If you believe choice is a good thing for cable TV customers, you should actively oppose AT&T’s proposal to buy DIRECTV, the second largest cable or satellite TV provider in the United States. If AT&T successfully acquires DIRECTV, it will become the largest cable TV company in the country, with 26 million customers; the second largest wireless provider, with 120.6 million customers; and one of the largest broadband suppliers, with about 16 million customers.
That’s simply too big.
At the very least, a merger of that magnitude would reduce competition and potentially raise prices in the cable TV market. It could also make AT&T even more powerful than it already is and give the giant company reason to undermine the cord-cutting trend, the current consumer shift away from cable subscriptions toward streaming services.
The proposed $48.5 billion deal flew under the radar for a while because public attention was focused on the even larger (and more obnoxious) proposal by Comcast to purchase Time Warner Cable (TWC), which failed last month when regulators said they would block it.
The AT&T/DIRECTV merger, however, is very much alive. Unlike Comcast and TWC, which do not compete head-to-head for cable TV customers, AT&T and DIRECTV compete in a number of major metropolitan areas, including San Francisco, Chicago, Boston and Denver. If regulators approve the merger, fewer choices will be available to consumers, and already expensive cable services will likely become more pricey.
A merged AT&T/DIRECTV would have enormous clout with independent networks and other content providers. DIRECTV and its competitors, such Comcast and TWC, pay networks to add their programming to subscriber bundles. The most popular networks, includuing ESPN, are paid the most while the little guys get less.
A smaller number of competing cable companies could force content providers to accept crummy deals from the remaining players or be pushed out of business. Two strong networks — CNN and AMC — were temporarily dropped from DISH and Comcast, respectively, due to disputes over fees. In other words, your favorite programming could be dropped in favor of content that generates more revenue for AT&T.
Earlier this month, Netflix wrote to the FCC, which needs to approve the merger, to warn that a combined AT&T/DIRECTV would have incentive to move against companies that stream programming over the Internet. If AT&T spends $48.5 billion to acquire DIRECTV’s customers, it won’t sit idly by and watch them switch to unbundled streaming options.
In its letter to the FCC, Netflix recounted a 2014 incident in which customers who accessed its content over AT&T’s broadband network had their connections slowed to a crawl. AT&T blamed an overcrowded network and denied it had deliberately slowed Netflix traffic, but when Netflix agreed to pay AT&T more, the connection problems largely disappeared.
Referring to the potential power of the merged AT&T and DIRECTV, Netflix wrote:
“Such market power creates new incentives and abilities to harm entities that AT&T perceives as competitive threats, and will exacerbate the anti-competitive behavior in which AT&T has already engaged. Netflix urges the Commission to reject the merger as currently proposed.”
A flood of negative comments to the FCC about the Comcast/TWC deal helped sink it, and you can, and should, help stop the AT&T/DIRECTV merger by writing to FCC Chairman Tom Wheeler (Tom.Wheeler@fcc.gov) or calling 1-888-225-5322 to express your lack of support.