising their Internet service for $150 or somewhere in that area. The catch? 25 GB’s of data. Further catch? 5 GB’s during peak times [6 a.m. to 9-10 p.m. and 20 GB’something during off peak [11 p.m. -12 a.m. to 6 a.m.] We’ve been asking ever since moving here for them to provide service [AT&T cable/dsl] but it’s always a no. They would just rather take in the $$$ from using mobile devices. [I use verizon though :)] Very frustrating.

That One Guy (profile) says:

"Sure, absolutely, just need you to do a few things..."

Any future mergers by companies should be blocked entirely until it’s been demonstrated by a third-party that hates the company’s guts that they have fully met all of their previous merger conditions.

Once they’ve demonstrated that they can be trusted to uphold their end of the deal, then and only then should they be given the opportunity to sign a new deal.

tvvcrdesk (profile) says:

Another ignorant article followed by ignorant comments.

If a person is getting 1.5Mbps service, it’s most likely because they are receiving service via IP-DSL and not VDSL. In short, it actually costs AT&T more to provide these slower speeds. It’s perfectly sensible to not offer discounts on this lower tier of service and it was a great idea to ensure the contract covered this. Unfortunately, if the cost is too much then you should go with another provider.

If there is no other provider, it’s not because of corruption or distorted markets. It’s because you live in the middle of nowhere and no company can justify spending millions of dollars to bring the service to you. However, if you will lay the infrastructure, I’m sure they’ll provide the service.

Anonymous Coward says:

Re: Another ignorant article followed by ignorant comments.

Absolutely, totally, verifiable not true. AT&T, like every other large ISP, refuses to spend money to upgrade services in lower income parts of the city. Population density isn’t a part of the equation. It’s not a question of whether or not a significant percentage of the resident of these neighborhoods can afford service, it’s a question of Average Revenue Per User/Customer. Higher numbers for a product or class of products plays well for investors. The aging network will need to be upgraded eventually, but their calculus no doubt shows them that the possibility of more customers doesn’t sufficiently offset the possible reduction in ARPC…

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