AT&T Files DirecTV Deal With FCC

Says together they can be stronger phone/pay TV/broadband competitor to cable bundle
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AT&T Wednesday officially filed its proposed DirecTV merger with the FCC, including public interest statements, saying the deal was all about the bundle.

"This transaction will unite two companies with uniquely complementary assets to create a strong, national competitor that delivers consumers an unparalleled combination of broadband, video, and wireless services," AT&T told the FCC.

AT&T announced in May that it had agreed to acquire satellite operator DirecTV in a $48.5 billion deal creating the second-largest pay TV operator.

In its public interest statements, AT&T said that the main reason for the meld was that they could achieve together what they could not separately: "A compelling bundle of video and broadband services" that neither company could offer individually.

At an Aspen Institute event Wednesday, AT&T D.C. exec James Cicconi said that one goal of the deal was to create a stronger national video competitor to cable, a point the public interest statement made high up. "AT&T can only provide video service, and thus a broadband/video bundle, to…less than one-quarter of U.S. TV households," the company said. "As a result of its relatively limited video footprint, AT&T is far smaller than Comcast and Time Warner Cable, its principal competitors. Lack of scale particularly hinders AT&T with respect to content acquisition, which is by far the largest variable cost of MVPD service."

AT&T pointed out that 97% of AT&T's current video customers already take at least a double-play of services, predominantly video and broadband.

AT&T said the deal would allow it to expand its video footprint sufficiently to get more and better programming. "As a result of its relatively limited video footprint, AT&T is far smaller than Comcast and Time Warner Cable, its principal competitors. Lack of scale particularly hinders AT&T with respect to content acquisition, which is by far the largest variable cost of MVPD service."

AT&T outlined the consumer benefits of the deal, which it summarized as being the stronger competitor to cable that bundling will allow. But it also talked about offering high speed broadband to an additional 15 million customer locations within four years.

That will comprise FTTP wireline broadband service to 2 million more customer locations fixed wireless local loop (WLL) technology to approximately 13 million, mostly rural, customer locations. Cicconi talked about that rural commitment at the Aspen Institute event, signaling the filing was imminent.

The fixed wireless component will be offered in areas outside AT&T's wireline footprint, as well as within it to those who do not receive a U-verse broadband and video bundle. AT&T pointed out that will expand access to OTT video services like Netflix, Amazon, Google and Hulu. Access to online video competition could be a selling point with the FCC.

AT&T said the deal will benefit competition by putting significant downward pressure on prices for bundles of AT&T/DirecTV service, not to mention the improved quality--though AT&T did mention it.

AT&T made the following deal commitments "to ensure the continued vibrancy of OTT competition, as well as video competition more generally."

1, "AT&T will adhere to the Commission’s Open Internet protections established in 2010 for three years after closing, regardless of whether the Commission re-establishes such protections for other industry participants following the D.C. Circuit’s vacatur of those rules."

2. "[F]or three years after closing, AT&T will continue to offer standalone retail broadband Internet access service at reasonable market-based prices, including a service of at least 6 Mbps [high-speed] down (where feasible) at guaranteed prices in areas where AT&T offers wireline broadband service today."

3. "AT&T will commit to offer, for three years after closing, standalone DIRECTV satellite video service at nationwide package prices that do not differ between customers in AT&T’s wireline footprint and customers outside the footprint."

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