AT&T buys DirecTV, now biggest traditional TV provider in US

25 Jul 2015 | Author: | No comments yet »

AT&T exec in charge of DirecTV, talks branding, rates, Net neutrality.

Dallas-based AT&T Inc. won its 14-month battle to gobble up DirecTV, the nation’s largest satellite TV company, on Friday, when the Federal Communications Commission voted to approve the $67 billion takeover.

NEW YORK — Even as TV watchers increasingly go online, AT&T has become the country’s biggest traditional TV provider with its $48.5 billion purchase of DirecTV.Just a couple of days after the DoJ said the deal could go through and FCC Commissioner Tom Wheeler recommend its approval, the FCC voted to make the $49 billion AT&T / DirecTV combo official — with a few conditions.The merger puts AT&T’s John Stankey in a new role as CEO of AT&T Entertainment & Internet Services, where he will run both DIRECTV and AT&T’s home solutions operations. Already the nation’s 12th-largest company and its second-largest wireless phone company, the new AT&T will also be the world’s largest provider of pay TV, edging out cable giants Comcast and Time Warner Cable, against which it had previously struggled to compete.

As we’d heard, the approval comes with strings (in place for four years) including a requirement AT&T expand its fiber network, hook up gigabit internet to eligible schools and libraries and provide affordable standalone internet for low-income customers in its service areas. At least three of the five FCC commissioners have voted in favor of the deal with conditions, according to the sources, who spoke anonymously because the votes have not yet been made public. Instead, FCC Chairman Tom Wheeler and his colleagues viewed AT&T’s deal as a vehicle to tackle one of their highest priorities: improving the nation’s high-speed Internet network.

The company said it will serve more than 26 million U.S. customers and more than 19 million in Latin America, making it the world’s biggest pay-TV company. The FCC’s vote, likely to be completed and announced on Friday, was the last regulatory step toward the completion of the merger between the second-largest U.S. wireless carrier and the largest satellite-TV provider. In a key condition to win approval, AT&T agreed to dramatically expand its high-speed fiber optic broadband network and upgrade Internet connections to schools and public libraries. The deal combines a nationwide satellite TV service, the country’s largest, with the number two nationwide wireless network as time spent on mobile devices rises. The other net neutrality requirement says AT&T will have to disclose any interconnect agreements — the ones Netflix is so concerned about — to the FCC so it can monitor the terms.

The requirements from the FCC, which ensures that deals are in the public interest, include protections for rival video and pledges to expand high-speed Internet services to schools, low-income Americans and other customers. The deal, which includes the assumption of about $18 billion in DirecTV debt, significantly expands the company’s reach into Latin America and links its 132 million existing wireless customers to a vast array of streaming video content that it says will be as readily available on phones, tablets and computers as it is on television. “Combining DirecTV with AT&T is all about giving customers more choices for great video entertainment integrated with mobile and high-speed Internet service,” said Randall Stephenson, who will continue as AT&T chairman and CEO. “We’ll now be able to meet consumers’ future entertainment preferences, whether they want traditional TV service with premier programming, their favorite content on a mobile device, or video streamed over the Internet to any screen. Those deals, announced this spring, have a combined value of $67 billion and would catapult Charter into the third-largest pay-TV provider in the nation, behind AT&T and Comcast. As the U.S. wireless market reaches saturation, AT&T hopes to tap into DirecTV’s business and has been expanding its footprint in Mexico after buying the third and fourth largest wireless carriers in that country recently.

FCC officials had expressed concern that there would be less incentive for the combined company to expand the network given that AT&T’s U-verse and DirecTV compete in some markets. Nobody else has the kind of toolset (and) breath that we now have–scaled content, world class mobile network, broadband network, the technical compatibilities to take all that out over an IP infrastructure.

But whether that new and stronger company means better service or cheaper bills for consumers in an increasingly consolidated telecommunications industry remained unclear Friday. The AT&T deal did not spur the same fears from consumer groups because the firm would not contain an entertainment unit like Comcast’s NBCUniversal and would not gain Internet users, considered the future of the industry, by buying DirecTV.

In addition, AT&T will be required to offer an inexpensive Internet plan for low-income residents. “For our goal of universal broadband access to be realized, we need both universal deployment of networks and access to affordable services,” FCC Commissioner Mignon L. And then there’s the basic blocking and tackling thrust (to take) two big companies and get the benefits of being able to leverage product distribution. Not surprisingly, rivals among the nation’s big and small cable companies, as well as programmers like Netflix, had opposed the deal from its inception. Clyburn said in a statement. “This merger makes strides in achieving both of these goals.” Integration of the two companies is expected to take several months. TL;DR version: No Sunday Ticket for U-verse, your current plans, channels and pricing won’t change, but new cross-bundles are coming soon. · Fiber to the Premises (FTTP) Deployment.

As late as this week, the FCC received new objections from companies and consumers alike, including one man who wrote to say that as a standalone company, DirecTV provides him with a competitive alternative to AT&T’s U-verse video service. “AT&T has raised my monthly rate for TV from $36 to $75 over the last two years. Recognizing that the merger reduces AT&T-DIRECTV’s incentive to deploy FTTP service, the Commission adopts as a condition of this merger the expansion of FTTP service to 12.5 million customer locations.

I recently received an offer from DirecTV of $19.99 per month if I switch back,” he wrote. “This kind of competition will be killed if the FCC allows AT&T to take over DirecTV.” But in congressional hearings, concerns like those were relatively muted. Video companies Netflix Inc. and Dish Network Corp., traffic company Cogent Communications Holdings Inc and others had fought for the FCC to reject the $45 billion Comcast merger, but took a more lenient tack with AT&T. The issues are addressed by the FCC’s conditions with requirements for AT&T to count its own affiliated video services toward any data caps on fixed broadband connections and to share with the FCC all traffic exchange agreements it strikes with content and web transit companies.

Still, the FCC made clear Friday that this summer’s slow consideration of the proposal came as a result of considering how a larger AT&T will affect consumers and the industry as a whole. And you should probably expect weeks (from now) you’re going to start to see things in the market that will represent the integration and togetherness of those products.

I’m not going to tell you today what the price is and what those products are but they will be out there and I think you’ll be surprised by how fast we move out there. It also agrees to not set data usage policies that would make it cheaper or faster for customers to stream content provided by DirecTV instead of content provided by competitors. What does this mean for cities waiting for AT&T’s GigaPower Internet access service, which the company says allows users to download a TV show in three seconds? It speeds it up, AT&T says. “When the expansion is complete, AT&T’s all-fiber broadband footprint will reach more than 14 million customer locations.” Who will lead the company? We think Title II is a regulatory overreach and it adds a degree of uncertainty into an investment marketplace (when the) FCC at any time can choose to reach in and reset the rules or regulate price or change performance metrics that create problems for consistency in business models.

But in the new company, revenue from consumer mobile customers will rank behind its business services division and the new video-focused entertainment and Internet division. But we also want that ability so that we can go start working with the people who have the really attractive content to build these new distribution models.

If you’re talking about 26 million homes that buy video — traditional linear video — and 100 million high quality handsets and customers that are out there, many of whom have smartphones, that’s a whole other opportunity to distribute content. That will allow us to do something with these guys that others who don’t have this whole set of vertically integrated capabilities—home broadband, mobile, great TV product, etc. — can do. So the vast majority of folks are going to have more than enough work to do over the next several months and years to get this business operating right, aside from some of the corporate overheads that we’re going to have to manage through.

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