FCC Signs Off on AT&T DirecTV Merger, And Early Indications Are The Conditions Are Hot Garbage

from the AT&T's-magic-math dept

Wed, Jul 22nd 2015 12:39pm — Karl Bode

While Comcast's failed merger attempt with Time Warner Cable received a well-deserved media and public beating, AT&T's almost-as-bad $49 billion acquisition of DirecTV has been able to largely fly under the radar, despite the fact that only the latter eliminates a direct pay TV competitor. With less public pressure from consumer outrage, the FCC and DOJ appear poised to approve AT&T's deal, and the FCC is circulating an order approving the deal among the agency's Commissioners. Approval could occur as soon as this week.

In a statement issued to the FCC website, FCC boss Tom Wheeler states he's pushing for several conditions on the deal he claims will "protect consumers, expand high-speed broadband availability, and increase competition." One of them involves restricting AT&T from using its fixed-line usage caps for anti-competitive advantage:

"In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections."

The problem? While AT&T's DSL users do face a 150 GB monthly usage cap (with $10 per 50 GB overage fees), AT&T's busy kicking these unwanted customers to the curb because they're too expensive to upgrade. On the other hand AT&T's U-Verse customers, the ones AT&T plans on keeping, don't face an enforced usage cap. As such, a condition preventing them from abusing this non-existent cap isn't much of a condition. Most of AT&T's controversial "zero rating" practices in regards to usage caps are happening on AT&T's wireless network, which the condition wouldn't apply to.

Wheeler's also promising that his conditions will force AT&T to deploy upgraded broadband services to more areas than ever before:

"If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection. This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment, increases the entire nation’s residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.

The problem here is that AT&T's been manipulating its broadband deployment statistics for fifteen years or so to win regulatory favor. The company will take deployments already planned (or in some cases built), pretend these users are new deployments, then promise regulators it will engage in a broadband "expansion" if regulators only agree to "X" (deregulation, more subsidies, more tax breaks, merger approval, whatever). Nobody in DC has ever bothered to actually audit AT&T's endlessly shifting deployment projections, or even call them on the statistical slight of hand.

And AT&T appears to be doing that again here. With the FCC's help.

Back on April 21st, 2014 -- a month before the deal with DirecTV was even struck -- AT&T announced a shiny new PR campaign (designed to counter Google Fiber's buzz) proclaiming the company would be bringing fiber to "up to" 100 cities. These are cherry picked installs, mostly high-end developments, where install costs are already low because fiber's already in the ground. You might recall that AT&T then pouted and threatened to pull these limited upgrades if net neutrality rules were passed. When pressed by the FCC, AT&T backed down on the threat.

But in a highly-redacted June response to the FCC (pdf), AT&T states that the company is promising to deploy fiber broadband to a total 11.7 million homes (this includes the April 2014 plans) should the merger be approved, with only 2 million of this total being actual, new deployment. So only a fraction of this 12.5 million number Wheeler is using is "new" at all, and it's certainly nowhere near "10 times" the size of AT&T's current deployment. The tl:dr version is that AT&T's taking existing (and in some cases finished) deployments, pretending they're totally new deployments only made possible by the DirecTV merger, and the FCC's helping them.

The real irony is that AT&T's actually cutting fixed-line investment CAPEX so it can focus on more-profitable capped wireless, and in the process preparing to hang up on tens of millions of unwanted DSL users. This is going to leave cable with an even stronger monopoly than ever before across a huge swath of the country, and few people in the press, public or in government appear to have noticed or care. Instead, we get a mega merger bloated with AT&T's miracle math.

I think the majority FCC is ok with AT&T's merger because buying a satellite TV provider on the eve of the Internet TV revolution is basically business seppuku, ultimately made irrelevant by the rise of alternative options. But the elimination of a direct competitor still means higher rates in the short term, and there's an awful lot of actual fiber that $49 billion could help deploy. There's little to no hard consumer benefits here, and as usual AT&T lawyers are doing a bang up job manufacturing some out of very thin air (while filing two lawsuits against the FCC's net neutrality rules to ensure nobody can police their behavior after the merger conditions expire).

