FCC Signs Off on AT&T DirecTV Merger, And Early Indications Are The Conditions Are Hot Garbage

from the AT&T's-magic-math dept

While Comcast's failed merger attempt with Time Warner Cable received a well-deserved media and public beating, AT&T's almost-as-bad $49 billion acquisition of DirecTV has been able to largely fly under the radar, despite the fact that only the latter eliminates a direct pay TV competitor. With less public pressure from consumer outrage, the FCC and DOJ appear poised to approve AT&T's deal, and the FCC is circulating an order approving the deal among the agency's Commissioners. Approval could occur as soon as this week.

In a statement issued to the FCC website, FCC boss Tom Wheeler states he's pushing for several conditions on the deal he claims will "protect consumers, expand high-speed broadband availability, and increase competition." One of them involves restricting AT&T from using its fixed-line usage caps for anti-competitive advantage:
"In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections."
The problem? While AT&T's DSL users do face a 150 GB monthly usage cap (with $10 per 50 GB overage fees), AT&T's busy kicking these unwanted customers to the curb because they're too expensive to upgrade. On the other hand AT&T's U-Verse customers, the ones AT&T plans on keeping, don't face an enforced usage cap. As such, a condition preventing them from abusing this non-existent cap isn't much of a condition. Most of AT&T's controversial "zero rating" practices in regards to usage caps are happening on AT&T's wireless network, which the condition wouldn't apply to.

Wheeler's also promising that his conditions will force AT&T to deploy upgraded broadband services to more areas than ever before:
"If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment, increases the entire nation’s residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.
The problem here is that AT&T's been manipulating its broadband deployment statistics for fifteen years or so to win regulatory favor. The company will take deployments already planned (or in some cases built), pretend these users are new deployments, then promise regulators it will engage in a broadband "expansion" if regulators only agree to "X" (deregulation, more subsidies, more tax breaks, merger approval, whatever). Nobody in DC has ever bothered to actually audit AT&T's endlessly shifting deployment projections, or even call them on the statistical slight of hand.

And AT&T appears to be doing that again here. With the FCC's help.

Back on April 21st, 2014 -- a month before the deal with DirecTV was even struck -- AT&T announced a shiny new PR campaign (designed to counter Google Fiber's buzz) proclaiming the company would be bringing fiber to "up to" 100 cities. These are cherry picked installs, mostly high-end developments, where install costs are already low because fiber's already in the ground. You might recall that AT&T then pouted and threatened to pull these limited upgrades if net neutrality rules were passed. When pressed by the FCC, AT&T backed down on the threat.

But in a highly-redacted June response to the FCC (pdf), AT&T states that the company is promising to deploy fiber broadband to a total 11.7 million homes (this includes the April 2014 plans) should the merger be approved, with only 2 million of this total being actual, new deployment. So only a fraction of this 12.5 million number Wheeler is using is "new" at all, and it's certainly nowhere near "10 times" the size of AT&T's current deployment. The tl:dr version is that AT&T's taking existing (and in some cases finished) deployments, pretending they're totally new deployments only made possible by the DirecTV merger, and the FCC's helping them.

The real irony is that AT&T's actually cutting fixed-line investment CAPEX so it can focus on more-profitable capped wireless, and in the process preparing to hang up on tens of millions of unwanted DSL users. This is going to leave cable with an even stronger monopoly than ever before across a huge swath of the country, and few people in the press, public or in government appear to have noticed or care. Instead, we get a mega merger bloated with AT&T's miracle math.

I think the majority FCC is ok with AT&T's merger because buying a satellite TV provider on the eve of the Internet TV revolution is basically business seppuku, ultimately made irrelevant by the rise of alternative options. But the elimination of a direct competitor still means higher rates in the short term, and there's an awful lot of actual fiber that $49 billion could help deploy. There's little to no hard consumer benefits here, and as usual AT&T lawyers are doing a bang up job manufacturing some out of very thin air (while filing two lawsuits against the FCC's net neutrality rules to ensure nobody can police their behavior after the merger conditions expire).

Note the FCC hasn't released the full details of the conditions, so hopefully there's more teeth here than Wheeler's original announcement suggests. But his willingness to buy into AT&T's magic, meandering math isn't a promising start.
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Filed Under: broadband, conditions, fcc, satellite, tom wheeler, tv
Companies: at&t, directv


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  1. icon
    fgoodwin (profile), 24 Jul 2015 @ 6:27pm

    Is the FCC really that dumb?

    "The tl:dr version is that AT&T's taking existing (and in some cases finished) deployments, pretending they're totally new deployments only made possible by the DirecTV merger, and the FCC's helping them".

    It amazes me that Bode, a third party w/o access to all the merger data, can figure this out, but the FCC staff, with all the merger info at the fingertips, cannot.

    Is the FCC really that dumb or is Bode really that smart?

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