The busy summer telecom merger season continues apace. Late yesterday, AT&T filed its paperwork with the FCC, officially kicking off the regulatory process that the company needs to get through in order to buy DirecTV and allow the two to live happily ever after.
The details of the process for the potential AT&T/DirecTV merger are about the same as they are for Comcast and Time Warner Cable. Telecom companies have to prove that their pairings are in the public interest, and the FCC is the agency responsible for agreeing or disagreeing with their arguments.
In the public interest statement that AT&T filed with the FCC yesterday, they make a few key arguments for why bringing satellite pay TV under their roof is in the public good:
To keep DirecTV competitive against cable companies. DirecTV is a satellite-based TV-only service. They don’t offer their own broadband, instead partnering with other companies — mostly AT&T — to allow customers to order double- and triple-play packages. “Despite their efforts,” the statement says, “AT&T and DIRECTV have been unable to make significant inroads against the integrated bundle offerings of entrenched cable companies.” DirecTV needs the boost to remain an option for consumers.
To make AT&T bigger (and therefore more competitive against cable companies). AT&T specifically calls out Comcast, arguing that Uverse is a “relatively limited video footprint” that is far smaller than the competition. In order to compete against Comcast and Time Warner Cable, therefore, they need the boost of bringing wider-reaching TV distribution in-house. Doing so, the claim runs, will allow them a better bargaining position for content acquisition, to offer more programming at lower rates (to them, not to consumers).
To create more bundle packages for consumers. We consumers do like to put our internet and TV in the same package, it is true. 97% of AT&T customers do, at least, and over 75% of cable subscribers do too, the statements says. But AT&T says the merger will not only bring DirecTV satellite television and AT&T wired broadband together, but also wireless service. Ordering your home internet and your family’s mobile plan as a bundle? That would be new.
To increase and improve broadband connections. AT&T basically says that buying DirecTV will provide them with the means and the motivation to make broadband infrastructure improvements, including bringing high-speed internet access to 13 million under- or unserved rural customers, and creating another 2 million residential fiber connections. The document also specifically calls out how cord-cutting consumers benefit, citing increased access to “Netflix, Amazon, Google, and Hulu” with increased broadband penetration.
There is one big theme underlying all of the arguments that AT&T puts forward in the document, and it is “significant competition” from “the cable incumbent.”
“Cable has long been the dominant provider of broadband and video services in the United States,” they write, “and if the Comcast/Time Warner Cable/Charter transactions are completed, that dominance will swell even further.”
That argument translates as: Comcast is huge, and after it buys Time Warner Cable, it will be gargantuan. In order to compete against a company that big, we need to be gargantuan, too — and in ways we can’t grow in-house.
That might be more of an argument for the FCC to block the Comcast/TWC merger, than an argument for why they should allow the AT&T/DirecTV one. But the two are separate regulatory proceedings, and each needs to be considered on the basis of its own arguments. And now we start the long legal process of finding out if AT&T’s arguments are enough to sway the FCC.