ATT clears final hurdle to close DirecTV merger: Sources

25 Jul 2015 | Author: | No comments yet »

AT&T Completes $48.5 Billion DirecTV Buy With FCC Approval.

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.

NEW YORK (AP) — 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.WASHINGTON • The No. 2 U.S. wireless carrier AT&T Inc. and the biggest satellite-TV provider DirecTV became the country’s largest pay-TV company on Friday, completing their $48.5 billion merger after receiving final regulatory approval.The Federal Communications Commission approved AT&T Inc.’s $48.5 billion takeover of DirecTV with conditions, making the former telephone company a new powerhouse in the television business with international reach. The panel’s blessing came one year after AT&T petitioned for government approval — a long slog, but one that lacked the public rancor that doomed another proposed merger: Comcast and Time Warner Cable.

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. The deal gives AT&T control of DirecTV’s 20.4 million customers and valuable programming, turning it into a media giant in addition to a telecommunications company.

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.

Armed with DirecTV’s paid content such as NFL Sunday Ticket, which carries an exclusive broadcast of certain professional football games, AT&T stands to entice new subscribers and provide additional offerings to existing customers. 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 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. That said, the two companies do compete against each other in parts of the country where AT&T offers TV service, including in California, Georgia, Illinois and Texas.

With DirecTV, AT&T becomes the No. 1 pay-TV company in the U.S. and gains a stronger negotiating position with media companies over TV programming costs. At a time when fierce competition over cellphone service is shrinking profit margins, the acquisition may also help AT&T diversify the types of content it serves over its mobile network, which increasingly supports non-voice services such as connected cars. 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 F.C.C. recognized that problem and is requiring AT&T to take steps to increase the availability of high-speed fiber lines in the places where it has a traditional wired telephone network so that its customers can take greater advantage of newer Internet-based TV services like Sling and HBO Now. 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. The merger is a spot of good news for AT&T, which revealed in its latest earnings report this week that it had lost customers for most of its consumer-facing services.

AT&T has broadened beyond its U.S. wireless strategy and investors have applauded the move, with AT&T shares outperforming its closest peer, Verizon Communications Inc., over the past three months. “We’re now a fundamentally different company with a diversified set of capabilities and businesses that set us apart from the competition,” AT&T Chief Executive Officer Randall Stephenson said in a statement. The AT&T deal did not trigger the same fears from consumer advocates because the company wouldn’t contain an entertainment division like Comcast’s NBCUniversal and wouldn’t gain Internet customers, considered the future of the industry, by buying DirecTV. Last quarter, the company shed 200,000 wireless phone customers, 652,000 fixed line phone customers, 136,000 DSL customers, and 22,000 U-Verse video subscribers. 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. DirecTV’s satellite TV business was hit by stagnation affecting the broad pay-TV market as viewers increasingly shift to watching videos on mobile devices.

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. 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. But as John Bergmayer, a senior staff attorney at Public Knowledge, said earlier this week, merger conditions will not address the larger problem in the telecommunications industry that is highlighted by transactions like this one: a lack of competition. Analyst Craig Moffett of MoffettNathanson had said before the deal’s close was announced that AT&T would probably build the fiber in markets where it already operates a slower Internet network. “In terms of increasing competition, AT&T has been claiming that bundling with DirecTV will help it compete better with cable.

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. If AT&T doesn’t complete its mandatory buildout of high-speed Internet at the end of four years, all of the conditions will be extended until the construction is complete, according to the deal. AT&T said that another executive, John Stankey, would become chief executive of the newly formed AT&T Entertainment and Internet Services, with responsibilities over DirecTV and AT&T Home Solutions operations. The companies pushed for limitations to AT&T’s power to slow down or charge fees for the web traffic traveling through its networks, as well as protections for competing video services. Another way the agency wants to try to promote video competition is by forbidding AT&T to make a potential online video service of its own not eat up data under the cap imposed by the company on its home Internet customers.

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. If AT&T did that, it could make its own service more appealing compared with Netflix, for example, because streaming Netflix would count toward the data cap and potentially could trigger additional fees if a customer went over the cap. AT&T also has singled out Latin America as a source for growth, having expanded service south of the U.S. border with the acquisition of Mexico’s Grupo Iusacell and Nextel Mexico. Swallowing DirecTV is expected to transform AT&T into a television juggernaut, one that is less reliant on its wireless phone business, which has been subject to price wars among the leading providers.

The merger also gives AT&T greater reach into Latin America, where DirecTV has a significant presence with ownership interests in satellite TV companies that serve Argentina, Venezuela, Mexico, Brazil and other countries.

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