Washington

House Judiciary Takes Measured View of AT&T/DirecTV

Deal probed, but not hammered, in subcommittee hearing 6/24/2014 01:33:00 PM Eastern

The opening of what will be a bicameral review of the proposed AT&T/DirecTV merger Tuesday began in the House Judiciary antitrust subcommittee, where the deal did not receive any sharp criticism from either side.

In fact, ranking subcommittee member Rep. Hank Johnson (D-Ga.) extolled the virtues of applying AT&T's strong record on diversity, both in employment and the supply chain, and its unionized workforce to DirecTV. The Communications Workers of America, which represents AT&T workers, supports the merger, a point Johnson had read into the record.

DirecTV, by contrast, is non-union, and may fight the one vote to unionize some of its employees that was made in California.

Johnson also said that as a strong advocate for digital inclusion, he commended AT&T's efforts to close the digital divide. He also called on the company to think outside the box when it came to promoting not just buildouts, but education about the benefits of the broadband.

There were concerns raised by the legislators, and witnesses for the American Cable Association and Public Knowledge about the combined company's size and its impact on over-the-top video, independent programming, and customer prices. But all were in the context of relatively non-heated discussions and no sparks flew.

Several members of the subcommittee made the point that there was a lot of potential consolidation on the table. Rep. John Conyers (D-Mich.), ranking member of the parent Judiciary committee pointed out last month the committee vetted Comcast/Time Warner Cable, this month it is AT&T/DirecTV, and next month it may be Sprint/T-Mobile. Have we gone too far, he asked. Not answering the question, but clearly indicating it needed asking.

But echoing a common theme of AT&T chairman Randall Stephenson and DirecTV chairman Michael White at the hearing, Rep. Darrell Issa (D-Calif.) asked whether getting bigger was now the way to insure that there were choices among companies with the scale to be competitive.

Conyers said that logic could lead to a "race to the bottom" of consolidation as competitors heavied up to match the latest merger.

Subcommittee chairman Spencer Bachus (framed the issue with the merger as the ability to achieve economies of scale that allow for access to the capital necessary to create competitive services, with the issues of market power and the possibility of abusing a dominant competitive position.

The hearing was civil, but not without its minor flashpoints. Stephenson bristled at a bloggers assertion AT&T had not lived up to its Bell South merger conditions. He said that was patently inaccurate, based on false data, and the company had lived up to all of them. Bachus moved on, but pointed out that he and other members had all "been blogger" before, giving the verb a clearly pejorative connotation.

John Bergmayer of Public Knowledge suggested that it was not clear which of AT&T's deal pledges about service buildouts and enhancements were new, and which had simply been planned along. Stephenson countered that AT&T had clearly outlined its larger plans for fiber and wireless buildouts and that the additional 15 million buildouts and enhancements via fiber and local loop wireless were additive.

In response to a question about potential job losses, Stephenson conceded there would be some overlap, but that AT&T had a tradition of "elegant" handling of those, including through attrition and moving people to new positions. He also said the 15 million commitment would mean "hard hat" jobs spread out over 48 states. Johnson put in a plug for getting fiber to his Atlanta constituents as part of that buildout.

Parochial interests were in evidence throughout, with members raising issues about where DirecTV did or didn't carry local TV station signals, just where any new jobs might be created, and where rural broadband buildouts might be occurring.

Several legislators picked up on the American Cable Association's concern that the combined company could wind up raising prices for smaller competitors, who, unlike AT&T could not buy its way out of trouble. AT&T made the point that buying DirecTV would help give it muscle in negotiations with programmers.

Among the other notable takeaways from the hearing:

In response to a question, White said that, given the tenor of current discussions with the NFL, he was confident he would renew DirecTV's Sunday Ticket deal by the end of the year.

Stephenson said the merger would lead to more fiber buildouts, not less—one member suggested having satellite video to the home would discourage duplicating that with video.

White predicted the deal could save DirecTV 20% on its $850-per-sub sign-up cost.

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