AT&T Claims That DirecTV Merger Will Allow It To Expand GigaPower Fiber Network

ATT-logoWhile we’ve been critical of the Comcast/Time Warner Cable merger, the motivation behind that deal is clear: It would instantly add 10 million customers to Comcast’s bottom line and give the company control over cable/broadband access for the two largest markets in the country. The reasoning behind the less-scrutinized marriage of AT&T and DirecTV isn’t as cut-and-dry.

In a recent merger-related filing [PDF] with the FCC, AT&T contends that the addition of the nation’s largest satellite-TV provider (and second-largest pay-TV service) will allow it to expand its high-speed GigaPower fiberoptic broadband service.

It might seem counterintuitive that you could grow a wireline service by acquiring an inherently wireless business, but AT&T (which only has around 5 million U-Verse TV customers) argues that the TV-related cost savings of adding 20 million DirecTV subscribers will free up resources to invest in fiber-to-the-premises (FTTP) service.

“Based on the expected content cost savings alone, AT&T concluded that it will have an economically viable business case to justify expanding FTTP GigaPower’s reach to at least two million additional customer locations that would not meet investment thresholds absent the merger,” reads the filing, “and AT&T has committed to do exactly that within four years of the closing of the merger.”

AT&T also claims that the availability of DirecTV for customers might result in improved performance for U-Verse broadband customers. According to the company, it would be able to offer bundles of satellite TV and U-Verse Internet access. Since the U-Verse connection would no longer have to carry a TV signal, it would free up capacity for broadband.

The filing does acknowledge that this offloading of TV service onto DirecTV is not a longterm solution or replacement for FTTP.

(We will be sure to remind AT&T of this statement when, in a few years, the company inevitably argues that its existing U-Verse service is just fine and there is no need for costly investment in FTTP expansion.)

DSL Reports’ Karl Bode is even more skeptical of AT&T’s claims that a DirecTV acquisition will result in improved and expanded broadband.

Pointing out that the AT&T filing redacts any relevant math that would give us an idea of exactly how much the company could save, Bode writes that “it’s highly unlikely” that consumers will ever see those savings passed on to them.

“It’s also highly unlikely this savings would be used to expand gigabit offerings with AT&T so squarely focused on wireless,” he writes. “AT&T’s ‘Gigapower’ deployment of fiber to the home is aimed primarily at select high-end developments where fiber is already in the ground, but the telco has dressed it up as a much broader effort for PR effect. There’s nothing specifically about the DirecTV acquisition that will impact these plans; in fact AT&T has a long history of pretending that already-scheduled broadband deployments are only possible if Uncle Sam gives it what it wants.”

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