DirecTV, AT&T Make Case for Merger with FCC

It’s all about the bundle.

That’s what AT&T and DirecTV told the FCC in a filing Wednesday that makes the case for why the union of the telco giant and satcaster would be in the public interest. As both sides have repeatedly stated, the combo will make DirecTV a more effective competitor against cable and allow the larger entity to sell bundled broadband/video/telco services.

“At its core, the rationale for this transaction is simply stated. Through this combination, the companies will marry complementary assets to achieve what they could not achieve separately or through a contractual arrangement: a compelling bundle of video and broadband services,” the filing stated.

A stronger entity created by uniting AT&T and DirecTV would provide competitive pressure on all sides to keep pricing for bundled services down, according to the filing. Consumers would benefit from AT&T’s gaining broader access to programming, through the clout that comes with being part of a national MVPD, and from improvements in its broadband speeds and general technological development.

DirecTV is, at present, handicapped by its inability to offer subscribers anything but programming as its satellite delivery system doesn’t allow for the two-way traffic of wired cable. AT&T’s video ambitions are limited because it can deliver video into the home only in areas wired with fiber lines. At most AT&T will reach about 33 million homes with its fiber-line service; at present its U-verse programming package is available in only a much smaller footprint. Since its 2006 launch, U-verse has garnered about 5.7 million subscribers.

As a concession to win approval for the $48 billion deal, AT&T-DirecTV reiterated its pledge to abide for three years after the transaction closes by the net neutrality rules set by the FCC in 2010, even if the commission overhauls them with more lenient terms for broadband service providers. It also vowed to maintain uniform pricing between DirecTV and U-verse program packages so as not to disadvantage existing subscribers of either service.

The FCC is in the early stages of gathering information and public comment in its review of the merger agreement unveiled last month. AT&T of course noted that the pending Comcast-Time Warner Cable merger, which the FCC is also reviewing, was a factor in its decision to pursue a combination with DirecTV.

 

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