AT&T Inc. (T) and DIRECTV (DTV) file public interest statement with FCC

Posted Jun 12, 2014

AT&T Inc. (NYSE:T) and DIRECTV (NASDAQ:DTV) said that the only way for the companies to compete against cable giants like Comcast and Time Warner Cable is for the two companies to merge, according to public interest statement they filed with the Federal Communications Commission today.

AT&T and DirecTV currently have a $48.5 billion proposed merger, which was announced last month. That deal is facing criticism from consumer advocates though. Consumer advocates believe that the merger in the communications market will harm consumers by reducing competition. This could result in higher prices and lower choices.

AT&T and DirecTV argued that the only way consumers will have any competition in the market is if the two companies join forces to take on the cable giants. AT&T said that a merger with DirecTV could lead to lower prices for consumers.

AT&T said that DirecTV cannot compete on its own without AT&T because the satellite TV company lacks the ability to offer a broadband service. Without having a broadband service, DirecTV cannot offer a bundle of services. AT&T says that consumers prefer to have a bundle of services, which includes TVs, phone, and Internet.
AT&T said that it can only offer its bundle of services in 22 states. Since it is a smaller territory, AT&T has to pay higher prices for video content. By acquiring DirecTV, AT&T will be able to scale its TV operations nationwide, which would allow it to negotiate cheaper content pricing.
“The rationale for this transaction is simply stated,” said the companies in a filing. “Through this combination, the companies will marry complementary assets to achieve what they could not achieve separately or through a contractual arrangement: a compelling bundle of video and broadband services.”
AT&T argued that if regulators approved the $45.2 billion merger between Comcast and Time Warner Cable, it would be at an even greater disadvantage.

AT&T said that if it can get better rates on video content, it can pass savings onto consumers, who would end up paying less for a bundle of services that includes TV, home phone service, broadband, and wireless services. The competition would also put pressure on cable companies to reduce their prices.

The public interest statement that was filed with the FCC is required as part of the regulatory review process. The FCC is tasked with determining whether the merger is in the public interest. The two companies have to win approval from the Department of Justice, which will examine antitrust concerns.

You can read the AT&T Executive Summary and Public Interest Statement here.