Broadband Roundup: AT&T-DirecTV Merger and its Impact on the Marketplace

WASHINGTON, May 19, 2014 - AT&T announced that it would acquire DirecTV in a $48.5 billion deal, according to multiple sources. The agreement may allow AT&T to position itself in a way to rival cable firms. AT& would acquire about 20 million of DirecTV's customers. The Washington Post recounts that the stated goal of the merger is to gain more customers in the high-speed internet, phone, and pay-TV subscriptions market.

Reuters reports that little overlap is shared between AT&T and DirecTV, permitting the telephone giant to tap into the video market more than ever before, including all of DirecTV's programming. DirecTV, on the other hand, would be able to offer its customers enhanced broadband internet service.

The New York Times speculates that AT&T’s bid is likely in response to Comcast's announcement of its intent to purchase Time Warner Cable in February for $45 billion. It's not the first time either that AT&T has attempted this big of a merger: three years ago, the company tried to acquire T-Mobile for $39, only to have the deal fall apart because of antitrust concerns.

"The media chessboard is moving more this year than it has in the past decade,” The Times quotes Richard Greenfield, a media analyst with the brokerage firm BTIG “You’re seeing major shifts. Everyone is jockeying for position.”

The merger first needs approval from federal regulators, who may be unlikely to approve out because of concerns about the possibility of higher prices in the face of less choices. The Post further reports that "in 2012, U.S. cable-TV bills increased 5.1 percent, to an average of $64 a month, triple the rate of inflation, according to a government report."

The advocacy group Public Knowledge criticized the proposed merger, with senior staff attorney John Bergmayer saying, "The industry needs more competition, not more mergers. The burden is on AT&T and DirecTV to show otherwise...to explain how this merger wouldn't harm wireless competition, and how whatever new services it plans to offer by combining with DirecTV would offset any harms to wireless and video competition."

USA Today said that AT&T’s proposed merger with DirecTV would be different from Comcast's merger with Time Warner Cable, in that the former eliminates a competitor in AT&T's U-Verse market. In in the aftermath of the FCC's proposal on net neutrality, concerns have been raised that the "increased concentration of power among the few who provide broadband would give AT&T more leverage if... ISPs are ultimately allowed to charge for "fast lanes" of the Internet for content providers that are willing to pay for them."

Additionally, Recode reports that Cisco Systems CEO John Chambers recently sent a letter to President Obama requesting that the National Security Agency "curtail" its surveillance activities.

This comes in the wake of recent documents leaked by former NSA contractor Edward Snowden claiming that the NSA "intercepted equipment from Cisco and other manufacturers and loaded them with surveillance software." Cisco has stated that this was not voluntary cooperation on its part.

“We simply cannot operate this way; our customers trust us to be able to deliver to their doorsteps products that meet the highest standards of integrity and security,” Chambers wrote. “We understand the real and significant threats that exist in this world, but we must also respect the industry’s relationship of trust with our customers.”