Note the FCC hasn't released the full details of the conditions, so hopefully there's more teeth here than Wheeler's original announcement suggests. But his willingness to buy into AT&T's magic, meandering math isn't a promising start.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: broadband, conditions, fcc, satellite, tom wheeler, tv
Companies: at&t, directv

23 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Ninja (profile), 22 Jul 2015 @ 11:46am

Honestly, I'd give them rope to hang themselves if I saw the opportunity. If this is the case and we find out in the future it will be awesome.
[ link to this | view in thread ]
Violynne (profile), 22 Jul 2015 @ 11:54am

As I said on Ars, I find this behavior from the FCC appalling. Just recently, the FCC criticized this company (and others) for its broadband and wireless business practices, yet it turns right around, forgetting all these issues, and gives AT&T what it wants.

Pathetic. Even if buying DirecTV in today's market is foolish, the reality of the situation is AT&T continues on business as normal, wherein it should be punished further by having this, and every other future merger, declined until AT&T can prove it intends to provide better service without costing children their lives.

The FCC gets a major frown sticker for their approval of this merger.

Oh, and perhaps this is just coincidence: AT&T raising activation fees.
[ link to this | view in thread ]
Jason, 22 Jul 2015 @ 12:53pm

Typo?
This additional build-out is about 10 times the size of AT&T’s current fiber-to-the-premise deployment...
I'm assuming there's a typo there ("fiber-to-the-premise"?) but I'm curious if it's in Wheeler's actual statement or in the transcription of it here.

Oddly apropos, though, in its way.
[ link to this | view in thread ]
Karl Bode (profile), 22 Jul 2015 @ 12:56pm

Re: Typo?
It's in the original release. Perhaps the inability to spell out premises is in some way tied to the FCC's inability to see most of AT&T's promised deployment has nothing to do with the merger?
[ link to this | view in thread ]
Karl Bode (profile), 22 Jul 2015 @ 12:58pm

Re:
I really think they're picking their battles after some pretty intense fighting with the industry over Title II, neutrality, municipal broadband, and a new 25 Mbps definition for broadband.

I believe the logic goes they can give industry something it wants, but won't really matter in the long run as Internet video takes off.

That doesn't explain however why they're helping AT&T push bullshit deployment claims.
[ link to this | view in thread ]
Anonymous Coward, 22 Jul 2015 @ 1:16pm

Satellite TV?
I thought the entire point of buying a company like DirecTV was for their massive wireless spectrum - not for their TV offerrings.
[ link to this | view in thread ]
Anonymous Coward, 22 Jul 2015 @ 1:28pm

The FCC needs to define what fiber deployment means or AT&T is going to continue to abuse and weasel their way around it.

It doesn't mean an infrastructure is in place. It doesn't mean running past houses and then denying subscribers. It doesn't mean magically flipping a switch and calling something fiber when it's not.

Fiber deployment to 1 customer should mean that 1 customer is able to sign up for the service and then be able to have that service activated and be able to use that service as advertised.
[ link to this | view in thread ]
Karl Bode (profile), 22 Jul 2015 @ 1:32pm

Re: Satellite TV?
AT&T's already in a pretty good spectrum position BEFORE the 600MHz auction next year. Dish is the one with all the (unused) spectrum. DirecTV's big asset is their exclusive eight year deal with the NFL, but even that's nowhere near worth $49 billion (plus debt).
[ link to this | view in thread ]
GrayArea (profile), 22 Jul 2015 @ 1:52pm

There goes the neighborhood
I have been a happy DirecTV subscriber for around sixteen years now. Guess I will be looking for new options. -sigh-
[ link to this | view in thread ]
PRMan, 22 Jul 2015 @ 2:04pm

I already switched to Dish
I would be a cable cutter already if my 78-year old father didn't live at my house.
[ link to this | view in thread ]
PCRob (profile), 22 Jul 2015 @ 2:35pm

Re: There goes the neighborhood
Same here. I've been thinking of cutting the cord, and this might just be the impetus I need.
[ link to this | view in thread ]
Anonymous Coward, 22 Jul 2015 @ 3:26pm

Re:
"The FCC needs to define what fiber deployment means..."

