AT&T, DirecTV Resist 'Self-Serving' Interconnection Conditions, Other Demands
AT&T and DirecTV are pushing back against calls for the FCC to attach interconnection conditions and other obligations to their planned deal. AT&T and DirecTV say the critics’ proposed conditions are “self-serving demands” that have little or nothing to do with the transaction. “Rather, they are designed only to advance unrelated business interests or specific policy agendas,” the prospective partners said in a Tuesday ex parte filing after officials from both companies met with FCC staffers Thursday.
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The FCC’s nonbinding 180-day time clock remains stopped on Day 170, but the FCC and Department of Justice reviews appear to have entered the end game, even opponents said Wednesday. Government action "could be very soon,” said Matt Wood, Free Press policy director. Another AT&T/DirecTV critic expects DOJ and the FCC to act within the next four weeks but says the timing depends on both sides. “It’s a matter of how hard the FCC will push and what AT&T will agree to,” the critic said. “AT&T is desperate for the merger to happen.”
The FCC and DOJ are generally expected to conditionally approve AT&T/DirecTV, but the precise conditions remain in play, with interconnection particularly contentious, sources told us. “I think there’ll be some serious conditions imposed on the deal regarding stand-alone broadband, data caps and net neutrality,” the AT&T/DirecTV critic said. But the critic was less certain about interconnection: “They’re all important conditions, but even if AT&T and DirecTV agree to all of them, I don’t think it would hurt them. None of the conditions would materially impact the deal.”
“To the best of my knowledge, the FCC has not yet made its ask,” said another industry official following the proceeding. “Typically, there will be a meeting where the FCC staff tells the companies what they want, and then the companies, sometimes after negotiating, will eventually come back with a list of voluntary commitments to address the demands.”
New Street Research analysts recently said they expected AT&T and FCC staff to agree on interconnection conditions soon. After that, “The deal may face another week or two of FCC review, leading to a final sign off as soon as early to mid-June, though it could be delayed due to final tinkering at the FCC Commission level,” the analysts said in a May 17 note.
In their Tuesday filing, AT&T and DirecTV said they had offered voluntary commitments to deliver public-interest benefits, including “expanding and enhancing high-speed broadband service to millions of customer locations, providing standalone wireline broadband service at reasonable market-based prices, offering DIRECTV satellite service at nationwide package prices, and abiding by 2010 Open Internet protections.” But the companies made it clear they weren’t ready to accept numerous conditions, including those proposed by Cogent, Dish Network, Free Press, New America’s Open Technology Institute and Public Knowledge (see 1505130042 and 1505180042).
The government has no legal or policy basis to impose conditions “on the highly competitive interconnection marketplace,” said AT&T's and DirecTV's Tuesday filing, which noted various agreements AT&T and others had recently signed with Level 3 and Netflix. The companies said the opponents had failed to show how their proposed combination even raised interconnection issues. Worse, the proposed conditions would subvert and distort industry arrangements, shifting costs and other burdens to AT&T and its subscribers while giving a free ride to other Internet backbone and edge providers, their filing said.
Wood said the DirecTV takeover gives AT&T more incentive to protect its legacy video services by using interconnection and related practices to make sure that over-the-top online video remains “a complement not a substitute for video.” But AT&T and DirecTV in their filing denied they would have any such incentive, including to use usage-based pricing or sponsored data policies to harm online video competition. AT&T said its data allowances for wireline customers “accommodate the great majority of customers” and noted Comcast and other broadband providers “offer similar allowances.”
AT&T and DirecTV defended AT&T’s stand-alone broadband commitment and opposed proposals to require AT&T to offer the service “at below-market prices for an extended period,” their filing said. They also opposed a “laundry list” of other conditions proposed by parties such as ACA, Comptel, Cox, Dish, Public Knowledge and TiVo.