Federal Communications Commission chairman Tom Wheeler has recommended that the commission vote to approve AT&T’s $49 billion acquisition of satellite television service provider DirecTV with some conditions.
“The proposed order outlines a number of conditions that will directly benefit consumers by bringing more competition to the broadband marketplace,” Wheeler said in his July 22 announcement. “If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection.”
This is about 10 times the current total number of fiber connections for Internet access that AT&T has in place or is currently building. The company also announced on July 22 that it was going to upgrade Durham, N.C. to gigabit fiber as its next big project.
Wheeler said that the fiber upgrade would increase the current national total by about 40 percent. This would make the AT&T fiber broadband network more than half as large as the Verizon FiOS broadband network that currently reaches about 20.1 million users, according to a Verizon spokesman.
In addition, the conditions for approval by the FCC would require that AT&T build on the FCC’s current Open Internet order by preventing discrimination against online video competition and provide greater transparency to its interconnection practices.
The non-discrimination provision means that AT&T will not be permitted to exclude its own and affiliated video services from data caps on fixed broadband connections. DirecTV is a major source of video content that will be available to AT&T once the merger takes place.
The transparency requirement means that AT&T will be required to submit its current interconnection agreements with the FCC and file regular reports on network performance.
While the FCC’s proposed approval specifically refers only to residential broadband, AT&T’s practice in the past has been to offer similar fiber broadband connections to business users. The FCC conditions also require some independent oversight.
“Importantly, we will require an independent officer to help ensure compliance with these and other proposed conditions. These strong measures will protect consumers, expand high-speed broadband availability, and increase competition,” Wheeler stated in his announcement.
The Department of Justice has previously said that it does not see potential antitrust law violations in an AT&T-DirecTV merger and does not plan to oppose it. This means that the FCC’s approval is the last major legal requirement for the deal.
FCC Chief Recommends Approval of AT&T $49 Billion Buyout of DirecTV
At least a majority of the FCC commissioners must vote to approve the merger, but considering the recent history of party line votes favoring issues supported by Wheeler, approval of this deal appears to be nearly a sure thing and could even be unanimous. At this point it doesn’t seem likely that the two Republican members of the Commission will oppose the merger.
If the merger is approved it’s not clear how soon AT&T will be able to close the deal, although a vote to approve it could come perhaps as early as the FCC’s Aug. 6 meeting.
However, the timing of the vote is uncertain. The Commissioners may want more time to consider their options, which means the vote may not come until the September meeting.
What nobody seems to be talking about right now is another merger between a major wireless carrier and another satellite television service. T-Mobile has reportedly been meeting with Dish Networks to quietly discuss a merger that’s similar to the one between AT&T and DirecTV. But there are important differences.
Perhaps the most important difference is that Dish has vast spectrum holdings that have lain fallow for years as Dish Network CEO Charlie Ergen has looked for a way to start or buy into a wireless carrier. During his most recent press call on July 14, T-Mobile CEO John Legere made a number of oblique references to the idea that T-Mobile and Dish would make a great pair and more than once he’s made it clear how much he’d love to have access to Dish’s spectrum holdings.
Of course, neither T-Mobile nor Dish has any terrestrial broadband assets to improve. But the FCC could to apply conditions similar to those placed on the AT&T buyout of DirecTV on T-Mobile’s wireless internet service, which for example could put a crimp into that company’s current practice of offering music free of data restrictions.
Right now we’re waiting to see what happens in regards to the FCC’s approval process. It’s possible that one of the Commissioners will put forth an alternate proposal for the merger conditions. But such a move is unlikely. The Commissioners discuss what they’re going to do well in advance of any public announcement and by the time one of them might actually make such a proposal, some level of consensus on it will have already been reached.
Whether T-Mobile and Dish will wait until the FCC votes on the AT&T-DirecTV proposal before announcing their own merger remains to be seen. Both companies are eager to take advantage of the synergies that a merger will bring and it’s unlikely that any significant roadblocks will appear once AT&T and DirecTV has been approved.
This means that a T-Mobile buyout of Dish isn’t so much a question of if as when.