Fiber-to-the-premise means AT&T will mail out samples of Metamucil to customers and then tell them to go take a sh*t, because AT&T won't.
[ link to this | view in thread ]
orbitalinsertion (profile), 22 Jul 2015 @ 3:57pm

Re: Typo?
Yeah, i noticed this straight off, too. It's right up there with FTTPR.
[ link to this | view in thread ]
orbitalinsertion (profile), 22 Jul 2015 @ 4:03pm

They need to get on every telco, cable, ISP, and mixed provider of every stripe who have been collecting "taxes" for any kind of build out and make them do it. Putting terms for a couple million premises is a joke beyond the pale which will never be finished, either.
[ link to this | view in thread ]
That One Guy (profile), 22 Jul 2015 @ 4:18pm

Here's a crazy idea, rather than accepting empty promises future actions later for gains now, they should make the deals contingent on past promises.

If company X promised something in order to get a deal/merger accepted, and failed to fulfill the promise, they should be blocked from any further deals/mergers until they do so. No more of this 'ignore past deals and pretend that every company has a spotless record', if a company has a history of failure to meet the standards set or promises made, that should be forced to fix the problem before they're allowed to make any other deals or promises.
[ link to this | view in thread ]
Anonymous Coward, 22 Jul 2015 @ 5:41pm

We were considering DirectTV and dumping Comcast/Xfinity until we heard this might happen , and it sure looks like it is going to. AT&T promises? Seems I have heard that before. Welcome to the third world America. What took you so long?
[ link to this | view in thread ]
Wyrm (profile), 22 Jul 2015 @ 8:40pm

Re: Typo?
There does seem to be a typo here.
We should read "0 times the size..."
:D
[ link to this | view in thread ]
Morgan Wick, 23 Jul 2015 @ 1:31am

Re:
As this very article shows, that'll barely hinder them. What either approach needs is regulators that are actually interested in regulating.
[ link to this | view in thread ]
Karl Bode (profile), 23 Jul 2015 @ 5:08am

Re:
That's what happened to Comcast (in part). It's not clear why those standards can't be applied more uniformly.
[ link to this | view in thread ]
Andrew (profile), 23 Jul 2015 @ 8:49am

I mentioned this to my wife the other day (when it leaked) because she works for Directv. She thought it'd already gone through, because they've been doing training etc. already.
[ link to this | view in thread ]
Garett Trietsch, 23 Jul 2015 @ 7:23pm

Not so fast! This is a good thing!
Our local Dallas newspaper, Dallas as in the home of AT&T, thinks that this merger is actually great for competition.

http://www.dallasnews.com/opinion/editorials/20150722-editorial-att-directv-deal-would-p rovide-more-consumer-choices.ece

Its not often I read something so blatantly pandering to a large entity - but I don't read the paper often these days.
[ link to this | view in thread ]
fgoodwin (profile), 24 Jul 2015 @ 6:27pm

Is the FCC really that dumb?
"The tl:dr version is that AT&T's taking existing (and in some cases finished) deployments, pretending they're totally new deployments only made possible by the DirecTV merger, and the FCC's helping them".

It amazes me that Bode, a third party w/o access to all the merger data, can figure this out, but the FCC staff, with all the merger info at the fingertips, cannot.

Is the FCC really that dumb or is Bode really that smart?
[ link to this | view in thread ]
fgoodwin (profile), 24 Jul 2015 @ 6:30pm

Re: Not so fast! This is a good thing!
The Dallas Morning News is traditionally a very conservative newspaper. Its direct competition, the Dallas Times Herald (not exactly liberal, but certainly less conservative than the DMN) went out of business in the early 90s, so there isn't an alternative voice to challenge the DMN's conservative pronouncements.
[ link to this | view in thread ]