AT&T Spent Hundreds Of Billions On Mergers And All It Got Was A Big Pile Of Cord Cutters

from the synergies,-yo dept

Over the last few years AT&T and Verizon have been desperately trying to pivot from stodgy, protectionist old telcos -- to sexy new Millennial media juggernauts. And while this pivot attempt has been notably expensive, the net result has been somewhat underwhelming. Verizon, for example, spent billions to gobble up AOL and Yahoo, but its lack of savvy in the space has so far culminated in a privacy scandal, a major hacking scandal, a quickly shuttered website where reporters couldn't write about controversial subjects, and a fairly shitty Millennial streaming service even Verizon's own media partners have called a "dud."

AT&T's efforts have been notably more expensive, but just as underwhelming. The company first decided to shell out $70 billion for a satellite TV provider (DirecTV) on the eve of the cord cutting revolution. And the company's putting the finishing touches on shelling out another $89 billion for Time Warner in a quest to gain broader media and advertising relevance. That was paired with the launch of a new streaming service, DirecTV Now, which the company hoped would help it beat back the tide of cord cutting.

But things aren't really working out quite like AT&T planned. The company's stock took a beating last week after it acknowledged it would be facing a 390,000 reduction in pay TV subscribers this quarter. AT&T, in an 8K filing with the SEC, tried to partially blame hurricanes for the mass exodus occurring at the company:

"The video net losses were driven by heightened competition in traditional pay TV markets and over-the-top services, hurricanes and our stricter credit standards. The decline of traditional video subscribers negatively impacts our Entertainment Group revenues and margins, resulting in an adjusted consolidated operating income margin that will be essentially flat versus the year-ago third quarter."

Unmentioned is that AT&T also lost 351,000 pay TV subscribers the quarter before, as the company gets hit harder by cord cutting than most pay TV providers. One of the real reasons for these departures? While AT&T was willing to spend hundreds of billions on megamergers, it has spent the better part of the last decade (especially in places where poor people live) neglecting necessary network upgrades. As a result, in countless markets Verizon & AT&T users on last-generation DSL lines are switching to cable providers for faster broadband, and bundling cable TV service that's priced cheaper than broadband alone.

In short AT&T neglected its core business in order to daydream about matching Google or Facebook's ad revenues, but (so far) lacks the core competency to jump the gap from telecom to Silicon Valley-esque Millennial marketing. Both AT&T and Verizon have spent so many years operating as government-pampered protected duopolies, they believed they could pivot on a dime, ignoring that years of regulatory capture left them with only a few key skills: charging too much for too little, lobbying to thwart competition and bullshit.

To its credit, AT&T was at least willing to take a risk and launch DirecTV Now, a streaming alternative. And while the company did manage to add 300,000 streaming customers on the quarter, those users pay a fraction of what traditional cable TV customers do - and AT&T still saw a net loss of 90,000 pay TV users. Still, most other incumbent pay TV providers have responded to the cord cutting threat by raising cable TV rates (ingenious!) or by pretending to keep pace via the launch of streaming alternatives that are intentionally designed to be underwhelming, lest they cannibalize more lucrative legacy customers.

One of the core problems here is that Wall Street isn't satisfied with ISPs simply doing a good job and making a reasonable profit. The relentless, myopic need for quarterly improvements has companies like AT&T and Verizon trying to use megamergers and vertical integration to magically elbow their way into markets it's unclear they lack the competency for. And only after mindlessly cheering these deals do some Wall Street analysts realize some of these arrangements don't even make coherent business sense given the current market climate:

"Though the company partly blamed recent hurricanes for these trends, MoffettNathanson analyst Craig Moffett notes that weather was only the third of four reasons that AT&T listed. “Heightened competition in traditional pay TV markets and over-the-top services” came first. In other words: cord cutting. “It is becoming increasingly clear that the wheels are falling off of satellite TV,” he writes, meaning that Dish Network might announce similar results."

In an ideal world, AT&T would realize its core competencies (building and maintaining wireless and fixed-line networks) should take priority. That $70 billion spent on buying a doomed satellite TV company could have gone a long way in shoring up broadband service that in many regions still doesn't even meet the FCC's base 25 Mbps definition. But in the world we live in that's simply not sexy enough for Wall Street, and the need to grow simply for growth's sake will likely result in AT&T making even more expensive deals of dubious net benefit down the line. Next up: Waffle House?

