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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.

Stand-alone services

For three years after the deal closes, AT&T promises that it will continue to offer a stand-alone broadband service with speeds of 6 megabits per second (where possible) in areas where broadband service is already available. That suggests the new 15 million locations may not have access to this stand-alone service from AT&T, but that's not yet clear. AT&T did not respond to a request for clarification.

DirecTV will also be available as a stand-alone service for at least three years after the deal closes. And both DirecTV and AT&T broadband will offer guaranteed pricing during the three years to ease concerns that a merger means jacked up prices.

But what happens when those three years are up? Will prices suddenly skyrocket? "Whether the [AT&T-DirecTV] deal goes through or not, prices are going to rise," said Erik Bannon, senior analyst for U.S. television at IHS. "And they are going to rise slightly faster than disposable income. It's just a foregone conclusion. That is the modus operandi of every pay TV operator."

So you'll pay more no matter what. But at least there could be opportunities for attractive service bundles combining AT&T's various services with DirecTV's content.

The crown jewel of DirecTV's offerings is its exclusive deal with the National Football League. NFL Sunday Ticket lets DirecTV subscribers view all out-of-market football games for $240 per season. Bump that up to $330 and DirecTV subscribers can also stream those games on their PCs and mobile devices.

But DirecTV's pact with the NFL expires at the end of the 2014 football season, and the pressure is on to make sure Sunday Ticket stays with the company. 

In fact, Sunday Ticket is such a high value service that AT&T made sure it could cancel its DirecTV acquisition if the NFL deal isn't renewed later this year, according to a government filing

"[The AT&T acquisition] gives DirecTV increased incentive to get this NFL deal done," said Ireland, who sees a number of potentially attractive NFL bundles for consumers. "[Sunday Ticket] could still be exclusive over DirecTV satellite, but perhaps also offered with AT&T Mobile or AT&T U-Verse. It could increase the value of the deal for NFL, and it could increase revenue opportunities for AT&T/DirecTV."

Who knows? Maybe one day you'll be able to buy Sunday Ticket as a complement to your new AT&T-flavored iPad with wireless broadband. But you can bet on paying more for the privilege.

The potential AT&T-DirecTV deal makes some big promises about how the merger would benefit consumers. But with rising prices a seemingly foregone conclusion, potentially toothless net neutrality commitments, and an unclear broadband expansion, it's far from certain that this deal will turn out to be a good thing for anyone beyond shareholders of the two companies.

 

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