AT&T/DirecTV Concessions Seen Standard for Such Deals; FCC Approval, Hill Hearings Viewed as Likely

AT&T and DirecTV executives examined areas that are cautionary to regulators and identified the conditions from there, said Stephenson. The deal is going to create “a very different competitor,” said Stephenson. He expects the deal to help AT&T to accelerate growth and redefine the entertainment business in the mobile and high-speed broadband world, he said. It gives AT&T the opportunity to develop new over-the-top (OTT) services, he said. The synergies of the transaction “will allow us to deploy IP broadband to 15 million additional households, mostly in rural areas,” he said. DirecTV will continue to be available on a stand-alone basis nationwide at prices that are the same for all customers for at least the next three years, he said. AT&T plans to have a bundled offering “right out of the gate” if the transaction is approved, he said.

AT&T’s plans to participate in the broadcast incentive and the AWS-3 auctions haven’t changed, Stephenson said. AT&T’s previous spectrum acquisitions will be critical to delivering video service over the next six years, he said. The AWS-3 and broadcast auctions are going to be very important for the industry, “and we have structured this transaction in a way that ensures we will have plenty of capacity to be very active in both of those auctions,” he added. What DirecTV’s premium business is missing is “owning our own two-way broadband pipe into the home and being able to offer a bundled offering to customers with a single bill,” said DirecTV CEO Mike White. This deal “gives us exactly that opportunity,” which would lead to more competitive pricing, he said.

Hill Plans Hearings

Lawmakers will inevitably dig into implications of AT&T’s proposed acquisition of DirecTV, announced Sunday night (see separate reports in this issue), Capitol Hill aides and industry observers told us. That deal requires approval from the FCC and from the FTC or Justice Department, and Congress oversees the approval process. House and Senate Judiciary committee members announced hearings. Congress has tackled such antitrust questions in recent months, as the Senate Judiciary Committee and House Judiciary Antitrust Subcommittee held lengthy hearings on Comcast’s proposed purchase of Time Warner Cable.

The AT&T deal, part of “an accelerating trend” of video market consolidation, “deserves careful examination,” said Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., in a statement. “I welcome the commitments made by the two companies to enhance service to rural America, but those commitments must be real and quantifiable, and the companies have to live up to their promises.” The combined company, if the deal is approved, must be “responsive to those demands and the broader public interest,” and Congress “needs to look closely at how to foster more video competition, particularly through online video distribution platforms,” Rockefeller said.

Senate Commerce will likely hold a hearing in June on holistic video market issues, said a Democratic Senate staffer. That hearing would likely address both Comcast/Time Warner Cable and AT&T/DirecTV, and the Satellite Television Extension and Localism Act reauthorization process, he said. AT&T’s proposed acquisition raises more competition issues than the Comcast one, which involved more questions of sheer scale and content issues, the staffer added. He thinks Senate Hill staffers will have a bigger desire to look at what consolidation is doing to the video market overall, and said many staffers want more details about this latest deal.

Judiciary Committee lawmakers in both chambers have said they will hold hearings on AT&T’s proposed deal. Senate Judiciary Antitrust Subcommittee Chairwoman Amy Klobuchar, D-Minn., said she wants “to examine the effect this merger would have on competition, innovation, and the prices, choices, and service offered to consumers across the country.” Subcommittee ranking member Mike Lee, R-Utah, said the deal “raises concerns about the level of consolidation in these markets” despite the occasional benefits of consolidation. Judiciary “will be looking closely at this transaction,” said Chairman Patrick Leahy, D-Vt.. “I am concerned that the telecommunications marketplace is trending even further toward one that favors big companies over consumers."

Sen. Al Franken, D-Minn., is “skeptical that this deal is in consumers’ best interest” and thinks the telecom industry transformation is “going in exactly the wrong direction,” with fewer competitors and driven by big corporations, he said. “I'm going to press regulators to scrutinize this deal, and I want to see hearings in Congress as well.” Franken has been one of the most outspoken critics of Comcast/Time Warner Cable. Sen. Ed Markey, D-Mass., is “deeply concerned” about the AT&T deal and looks forward to congressional hearings, he said.