Media

Why you should hate the AT&T-DirecTV merger

Image Credit: illustration via Tom Cheredar/VentureBeat
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It’s hard to imagine that AT&T’s $48.5 billion merger with satellite TV service provider DirecTV will result in increased competition for consumers. That said, I’m sure AT&T will do its best to “prove” this will indeed be the end result.

But reasonably speaking, there are a few things you can probably expect to happen should that merger gain approval from federal regulators.

Media consolidation as a business strategy

To really understand what effect a ATT-DirecTV merger would have on competition, you’ll have to think about the long term. Should federal regulators approve this deal, it will solidify the notion that consolidation is the most reasonable path for media companies looking for a solid business strategy.

That’s the wrong message we should be sending to these companies, which could be spending billions of dollars to innovate and upgrade existing services to grow the business instead of just merging.

“For the amount of money and debt AT&T and Comcast are collectively shelling out for their respective mega-deals, they could deploy super-fast, gigabit-fiber broadband service to every single home in America,” president of media advocacy group Free Press Craig Aaron said in a statement to VentureBeat.

“But these companies don’t care about providing better services or even connecting more Americans. It’s about eliminating the last shred of competition in a communications sector that’s already dominated by too few players,” he added.

Fewer real choices

A DirecTV service under AT&T might actually have more clout than the current iteration, but that would come at a cost that may not manifest itself for years. AT&T already has relationships for content licensing through its Uverse cable TV service, which could be used or combined when negotiating for DirecTV.

Why does this matter? Well, basically it means that Uverse and DirecTV’s programming will likely be very similar if not identical over the next few years. That means you’ve got one less choice for a pay TV service if you’re unhappy with AT&T as a cable TV provider.

“I’m skeptical that this deal is in consumers’ best interest,” said Sen. Al Franken (D-Minn.) in a statement about the merger.

“We’re moving toward an industry with fewer competitors — where corporations are getting bigger and bigger and gaining more and more control over the distribution of information. This hurts innovation, and it’s bad for consumers, who have been getting squeezed by higher bills.”

Franken said he plans to raise these issues with his fellow members of Congress.

Higher prices

AT&T likely wants this DirecTV merger to go through so that it can bundle the TV service along with its wireless cellphone plans. Both of these services are available nationwide, which would give AT&T an advantage over other carriers who don’t have a national option for bundling.

It also allows AT&T to charge more if you don’t want to bundle services while still being able to tell people prices are coming down.

For further proof that prices won’t come down, you need only look to the other massive media-company mashup being discussed, the Comcast-Time Warner Cable merger. Neither of those companies promised lower rates for television or Internet services, citing the high cost of content licensing agreements and expensive costs associated with upgrading existing broadband infrastructure.

Don’t be surprised if the same is true for AT&T, starting with a potentially much more expensive licensing deal to renew DirecTV’s NFL Sunday Ticket.

Of course, AT&T might also get a nice price break after becoming a more powerful player in the pay TV space, too.

“Two providers are going to control well over half of the pay TV market. More than half of all subscribers will belong to AT&T or Comcast. This gives leverage back to the service providers,” IDC analyst Greg Ireland told VentureBeat.

“If you’re the programmer, you have only two major distributors to work with.”

Ireland said this could cause programmers to be a bit more willing to negotiate lower pricing but that willingness is no guarantee the savings will get passed down to consumers.

Appearance of more choice

Should federal regulators approve an AT&T-DirecTV merger, it would likely be after the newly merged company agreed to some stipulations. One of those could be that AT&T has to sell off its existing TV service Uverse to a competitor. (Either that or all Uverse customers would be transitioned to DirecTV.)

Having recently forged a tentative agreement to take a large chunk of subscribers from Comcast-TWC, Charter might be one company that could take these Uverse customers. Alternately, the newly formed SpinCo (a new cable provider entity created by Comcast and Charter, post-Comcast/TWC merger) could also absorb some of those AT&T customers. And let’s not forget Cablevision or Cox.

One important thing to point out here is that none of these competitors are large enough to compensate for the loss of a major TV service provider like DirecTV.

VentureBeat staff writer Mark Sullivan contributed to this article.

More information:

AT&T is bringing it all together, from revolutionary smartphones to next-generation TV services and sophisticated solutions for multi-national businesses. For more than a century, they have provided innovative, reliable, high-qualit... read more »

DIRECTV (DTV) is the world's leading provider of digital television entertainment services. Through its subsidiaries & affiliated companies in the United States, Brazil, Mexico & other countries in Latin America, DIRECTV provides digit... read more »

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12 comments
Peter James Herz
Peter James Herz

No more disgusting than the recent re-appropriation of NBCs logo by Comcast

Kenny Hart
Kenny Hart

It don't think it will happen. AT&T has an out if the NFL package is not renewed. It's just a guess but I have a feeling Google will be at the bidding table for the NFL package. It will change TV as we know it.

Jason Reuter
Jason Reuter

Pretty sure that's just for the sake of having a photo for the article...

Jeff Lz
Jeff Lz

Time-Warner/Comcast, ATT/DirectTV, the death of Net Neutrality..What kind of legacy is the Obama White House leaving behind?? Obama can claim to be only an observer but no one believes that he cannot exert great influence.   This is a series of blows to  telecommunication that one might expect under a Reagan or a Bush..  Not only it is a major disappointment to those who helped elect Obama .. he is helping to create additional threats to democracy.

Colleen Sprague
Colleen Sprague

If Google or Amazon bought an NFL package that you could stream to your Smart TV, I'd never pay another monthly cable bill again.  I so wish that were an option.  Sunday Ticket is the absolute only reason I bother with DirecTV, their on demand is a joke.  I don't even use it because I can't rent the movies I want half the time unless I'm ALSO paying for the premium channel.  Dumb.  Streaming through Amazon is so much easier and right on my TV through my $30 internet.  Whaatt, if not for football, do I even need cable for.   Rant over I just really hate TV companies.  They always just exactly fail to deliver the good experience I'm looking for.

Jim Wolfson
Jim Wolfson

@Jeff Lz Obama has neither the intelligence nor interest to push technology, competitiveness or American business forward.  He's too busy golfing and denying knowledge of his multiple incompetent scandals.