Mergers and Consumer Interests

Keeping pace with the onslaught of new technology has always been a battle for old-wave telecom companies. Recently, it seems mergers and acquisitions have been the primary weapon in the fight to stay relevant. That certainly seems to be the case for AT&T, as they took a (proposed) giant leap forward in their offerings on May 20th when they announced plans to acquire satellite TV giant DirecTV.

The acquisition has certainly caused a stir over the past month. Consumers looking for easy bundling of high-speed Internet service with their increasingly Internet-reliant TV programming are excited to hear news of a potential merger. But observers are watching to see if the government will attempt to block a deal. Over the past decade the government, and specifically the FTC and FCC, have made no qualms about their opposition to merging tech and media giants. They’ve been inventing hurdles wrapping the processes in red tape for the past few years. They’ve attempted to block 44 mergers in 2012 alone and successfully blocked several that would have been a key to developing new and better options for consumers.

Currently the FCC and Department of Justice are reviewing another similar buyout in the cable industry, where Comcast seeks to purchase Time Warner Cable. While we don’t yet know the outcome, most experts fear the deal can’t possibly go forward in “any recognizable form.” In 2011, the Department of Justice blocked a merger that would have helped create a better and faster network for cell phone carriers AT&T and T-Mobile. And this merger isn’t the first attempt for DirecTV who in 2002 sought permission to merge with rival EchoStar. In that deal, the merger was shot down in a unanimous vote. The history of mergers in the media industry doesn’t seem to bode well for the AT&T – DirecTV deal, and AT&T seems to know it.

AT&T offered a lengthy argument this past week in favor of their plan, in the form of a public interest statement to the FCC. The 10-page memo likely serves as preemptive defense against an expected onslaught from the FCC and Senate in the coming weeks. While the filing didn’t surprise anyone, it brought to light some of the consumer benefits of the acquisition that may have gone unnoticed.

The $48 billion buyout, first announced on May 20, could be one of the largest of its kind. And before legislators and bureaucrats shoot down the idea and laud themselves as consumer advocates, it would do them well to hear out the many reasons that the AT&T plan could change the landscape of mobile and television access in a ton of positive ways.

First, thanks to VoIP and other new technologies, different types of companies are offering new and expanded services. To corner the market, those companies have been bundling services together under a single monthly rate. The practice makes life easy for consumers, and helps to expand new product lines for media companies. The proposed deal would allow DirecTV–who had until now been reliant on cumbersome multi-company deal-making to even attempt to bundle services–to finally offer competitive bundles of meaningful products. The new competition in the bundling market means more choices and easier servicing for consumers.

Secondly, the savings and lower cost of operation that are an inherent outcome of the merger will likely be passed to consumers in one of two ways. Consumers will see a decreased cost in using either satellite service or broadband Internet, and AT&T promises to use part of the savings to invest in infrastructure. If the administration and FCC’s shared goal of universal Internet access are not simply rhetoric, this merger could go a long way in finally bridging the Internet divide for the remaining small minority of rural households lacking access.

And third, the new deal would allow DirecTV to finally compete in the over-the-top consumer video market with increasingly popular brands like Netflix and Hulu. As a “one-way” video provider, DirecTV (despite its innovative record for programming) has begun to lose swaths of subscribers to programming they receive via broadband networks.

So, as the many governing bodies begin to circle above the proposed deal, it would be wise for them to keep consumer interests in mind; not just as a matter of rhetoric, but as one of policymaking.

Zack Christenson writes on digital tech issues for the American Consumer Institute Center for Citizen Research.

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