AT&T and DirecTV defend proposed mega-merger

Randall Stephenson

Randall Stephenson, former chief executive officer and president of AT&T and current Chairman and CEO of AT&T, speaks at a news conference where it was announced that AT&T Inc. will be buying its wireless rival T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock back in 2011 in New York City.

Top executives from AT&T and DirecTV will appear before a House Judiciary subcommittee to make the case for their proposed $48.5 billion merger. The deal faces anti-trust questions, as does the $45 billion proposed merger of rivals Comcast and Time-Warner. The final decision will be made by the Federal Communications Commission and the U.S. Justice Department.

AT&T already has a strong customer base in mobile phone and internet, and it has a smaller pay-TV business, U-verse. It wants DirecTV so it can compete better in the pay-TV market. With all the satellite subscribers from DirecTV, AT&T would end up with 25 percent market share nationwide, though it would still trail a merged Comcast-Time Warner.

Carl Howe, technology analyst at the Yankee Group, says all this consolidation may lead to fewer choices for consumers — especially since cable companies tend to lay lines to an entire neighborhood or city.

“The number of companies that serve any individual consumer is usually one or two,” says Howe. "When you shrink one or two down to one, that’s called a monopoly.”

And a monopoly could mean higher prices for cable-TV customers.

Antitrust attorney Mark Ostrau at Silicon Valley law firm Fenwick & West says companies that make television shows and other video material won’t welcome all these mergers among cable-TV distributors, either.

“They (the cable companies) really do compete both for content and for advertising,” says Ostrau. “If you’re a content provider, you would be very nervous about too much concentration.”

AT&T argues that the merger with DirecTV will allow it to bundle stations and services. The company claims that could lead to better prices for consumers.

 

The share of pay-TV market held by various companies 

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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