AT&T & DirecTV announced $49B deal, what comes next for consumers?

May 19, 2014
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After my wife and I recently moved into our new house, we were frankly confused and annoyed at being forced to choose between two completely different TV providers and one, maybe two, internet providers with speeds above dial-up. Now, it looks like in the future, we will only need to call one company for everything as we would have no other choice!

Yesterday, AT&T agreed to acquire DirecTV in an equity deal valued at $48.5 billion. Including net debt, the transaction values the biggest satellite-TV provider in the U.S. at $67.1 billion. Let’s not forget that Comcast, the largest cable-TV company in the country, is waiting for regulatory approval for its $45 billion acquisition to acquire/merge with¬†Time Warner Cable.

Federal regulators therefore have a very tough decision to make on whether to allow these mega-mergers to go through.

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Recently, Comcast completely embarrassed themselves in trying to drum up the broadband and TV competition in the country so it makes sense to then consider merging AT&T-DirecTV so that AT&T and Comcast would command about two-thirds of the American pay-TV market. Yes, two-thirds.

Additionally, AT&T plans to pay for this merger¬†partially with¬†cash, by selling some of its assets and by taking on additional debt. So, AT&T would become the¬†nation’s largest pay TV operator, a significant competitor would be eliminated and AT&T would be taking on billions of dollars in debt that ¬†it needs to pay off.

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Well, I must admit that when I read it like that, the merger screams “more choice, better service and less cost to the consumer.”

AT&T also seems to understand the concern of net neutrality with their potential merger. The Washington Post is reporting today that in¬†order to help¬†win approval, AT&T is offering to abide by net neutrality principles for three years: “the company would not block Web sites; it would also not discriminate against certain Web content by slowing down or speeding up different lanes of Internet traffic to customers.”

That’s nice of AT&T…..for three years.

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AT&T also wants people to know that if the merger with DirecTV is allowed, they will spend money¬†to bring broadband to 15 million¬†rural households. Again, this sounds nice but it sounds extremely similar to Comcast’s¬†proposal to bring broadband to low-income housing if their deal with NBC was allowed. The deal went through and almost nobody signed up for the low-income housing internet program because the restrictions were absurd and allowed few, if anyone, to sign up.

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Today, consumers got yet another reason to be excited about the prospects for an AT&T and DirecTV merger. On the heels of a new study by Nielson which suggested that American TV viewers pay for (on average) 189 channels while watching just 17 of those channels, the CEO’s of AT&T and DirecTV spoke to an audience and made it clear that any form of a-la-carte channel selection would not occur.

Without any doubt, a-la-carte has significant drawbacks. But the bigger issue is that there is this idea that continues within the CEO world that the bundled channel model can not be¬†deviated from and that the¬†sheer volume of channels creates “value” for the consumer. Meanwhile, consumers continue to be hit with repeated rate hikes for low-quality and unwatched content.

But, not to worry as the Los Angeles Times informs us of what will be occurring in the near future:

The deals by Comcast and AT&T are expected to spark even more consolidation. Other companies seen as potential merger candidates include satellite broadcaster Dish Network, telecom giant Verizon and cable operator Cox Communications. There has even been talk that AT&T might quickly move to acquire Dish and then merge it into DirecTV.

 

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