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Executives at AT&T and DirecTV Defend Their Broadband Merger Against its Critics

in FCC by

WASHINGTON, July 1, 2014 – AT&T and DirecTV have no doubt their merger will actually strengthen broadband, competition and consumer choice, contrary to naysayers. Both companies had to fend off fears of market consolidation in back-to-back hearings on Tuesday, June 24, before the House Judiciary Committee and Senate Judiciary Committee.

This proposed merger isn’t like that of Comcast and Time Warner Cable, said AT&T Chairman and CEO Randall Stephenson. AT&T and DirecTV offer mostly complementary services with little overlap. A merger would allow both companies to “respond to consumer demand.”

Specifically, DirecTV doesn’t have the broadband platform to adapt to the modern Internet landscape, said DirecTV Chairman and CEO White. By the same token, AT&T doesn’t have DirecTV’s programming. It hardly makes any money at all from its U-Verse video service, Stephenson said.

A merger with AT&T would let DirecTV integrate video with broadband, serve users with complementary over-the-top offerings, optimize video service, and manage content cost increases, White said. What’s more, Stephenson said AT&T could cut video subscriber costs by 20 percent or more.

“When complementary providers join forces, the net result is downward pressure on prices and increased incentive to invest in innovation, integration, and infrastructure,” Stephenson said. .

AT&T would also be able to build out a “fixed wireless” solution at 15-20 Megabits per second (Mbps) and “enhance high-speed broadband service to at least 15 million customer locations, most of them rural, within four years of the transaction closing,” Stephenson said. AT&T’s Gigapower offering could be expanded to two million locations in the U.S.

“Combining with AT&T will enable us to meet our greatest challenge and better compete in today’s marketplace,” White said. “We will unlock new growth opportunities to provide new services to customers at a better value. As we offer subscribers better and more innovative services, cable operators and other competitors will have to respond in kind. The result will be more competition and a better video experience for all Americans.”

Others at the hearing weren’t as thrilled. Michigan Democratic Rep. John Conyers said the merger may spur “too much” and “too rapid” consolidation in the telecommunications industry.

“I am concerned about the loss of a competitor for paid television services in many of the largest markets,” Conyers said. “We should also consider whether smaller video providers in the aftermath of the sheer size of a combined AT&T-DirecTV, could face increased content prices, potentially driving some of them out of business.”

Public Knowledge senior staff attorney John Bergmayer questioned the sincerity of AT&T’s promises to provide fiber to 15 million customers, and even more so, building out Gigabit to two million homes. He called these “marginal upgrades and not new build-out.”

“The remaining two million of AT&T’s 15 million number likewise does not consist of new buildout, but instead references fiber-to-the-premises upgrades to AT&T’s existing network,” he added. “These upgrades are for the most part already in the planning.”

Ross Lieberman, Senior Vice President of Government Affairs at the American Cable Association, also expressed concern that while AT&T can “buy its way out of programing cost problems” by acquiring DirecTV, small and medium-sized operators “without AT&T’s financial resources and scale” will be forced out of business.

And in rural communities with few competitors, a merger would further reduce options for residents, incentivizing AT&T to inflate prices.

Both Lieberman and Bergmayer suggested that AT&T “actually invest” rather than make empty promises.

Stephenson fired back, saying that “two million with fiber to the home is a significant capital investment” and not something to be scoffed at.

In the merger’s defense, Sen. Mike Lee, R-Utah, said regulators should be wary of acting against AT&T and DirecTV.  Doing so may backfire and cause as much harm to consumers as consolidation. In fact, Lee agreed that in some cases like AT&T’s, mergers represent intelligent decisions on part of telecom companies adapting to the industry.

“It’s essential in considering important transactions, such as the one before us, that we apply rigorous economic analysis,” Lee said. “By ensuring we protect competition, and not any individual company or competitor, we can help to create market conditions that benefit the consumers.”

Broadband Roundup: Internet Tax Freedom Act, Report on Broadband Speeds, and AT&T on Gigabit Networks

in Broadband Data/Broadband Roundup/FCC/Gigabit Networks by

WASHINGTON, June 19, 2014 – The House Judicary Committee on Wednesday approved the Permanent Internet Tax Freedom Act this week by a vote of 30-4, according to a press release from the committee. The act banned state-imposed taxation of internet access or discriminatory taxes on e-commerce.

