Executives For AT&T, DirecTV Questioned About Deal On Capitol Hill
June 25, 2014

Executives For AT&T, DirecTV Questioned About Deal On Capitol Hill

Peter Suciu for redOrbit.com - Your Universe Online

On Tuesday, AT&T CEO Randall Stephenson headed to Capitol Hill to convince law makers and regulators that his company's proposed $48.5 billion takeover of satellite TV provider DirecTV won't push up prices or even limit consumer choice.

"It's about fueling investments that bring new and faster broadband connections to millions more Americans," Stephenson told members of the US Senate Judiciary Committee at a hearing Tuesday afternoon, as reported by USA Today. "By integrating DirecTV's video capabilities with our strength in fixed and mobile broadband delivery, we will create a new competitor with unprecedented capabilities."

Stephenson added that the scale of the merger would allow the combined companies to save on the high cost of negotiating rights to video content from providers including the broadcast networks.

However, not everyone seemed to buy what Stephenson was selling.

"I am very, very skeptical as a senator, not just as a consumer," responded Senator Richard Blumenthal (D-Conn) at a hearing by the Senate Judiciary Committee's antitrust panel, as reported by Reuters. The Senator asked whether the savings from the lower content fees would therefore be passed onto consumers "dollar-for-dollar."

Stephenson said that while he couldn't commit to passing on those savings to consumers, he did express hope that the merger would result in slower price increases for consumers.

"It's pretty hard to commit to lower prices on pure-play TV because of the price of content," added Michael White, DirecTV's chief executive.

AT&T and DirecTV also took the angle that the their merger combines the satellite service with AT&T's broadband wireless product – and noted how it is different from Comcast's proposed $45.2 billion bid to buy Time Warner Cable. Comcast, which acquired NBC/Universal in 2011, is thus a media and distribution company and has to essentially negotiate with itself for content.

So while the AT&T and DirecTV deal still means the combination of two large pay-TV services its executives tried to say it was completely different. "In other words, the AT&T-DirecTV merger is the least awful compared to all the other bad mergers," reported VentureBeat's Mark Sullivan.

Lawmakers seemed skeptical of AT&T's spin on the situation as well.

"We're concerned that there may be too much, too rapid consolidation in the telecommunications industry," said Rep. John Conyers (D-Mich.). "This ongoing wave of consolidation will without question result in fewer firms and may harm consumers by limiting choices and also raising prices after all. … I will be looking and listening to make sure that we are not moving in the wrong direction."

Content creators have also expressed concerns on what these mega-mergers mean not only for viewers and pay-TV subscribers but also those actually creating the content.

"The writers whom I represent have experienced two decades of consolidation, which has reduced a once vibrant market of independent producers to one in which seven companies control almost all of television," Christopher Keyser, president of Writers Guild of America, West, told the Senate committee members, as reported by USA Today.

Also expressing concern this week is the American Cable Association (ACA), the trade group that represents 850 small cable companies across the country. It had argued that these two mergers would actually contribute to higher programming costs, which in turn could drive some small operators out of business, but likely won't drive costs down either.

"We are in the midst of considerable consolidation within both the multichannel video programming distributor ('MVPD') and video programming markets that will have major ramifications for consumers and competition," said Ross J. Lieberman, senior vice president of Government Affairs of the American Cable Association, in prepared testimony. "In 2011, Comcast, the nation's largest MVPD, acquired broadcast and cable programming giant NBCUniversal ('NBCU').

"Comcast has now announced plans to grow its MVPD business even larger by acquiring Time Warner Cable (“TWC”), the nation’s second-largest cable MVPD, and to divest to and swap systems with Charter Communications to create another industry giant," Lieberman added. "For the past several years, in a series of deals large television station groups in the broadcast industry have also been merging. Recent reports also indicate that large programmers are looking to get even larger by acquiring mid-sized programmers, like AMC Networks, whose AMC channel is home of the popular 'Walking Dead' series, and Scripps Networks, the company behind HGTV and the Food Network. Now AT&T is acquiring DirecTV. The cumulative impact of these transactions will transform the industry, the competitive marketplace and the consumer experience and should be cause for concern."