AT&T's DirecTV Deal Flies Under The Comcast-Hate Radar, Will Likely See FCC Approval

from the land-of-make-believe dept

With Comcast's attempted acquisition of Time Warner Cable dead and buried, telecom regulators now shift their gaze to AT&T's attempt to acquire DirecTV. Unlike the Comcast deal, AT&T's deal is in some ways worse because it actually eliminates a direct competitor in the pay TV marketplace. Still, somehow the overarching narrative is that the deal isn't nearly as bad because the final company will be only slightly less massive. As such, regulators appear poised to sign off on the deal, with insiders saying they're swayed by AT&T's claims that the deal will somehow help expand broadband services:
"The divergence in fortunes signals that regulators are more worried about providing choice in Internet access and new, online video options than they are about concentration in pay TV...The Federal Communications Commission sees the AT&T deal as helping competition and aiding the spread of broadband into rural areas that lack service, people familiar with the matter said."
The problem? AT&T's merger benefit claims have historically been even more ridiculous than Comcast's. As it stands, AT&T's current plan is to back away from DSL markets it doesn't want to pay to upgrade, leaving cable operators with greater monopoly control over dozens of markets than ever before. AT&T's then planning to run fiber to only very selective high end developments, and shovel most of its older DSL users onto notably more expensive LTE service. Outside of the potential for some satellite/wireless hybrid products, there's really nothing about the DirecTV deal that changes this.

Yet in a recent, heavily-redacted filing with regulators, AT&T promises that if it's allowed to buy DirecTV, it will expand fiber to the home service to an extra two million households. After defending its decision to skimp on network investment for a decade, AT&T's filing illustrates how the telco, unlike Verizon, chose to spend a lot less money on slower fiber to the node service, painting itself in a corner in terms of offering broadband speeds on par with cable. The filing claims that being allowed to buy DirecTV will somehow magically fix this by pushing AT&T to invest more heavily in fiber (and they mean it this time):
"Based on the expected content cost savings alone, AT&T concluded that it will have an economically viable business case to justify expanding FTTP GigaPower’s reach to at least two million additional customer locations that would not meet investment thresholds absent the merger, and AT&T has committed to do exactly that within four years of the closing of the merger. Significantly, this “lift” in the economic viability of FTTP GigaPower service from the transaction is in addition to any further expansion justified by changes in the constantly evolving competitive landscape."
There are a few problems with this scenario. One, AT&T has a long history of using phantom broadband expansion as a carrot on a stick for regulators, then failing to follow through. Whether it's the company's acquisition of BellSouth or its failed acquisition of T-Mobile, AT&T's strategy has always been to take broadband deployments it was planning to do anyway, then break them out as a pretended added expansion should its latest deal get approved. Meanwhile, AT&T's Gigapower service is, as previously noted, mostly aimed at high-end housing ("greenfield") developments. Even if real (which if history is any indication it's not), two million isn't much of an expansion when you consider how much fiber to the home service $49 billion would have purchased. Even if AT&T sees cost savings thanks to improved programming leverage, AT&T's historically the type to pocket those proceeds -- not put them back into the network.

Even M&A loving Wall Street analysts don't quite understand the point of the DirecTV deal, even though history (T-Mobile) has made it perfectly clear the telco is willing to spend tens of billions simply to reduce sector competition. Some argue that buying a satellite TV operator at a time when cord cutting is just starting to nibble at satellite's subscriber base -- and the traditional pay TV ecosystem is undergoing a seismic shift related to unsustainable pay TV rates -- just doesn't make sense. As such, the FCC may be thinking the deal may not need to be blocked, given it may just be dumb enough to be irrelevant over the long haul. It may even be able to extract some consumer-friendly conditions in the process.

Still, in the short term, AT&T's inevitable competitive-hamstringing of the traditionally more price disruptive DirecTV is troubling. It's here I'll remind folks that AT&T's attempt to nab T-Mobile was blocked, and the result was undeniably a more competitive wireless marketplace than before. Meanwhile, Comcast's deal was refused in no small part thanks to the extreme, negative public sentiment surrounding cable service and the Comcast brand. Though AT&T is every bit obnoxious and aggressively anti-competitive as Comcast, AT&T's merger has managed to fly under the public-perception radar. Should AT&T's deal (and bundled nonsensical broadband expansion plans) be approved, AT&T's certainly going to owe the folks at Comcast a very lovely "thanks for the distraction" gift basket.

Filed Under: broadband, competition, doj, fcc, fiber, gigpower, mergers, tv
Companies: at&t, comcast, directv


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  • identicon
    AnonCow, 27 Apr 2015 @ 10:49am

    Every merger under review should have a list of deliverable that both sides promise in the merger is approved. Specific deliverables and timeline. If the deliverables are met on the timeline, the merger has to be unwound at the expense of the merging companies. And only these specific named benefits can be considered by regulators.

    Imagine how much more conservative the parties would be about the benefits of their merger.

    I'll wager that most mergers would check the box stating "No specific benefits"...

    reply to this | link to this | view in chronology ]

  • identicon
    PRMan, 27 Apr 2015 @ 11:11am

    I already switched to Dish

    I switched to Dish and I told DirecTV that the AT&T merger was the reason why. I refuse to do business with that company. They've got a lifetime ban from me.

    Now I'm saving money every month and the Hopper is actually a much better DVR.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 27 Apr 2015 @ 1:50pm

      Re: I already switched to Dish

      it seems I may also have to 'cut the cord' on my DirecTV if this merger goes through - although at this point, I won't bother switching to anything... except internet streaming.

      I already dislike DirecTV - but AT&T would make it a million times worse :(

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 27 Apr 2015 @ 11:27am

    quite amazing how stupid people are when trying to act less stupid. this is as bad as the Comcast failed (thankfully) deal. had any one in politics wanted to do something that was truly beneficial to the American public and not cause even greater monopolies than they already have, the deals with independents that were thrown out through the bullshit copyright claims would have been the ones to do. as it is, whatever comes into being in the next few months will be because of the bills thrown at politicians and Obama behaving in ways not becoming a President!

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 27 Apr 2015 @ 12:44pm

      Re:

      Friend coward, you could do with some more capital investment yourself. And (a) president is not a proper noun, even with Obama in office.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 27 Apr 2015 @ 2:21pm

    Dish here I come!

    reply to this | link to this | view in chronology ]


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