Originally enacted in 1998, the bill had previously been renewed three times, with only two “no” votes ever being cast.

“The internet increasingly serves as a daily requisite for millions of Americans, businesses and schools. It has transformed our economy and how we conduct business, communicate, educate, and live our lives,” said the joint statement from members of Congress including committee Chairman Bob Goodlatte, R-Va..

“The Permanent Internet Tax Freedom Act passed by the Committee today permanently bans taxes on internet access. This broadly bipartisan bill ensures that access to the internet is not burdened by unnecessary costs and that Americans can continue to access the Internet tax free.

The bill might have trouble passing the Senate as Democratic members recently approved an online sales-tax measure, the Wall Street Journal reported.

Ranking Democrat John Conyers of Michigan, for instance, has argued that the internet no longer needs as much protection and that state finances would be hurt by the inability to tax online sales.

For the internet to remain tax-free from local and state governments, Congress must pass the measure by November 1.

The National Cable & Telecommunications Association wrote Wednesday that it was pleased with the FCC’s report on broadband speeds. The group said that the findings “refute the unsubstantiated allegations that cable operators routinely under-deliver and are solely responsible for any deficiencies in the performance experienced by consumers.”

More information is needed besides the information that has been revealed about access service provided by internet service providers, the association wrote. Other factors influencing the consumer experience beyond the control of ISPs include upstream congestion, performance limitations of computers or Wi-Fi routers.

In other news, AT&T has ratified a deal with a third city in North Carolina: Raleigh. As with Winston-Salem and Durham, AT&T will deploy “U-verse with GigaPower,” a 1 Gigabit per second-capable fiber platform, Multichannel News reported

The telecom giant is also pursuing Gigabit Networks in three other areas in North Carolina: Carrboro, Cary, and Chapel Hill. The telecom company is deploying Gigabit Networks to parts of Austin, Texas, with plans to expand to Dallas, Atlanta, Chicago, Houston, Kansas City, and Los Angeles.

Meanwhile, CenturyLink is trying to deploy its own Gigabit-capable broadband to Omaha and Las Vegas, according to Broadband Reports. The company sent postcards that it might consider service trials in Eagan, Minnesota.

Additionally, the company has told residents of Portland that they would receive guaranteed 1 Gbps service if they signed long-term contracts, which may be a competitive response to recent news that Google Fiber might be coming to Portland as well.

Wireline Duopoly Losing its Bite As Comcast and Verizon Carve Up Broadband Terrain, Say Workshop Panelists

in FCC Workshops/National Broadband Plan by

WASHINGTON, October 9, 2009 – The Federal Communications Commission workshop on economic issues in broadband competition on October 9 brought together regulators and academics, who agreed that regulation of the broadband market would be difficult and different compared to old-style telecommunications.

Judith Chevalier of Yale University, explained that while economic models do exist and can be useful they are not perfect. “There are big gaps between these models and the world we see.”

She said that there are too many variables for a truly perfect model to be created. Hence one must look at the market to predict the outcome of any regulation – and not just rely on a result from an econometric model. Echoing a refrain of almost every workshop, Chevalier said that in order to create a better model, “we need more and better data”.

In answer to the question of whether “there a duopoly in the broadband market,” almost everyone said yes.

However this duopoly in the wireline market may soon be losing its bite, as incumbent telecommunications carriers begin to compete more aggressively with cable companies. Additionally, panelists said, mobile broadband is becoming more of a substitute than a complement to the wireline options.

Looking at the expansion of Verizon Communications’s fiber optic service (FiOS), the cable industry’s DOCSIS 3.0 and AT&T U-verse broadband product, panelists noted that such upgrade efforts are happening in the locations where the others already are. In other words, Comcast is launching its DOCSIS 3.0 first in markets where FiOS already is available.

Professor Marious Schwartz of Georgetown University said that mobile broadband would expand to become a viable competitor to wireline over the next few years.

He compared the service to that of mobile phones versus landlines telephones. While at first there were limitations on mobile phones which made them appear to simply be a complement, as the market matured they eventually became a viable substitute.

Mobile broadband network providers such as Verizon and Sprint have already been delving into the “home” market with their MiFi products. He warned that regulators must look to the future and imagine a market where individuals have three different broadband connection options: cable, mobile and digital subscriber line or fiber-optic.

Workshop presentations and video.

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