Wednesday, May 6, 2015

Will AT&T And DirecTv Merge?

Now that the Comcast and Time Warner Cable deal is kaput, attention turns to the next media merger.  While a merger would create a cable subscription behemoth larger than Comcast is currently, it would not impact the size of their broadband subscriber base.  That factor was the key stumbling block to Comcast getting its deal done.  DirecTv, as a satellite company, does not offer broadband service.  AT&T does.  Is that enough for the FCC to okay this merger?  Netflix doesn't think so.

In today's New York Times, Netflix "argued that a combined AT&T and DirecTV would have the ability and incentive to use its heft to harm online video distributors like Netflix to protect its core TV business." Actually, creating a video entity larger than Comcast might actually enhance competition.  Fundamentally, DirecTv and AT&T bring two different platforms together, satellite and fiber while the Comcast Time Warner Cable deal would have expanded their fiber distribution platform to control more than 50% of the broadband market.   Two very different outcomes.

Still, when looking at the merger of AT&T and DirecTv, the synergies that come into play seem more about negotiating cable content and getting more economies of scale on their contracts.  As to the broadband side of their business, AT&T still must rely completely on their own cellular and U-verse platforms to compete.  Of course should DirecTv satellites someday be able to provide two way broadband access to the internet, then new concerns might arise.  At the same time, Lightsquared and Dish have been currently unsuccessful in this approach.  Once spectrum opens to enable such opportunity, it would open new competition into the marketplace to challenge a merged AT&T - DirecTv entity.  And isn't that what the FCC really hopes happens in the broadband marketplace.