Petitions Against AT&T/DirecTV Claim Harms to Video Competition

Free Press and Public Knowledge each filed petitions to deny, claiming public interest harms and harms to the video market. “The most straightforward way for the FCC to protect TV viewers and Internet users from the harm this merger would cause would be to block it,” said John Bergmayer, Public Knowledge senior staff attorney. He cautioned against granting the deal request without proper conditions: In the event the commission elects to grant this deal with conditions, “it must make sure those conditions are verifiable and enforceable,” he said in a news release (http://bit.ly/XCwV0g). “The FCC has enough experience with this to know by now that it takes more than promises to protect the public interest."

The public interest benefits are unverifiable, said the Institute for Local Self-Reliance and Public Knowledge in a joint petition (http://bit.ly/1s70QMn). AT&T’s case for the public interest benefits relates primarily to its claim that the deal would result in it upgrading its existing networks at a faster pace, the petition said. The commission can’t recognize claims of this sort as benefits “unless the proposed upgrades are merger-specific and can be publicly tracked and verified,” it said. If AT&T becomes a larger player in the pay-TV market, “its incentive to discriminate against online video services would increase,” it said: The FCC must block this transaction “if it cannot be assured that it can alleviate these harms."

Free Press backed outright denial of the deal and claimed the alleged harms can’t be fixed with conditions. The deal echoes promises AT&T made from its failed takeover of T-Mobile, it said. AT&T appeals to the commission again making the case that, if permitted to eliminate a competitor, “only then can it make what amounts to small and incremental broadband deployment increases,” it said. The supposed benefits are actions AT&T would take in the absence of the deal, “and do not come close to offsetting the harms of the transaction,” it said.

Regulators have become lax and “a bit enamored with their ability to fix harms that they identify as being likely to occur with temporary short term conditions,” said Free Press Research Director Derek Turner in an interview. When facing a direct horizontal merger and the elimination of a competitor, “conditions just don’t work to address the harms that the commission will identify,” he said. The proposal is “eerily similar” to AT&T/T-Mobile, Turner said. There’s a reduction in competitors, a concentration in the market that far exceeds Justice Department merger guidelines, “and the only tangible benefit that AT&T is suggesting will arise from this is that it will enable them to build out more broadband,” he said. AT&T wanted to cover 97 percent of the country with LTE by 2018, he said. “They've already done that in 2014 without T-Mobile."

The would-be-acquirer continued to defend the deal, and also addressed PEG concerns. The combined AT&T/DirecTV will be able to offer new and better service bundles, and unites two companies “with uniquely complementary assets to deliver consumers broadband, video and wireless services,” an AT&T spokesman said.

Past merger attempts will be considered to the extent that they contribute to the FCC’s overall competition policy, said Georgetown Law Institute for Public Representation senior counselor Andrew Schwartzman. In the broadest terms, AT&T/T-Mobile was affected by a policy “that said four is better than three,” he said. “To some considerable extent, AT&T/DirecTV is the same question.” The previous attempt informs the overall competition analysis, but that’s all, he said.

The lesson from the AT&T/T-Mobile attempt is that “if these companies can’t buy their way to growth, they'll build their way to growth,” Turner said. Both AT&T and T-Mobile went off independently and invested and competed, and the market it better for it, he said. The FCC had no comment.

Commitments made in the current proposed deal may be of a different nature than those made in the previous attempt, and therefore, the AT&T/DirecTV deal shouldn’t be influenced by it, said David Honig, executive director of Minority & Media Telecom Council. In questioning whether AT&T and T-Mobile would have met commitments without combining, one also could question that “if that deal had been granted, would AT&T have done more?” he said in an interview. “We don’t know.” It may be that “one can’t use the fact that commitments made in an application later came into fruition or effectuated anyway as an indication that commitments made in 2014 would be effectuated anyway as well,” he said. The trajectory may be different, and other independent factors may determine whether, and to what extent, the commitments would be observed then and now, he added.

PEG advocates argued in a petition that AT&T would better serve consumers by improving the quality of its U-Verse video service or by investing in broadband buildout rather than further reducing video competition. AT&T has resisted any meaningful accommodation of PEG access on its U-Verse platform, said the Alliance for Community Media, Alliance for Communications Democracy and Common Cause (http://bit.ly/ZpRuhS). Joining AT&T and DirecTV, which doesn’t provide for any PEG programming on its platform, “would lead to a localism race-to-the-bottom and threaten the continued availability and viability of all local independent programming and content,” it said.

A satellite-TV operator doesn’t use the public rights of way, which is how PEG channels are transmitted, but there will be an issue if AT&T decides to get rid of U-Verse, said Bunnie Reidel, executive director of American Community Television. ACT won’t comment in the docket, she said. If AT&T walks away from U-Verse, the problem is that it leaves Comcast, Charter Communications and other cable operators alone as direct competitors via wireline, she said. “This puts PEG communities in a tougher position for bargaining with the cable operator.” When there are monopolies in the wireline business, PEG fares far worse, she said.

AT&T customers will be able to keep their U-Verse video service within the U-Verse video footprint, the AT&T spokesman said. That service will be enhanced “by better content offerings and an improved user experience,” he said.

The PEG petition argues that if AT&T took the money that it’s spending on DirecTV and used it for buildout of U-Verse, “it would be deploying a broadband service and providing a competitive pay-TV service to more people,” said Schwartzman. U-Verse has PEG obligations, he said. PEG advocates can argue that if AT&T “switches all its emphasis to DirecTV, they'd lose PEG channels,” he said. If AT&T, instead deploys U-Verse, there'll be more PEG channels, he said.