AT&T defends deal to take over DirecTV

Bloomberg NewsJune 24, 2014 

— AT&T says its growing power will be its customers’ gain.

The second-biggest U.S. mobile-phone carrier and operator of the television and Internet business U-verse took its case for its $48.5 billion takeover of satellite-TV provider DirecTV to Congress Tuesday.

“This transaction will allow us to price more competitively and provide consumers with a higher-quality experience,” AT&T Chief Executive Officer Randall Stephenson told a panel of the House Judiciary Committee.

The committee is examining the implications of the AT&T deal announced last month, a transaction that along with Comcast Corp.’s plan to buy Time Warner Cable Inc. stands to reconfigure U.S. telecommunications.

There may be too much consolidation in the industry happening too quickly, Rep. John Conyers, a Michigan Democrat, said at the hearing. The concept that merging allows companies to better compete may spur further deals, he said.

“What’s to stop competitors from using the same argument to justify even further consolidation,” he said. Future mergers “will without question result in fewer firms and may harm consumers by limiting choices and raising prices.”

Consumer groups have sought to block approval, saying AT&T has failed to show that combining with the nation’s largest satellite-television company wouldn’t harm competition.

“The proposed merger would remove a pay-TV competitor from many local TV markets – a direct competitive harm,” John Bergmayer, senior staff attorney with the Washington-based policy group Public Knowledge, said in his prepared testimony for the hearing. “Yet it offers only to do some limited price- matching for three years.”

DirecTV is in every state, and AT&T sells U-Verse, its bundled broadband and television product, in parts of 21 states.

AT&T would gain 38 million video subscribers in the U.S. and in Latin America to compete as cable-TV providers such as Comcast bulk up. Comcast, the largest U.S. cable-TV company, proposed buying No. 2 Time Warner Cable Inc. in February. In addition, Japan’s SoftBank Corp. is eyeing T-Mobile US Inc. after buying control of Sprint Corp. last year.

AT&T and DirecTV would combine their complementary services and allow the new company to meet demands from consumers, who want bundled services that combine pay TV and broadband services, Stephenson told the panel.

“This transaction gives AT&T the capability to be a more effective competitor to cable,” he said.

Stephenson and DirecTV CEO Michael White are also scheduled to testify today before the antitrust subcommittee of the Senate Judiciary Committee.

Members of Congress could raise objections about the effect of the merger on content providers and about the reduction of pay-TV providers in cities covered by U-Verse, Paul Gallant, an analyst at Guggenheim Securities, said in a research note.

The AT&T deal, like Comcast’s merger, needs approval from U.S. regulatory agencies that opposed AT&T’s unsuccessful bid in 2011 for T-Mobile, saying it would damage competition. Congress doesn’t have a vote on the mergers. It oversees the regulatory agencies, approving their budgets.

AT&T, in announcing its deal May 18, promised the new company wouldn’t raise rates for at least three years on stand-alone broadband service and DirecTV video purchased separately. The Dallas-based provider pledged to roll out more high-speed broadband connections, a sweetener for the administration of President Barack Obama, which has made more broadband a policy priority.

The Triangle is one market that the company is targeting for such connections. AT&T announced Tuesday that it had reached an agreement with Chapel Hill to install high-speed Internet in parts of town. Durham, Raleigh, Cary and Winston-Salem have already approved similair agreements and AT&T has also asked for approval from Carrboro.

AT&T said it will commit to abiding by the principles of net neutrality for three years, meaning it won’t block websites or selectively speed or slow Internet traffic. The Federal Communications Commission is writing new net-neutrality rules to replace regulations it passed in 2010 that were rejected by a court this year.

DirecTV, based in El Segundo, Calif., is the largest U.S. satellite-television company.

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