The CEOs of AT&T and DirecTV were pressed on Capitol Hill on whether their proposed $49 billion merger, pitched as a way to achieve cost efficiencies, would lead to lower prices for consumers, but neither company committed to such a scenario.
Instead, AT&T chairman and CEO Randall Stephenson said that the rate of increase would be slowed, while DirecTV chairman and CEO Michael White said that consumers will see “better valued bundles” with the linkage of AT&T’s broadband and voice services and DirecTV’s satellite video options.
The CEOs of both companies appeared before House and Senate Judiciary subcommittees on Tuesday in hearings on their $48.5 billion transaction, announced last month. The Justice Department and the FCC must sign off on the deal, but the subcommittees have oversight over the government regulators.
While AT&T and DirecTV were met with friendlier questions from lawmakers than Comcast and Time Warner Cable faced earlier this year about their planned merger, some lawamkers expressed worries that it was the latest in a wave of media consolidation.
“The question is, where does this end?” said Rep. John Conyers (D-Mich.).
Rep. Darrell Issa (R-Calif.) asked the CEOs, “Are we looking at a future where in order to be competitive, companies have to find these partners?”
Stephenson and White, however, tried to distance themselves from the Comcast-TWC deal, noting that their transaction is driven by a desire to draw on each company’s strengths in the bundling of broadband and video services. Although there is overlap between DirecTV and AT&T’s U-verse in some markets, Stephenson said the merger would allow U-verse to expand and become profitable, as because they will be able to realize lower costs for channel carriage.
The companies also have been pitching the merger as one that will put downward pressure on prices across the industry. In Stephenson’s written testimony, he said that they would be a much more formidable competitor, allowing them to price their own services “more competitively,” and enough to drive cable and other competitors to lower their prices.
Yet pressed by Sen. Richard Blumenthal (D-Conn.), the CEOs would not say that meant that their own subscribers would see lower monthly bills.
What it would do, Stephenson said, was allow them to slow the rise in programming costs. He said that it is “hard to say how much [in cost savings] will be passed along to the consumer,” noting that prices are always fluctuating.
Blumenthal was wary. “If I am ordinary consumer I am rolling my eyes because I have seen this before,” he said.
Another critic of the merger, Sen. Al Franken (D-Minn.), questioned why AT&T has lobbied in some states for laws that prevent cities from offering their own broadband service. Stephenson said that in areas where they have made substantial investment, they shouldn’t have to compete with taxpayer-financed Internet service, characterizing it as “inconsistent” with a free market.
The merger did have clear supporters. Rep. Hank Johnson (D-Ga.) said that the FCC should consider the public interest benefits in reviewing the transaction, including the deployment of broadband services to rural areas. He noted that the Communications Workers of America had endorsed the transaction. Sen. Mike Lee (R-Utah) warned of competitors trying to use antitrust law to their advantage.
Others who testified warned that the merger would only make a situation worse for smaller competitors. Ross Lieberman, senior vice president for government affairs at the American Cable Assn., said that smaller cable operators are paying 30% more for programming that larger companies. He said that regional sports networks affiliated with DirecTV would have more incentive to gouge smaller operators in negotiations to carry their channels.
Chris Keyser, president of the Writers Guild of America, West, expressed concerns that the increased leverage of the combined companies means greater power in distribution pricing, ultimately having an impact on what has been a boom in scripted programming. Keyser said that the “outsided power of monopoly” would result in “less creativity, less product, less innovation.”