AT&T Starts Telling Washington Why Its DirecTV Deal Should Pass
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Now that AT&T’s plan to buy DirecTV has been approved by both companies — AT&T plans on spending $67 billion, including debt, for the satellite TV company — the next step is getting the deal past federal regulators.
This shouldn’t be that hard, as there’s little overlap between the two companies: AT&T and DirecTV both sell pay TV, but AT&T doesn’t sell very much of it right now.
And while AT&T has a growing broadband business, DirecTV doesn’t own any broadband pipes. It sells its TV customers Internet access by teaming up with companies. That is one of the reasons it is selling out.
Like the Comcast/Time Warner Cable deal, this one is designed to give AT&T/DirecTV more leverage when it comes to making distribution deals with programmers. But just like that deal, AT&T isn’t going to play the consolidation angle up, for obvious reasons.
Instead, it is making the case that combining two companies into one somehow creates more options for consumers. How so?
- More broadband: AT&T says that once the deal closes, it will build out high-speed Internet services that could reach 15 million more people, mostly in rural areas. AT&T says it will use “merger synergies” to do this, which is a translation for “Sure, we could do this now, too. But there’s no business reason to do it, so we haven’t. But if you let us consolidate, we’ll use some of our extra cash to fund it. Okay?”
- Unbundled broadband: AT&T notes that you can get TV shows over the Internet today without paying a traditional pay-TV provider. Instead, the company notes, you can use Netflix or Hulu. That will continue to be the case after the deal, and AT&T has helpfully agreed to lock in its broadband-only prices for three years once the deal is done. (But after that …)
- Net neutrality, for a while: Like Comcast, AT&T says it will honor the net neutrality laws that a federal court has already overturned, “for at least three years after closing.” Comcast* doesn’t have a choice in the matter, as it is already bound by a consent decree. And net neutrality advocates haven’t given Comcast much credit for its pledge — instead they’re worried about one company owning lots of broadband pipes. We’ll see if AT&T’s move helps win any hearts and minds.
Consider today’s announcement a formal throat-clearing. The full speechifying begins tomorrow morning, when the two companies hold an investor/press call to explain the deal. We’ll have more translations for you after that.
*Comcast owns NBCUniversal, which is a minority investor in Re/code.