Policy

Consolidation Critics Lay Into AT&T/DirecTV

Free Press, Consumers Union, Public Knowledge Weigh In 5/18/2014 9:00 PM Eastern

The news Sunday that AT&T was trying to buy DirecTV for $48.5 billion plus almost $20 billion in debt drew jeers from some familiar anti-consolidation voices.

 

"You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers," said Delara Derakhshani, policy counsel for Consumers Union.

 

“On the heels of Comcast’s bid for Time Warner Cable, AT&T is going to try to pull off a mega-merger of its own," said Derakhshani. "These could be the start of a wave of mergers that should put federal regulators on high alert.  AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes. The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end."

 

“The captains of our communications industry have clearly run out of ideas," said Craig Aaron, president of Free Press. "Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition. These takeovers are expensive, and consumers end up footing the bill for merger mania."

 

“AT&T is willing to pay $48.5 billion and take on an additional $19 billion in debt to buy DirecTV. That's a fortune to spend on a satellite-only company at a time when the pay-TV industry is stagnating and broadband is growing. “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," said Aaron.

 

Comcast's proposed deal is valued at $69 billion including debt.

 

“Wall Street deserves much of the blame for rewarding acquisitions instead of investments in infrastructure," Aaron said. "Weakened antitrust enforcement hasn't helped. But this merger wave is also a result of more than a decade of shortsighted FCC policies that have encouraged consolidation over competition. FCC Chairman Tom Wheeler — who has stated his mantra is competition, competition, competition — has the power to block these wasteful and anti-competitive deals. And he should use it.”

 

John Bergmayer, senior staff attorney at Public Knowledge, said what the industry needs is more competition, not consolidation, though he was not dismissing it out of hand. "The burden is on AT&T and DirecTV to show otherwise," he said. "We'll have to analyze this carefully for potential harms both to the video programming and the wireless markets. The most obvious concern is that customers in U-Verse territories would lose a video competitor, though the transaction would have nationwide effects."

 

AT&T and DirecTV will have to submit the deal, including a public interest statement, to the FCC, as well as to the Federal Trade Commission and Department of Justice for antitrust review.

 

AT&T says it will abide by network neutrality rules for three years and pointed out it plans to participate in the broadcast incentive auction and will bid at least $9 billion, so long as there is enought usable spectrum for it to bid on, given the FCC's planned low-band carve-out and spectrum aggregation limits. It also made other commitments to try and smooth the regulatory road to approval.

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