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What will consumers gain from AT&T's DirecTV buy?

Ian Paul | May 20, 2014
It's official: AT&T wants to buy DirecTV in a deal valued at around $48.5 billion. And to help the acquisition's public appeal, the telecommunications giant is offering a number of sweeteners.

It's official: AT&T wants to buy DirecTV in a deal valued at around $48.5 billion. And to help the acquisition's public appeal, the telecommunications giant is offering a number of sweeteners.

In return for approval to purchase DirecTV, AT&T is promising to make more broadband available to more U.S. homes; stand-alone AT&T wireline broadband will be available where it is now for three years; and DirecTV will continue as a stand-alone satellite TV service also for at least another three years.

To top it all off, AT&T promises to respect the Federal Communications Commission's net neutrality rules that were struck down by a federal court in January.

More broadband in America, commitments to stand-alone services to maintain competition and choice, and a promise to respect the principles of net neutrality? Sounds like a menu of guarantees tailor-made to appeal to federal regulators, and AT&T freely admits it.

"[The DirecTV acquisition] is designed to ensure that when you look at this transaction that it is very consumer friendly and very much in the public interest," AT&T CEO Randall Stephenson said during a conference call with analysts on Monday.

AT&T has good reason to be concerned about regulators balking at its DirecTV buy since this deal may actually have a tougher time than the looming Comcast-Time Warner Cable purchase, according to Greg Ireland who covers the cable industry for market-research firm IDC. (Disclaimer: IDC and TechHive are owned by the same parent company.)

Cable operators typically don't overlap in coverage areas, Ireland argues, so it's not like customers would necessarily lose a competing service if Comcast successfully buys Time Warner Cable. Not so for AT&T and DirecTV who do overlap.

"Some of the appeal of the TV services that AT&T and Verizon offer is that it is an alternative to cable that doesn't require a satellite dish," Ireland said. "I think one of the key areas that regulators will focus on is how are you going to preserve customer choice in those overlap markets? And what types of assurances can you give that customers aren't going to be disadvantaged?"

Digital rights advocacy group Public Knowledge sees a similar problem. "The most obvious concern is that customers in [AT&T] U-Verse territories would lose a video competitor, though the transaction would have nationwide effects," John Bergmayer, senior staff attorney at Public Knowledge, said in a statement.

U-Verse is AT&T's "triple-play" bundle of services that includes broadband, and Internet-based telephone and television.

Net neutrality

In a clear nod to public sentiment, AT&T says it will continue to abide by the Federal Communication Commission's now-defunct net neutrality rules for three years after the deal closes. Those rules restrict Internet Service Providers from slowing down one online service in favor of another, or from blocking other services entirely.

 

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