FCC to AT&T: We’ll OK DirecTV Deal With These Conditions

22 Jul 2015 | Author: | No comments yet »

AT&T’s acquisition of DirecTV appears headed for approval with conditions.

NEW YORK (AP) — The head of the Federal Communications Commission has recommended approving AT&T’s $48.5 billion purchase of DirecTV. WASHINGTON — After more than a year of negotiations, the federal government appears ready to approve the $67 billion merger between Dallas-based AT&T and DirecTV. Assistant Attorney General Bill Baer of the Antitrust Division said in a statement that the division had concluded that the combination of AT&T’s land-based Internet and video business with DirecTV’s satellite-based video business does not pose a significant risk to competition. The F.C.C. reviewed whether the deal, announced in May 2014, would serve the public interest; the Justice Department review was to determine whether it would harm competition. Most importantly, the FCC’s approval comes with strings: AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections, and it must submit all interconnection reports to the FCC, as well as reports on network performance.

Under one condition, AT&T would be required to build its current high-speed fiber Internet connection to about 10 times its current size, extending the service to 12.5 million customer locations. It would also include AT&T’s nationwide network of tens of millions of wireless customers, its Internet and landline phone services and DirecTV’s millions of customers in Latin America, where AT&T wants to grow. Consolidation has swept the industry as people increasingly turn to the Internet for video and content costs rise for cable and satellite TV companies. AT&T issued a statement late Tuesday: “We are pleased that an order to approve our DirecTV transaction with certain conditions is circulating at the FCC. For AT&T’s part, it says “We hope the order will be approved by the Commission quickly and we expect to close shortly thereafter.” Washington, July 21, 2015 – In light of news reports concerning the AT&T/DirecTV transaction, FCC Chairman Tom Wheeler issued the following statement: “An order recommending that the AT&T/DirecTV transaction be approved with conditions has circulated to the Commissioners.

Such agreements provide for a company like Netflix to pay a fee to a distributor, like Comcast or AT&T, for better service when it creates a lot of traffic for a network. That proposal had seemed to rattle those concerned with the hyper-concentration within the telecommunications industry in a way that the proposed AT&T deal has not. AT&T executives have promoted the deal as an opportunity to create a company that could offer customers the ability to watch television on the go across a wide variety of screens. That’s because regulators were concerned that a bigger Comcast would have had too big a chunk of the country’s high-speed Internet customers, which are seen as the future of the industry. The bigger AT&T wouldn’t have a significant entertainment arm like Comcast’s NBCUniversal, and buying DirecTV does not add to AT&T’s U.S. wired Internet subscriber count of just over 16 million.

Users are relying on mobile phones and tablets for more and more Web-based activities, from watching movies to video conferencing to streaming live personal broadcasts on apps like Periscope. In March, AT&T executives told The Dallas Morning News that the DirecTV acquisition would be part of the company’s strategy to focus more on business customers. Netflix urged regulators to reject the transaction as it was proposed, arguing that the combined company would be able to harm online video distributors like Netflix while protecting its core TV business. For example, with the satellite provider, AT&T can bundle its big data connections at hotels and hospitals with television service in guest or patient rooms.

Streaming lots of Netflix video could potentially tip a user over an AT&T Internet data cap and trigger additional charges, while streaming video from a service from AT&T wouldn’t. The FCC’s decision has come against a backdrop of tense relations between AT&T and the agency, which in 2011 helped kill previous plans by AT&T to merge with T-Mobile. The FCC has become concerned about the potential of fights over such traffic agreements, called “interconnection” deals, to disrupt service for consumers.

In addition, an increasingly aggressive FCC and FTC have each recommended or imposed substantial fines against AT&T, including a proposed $100 million fine in June tied to AT&T’s throttling the speeds of its customers who pay for unlimited data. Charter Communications Inc. earlier this month pledged not to charge companies to connect to its network in a bid to appease regulators combing over its proposed $67.1 billion bids for time Warner Cable and Bright House. AT&T has also led the outrage — and legal pushback — among Internet companies and others who object to the FCC’s landmark 3-2 decision this spring to sweep broadband Internet service under its regulatory oversight.

That latter conflict was clearly on Wheeler’s mind, as he announced Tuesday that if the merger is approved, AT&T will agree to treat video data consumed by its customers on an equal basis, regardless of whether it originates from DirecTV or a competitor.

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