Filed Under: broadband, cable, competition, cord cutting, dsl, mergers, satellite, tv, video
Companies: at&t, directv

DirecTV's 'Regional Sports Fees' Make No Coherent Sense, Company Won't Explain Why

from the because-we-can dept

For several years now, the cable and broadband industry has, like so many industries, turned to obnoxious, misleading fees to help pad their already healthy revenues. The fees, usually tacked on below the line post-sale, aren't just a great way to covertly raise rates -- but they allow companies to advertise one rate -- then charge something decidedly different. Despite effectively being false advertising, this practice has long been ignored by regulators. Companies like Comcast and Charter have, however, been repeatedly sued for the practice.

Two major fees in the last few years have received the brunt of the attention. One being the "broadcast TV fee." The broadcast TV fee is simply your cable operator taking a part of the cost of programming and burying it below the line to help them falsely advertise a lower rate. Comcast and Charter have both insisted this is simply them being transparent with their customers.

Another contentious fee is the "regional sports fee," which functions in just the same way, and as the name implies is just the cost companies pay to broadcast sports content. On its face, this fee was already contentious (given that many cable providers own the local sports broadcaster). But one DirecTV customer actually discovered that you could use a tool on the DirecTV website to determine how much each zip code pays in regards to this fee.

What she found is that there appears to be no rhyme or reason for how this fee is assessed. Users just a few feet apart could pay $0, $2.47, $5.83, or $7.29 in regional sports fees -- despite all having access to the same content. The user even broke down this in practice in Arizona via a handy map:

The Consumerist then went city by city and found the same thing in Chicago, New York, and multiple cities in California. And in places like Philadelphia, the website found that people paying absolutely nothing in fees are often saddled right next to people paying up to $7.29 more per month:

There's no coherent reason for this. It's not because of regional franchise agreements, most of which were demolished when companies like AT&T and Verizon convinced state legislatures to pass state-level agreements when they got into the business a decade ago. Similarly, DirecTV doesn't even offer a regional sports offering in many of the markets with varying rates. What is for certain is that both the broadcast TV fee and these regional sports fees have skyrocketed in very short order. The regional sports fee has jumped from $1 to nearly $10 for some carriers in just the last few years.

Hoping to find out why different people pay such dramatically different rates, the website asked DirecTV and got a complete and total non (and frankly false) answer:

"We sent all these maps to DirecTV, hoping to get a better explanation than the non-answer given to Connie. After more than two days of waiting, the best the company has been willing to provide is “[Regional sports network] content and thus the costs charged by providers vary significantly by ZIP code.”

Yet that’s simply not true. The examples we provided to DirecTV all involve relatively small areas where any regional channels would be the same. For instance, we could find no evidence of any special regional sports channel being beamed only to residents of Chicago’s Logan Square neighborhood."

If the cost fluctuation had a legitimate, above-board reason, you'd have to think DirecTV wouldn't shy away from explaining it. Given that this is the least liked industry in America, the other possible explanation is that there's nothing to explain because the entire fee is bullshit -- and therefore so is its implementation. In that case, why not charge everybody the same, uniform rate? Are some neighborhoods not being charged the fee to improve overall subscription rates? Follow up questions to DirecTV were subsequently ignored, suggesting there certainly is a reason -- just not one DirecTV wants to share with you.

Filed Under: fees, regional sports fees, sports fees, zip code
Companies: directv

AT&T Already Backing Off Its Biggest Time Warner Merger Promise: Cheaper TV

from the wink-wink-nudge-nudge dept

AT&T has spent the last few months fending off critics of its planned $100 million acquisition of Time Warner. Most critics say the company's ownership of Time Warner will make it harder for streaming competitors to license the content they need to compete. Others warn that AT&T's decision to zero rate (cap exempt) its own content gives the company's new DirecTV Now streaming TV service an unfair advantage in the market. That's before you get to the fundamental fact that letting a company with the endless ethical issues AT&T enjoys get significantly larger likely only benefits AT&T.

Responding to these criticisms, AT&T CEO Randall Stephenson spent the last few months repeatedly insisting that critics have it wrong, because the merger was allowing the company to introduce a new streaming video service that provides 100 channels of TV for just $35 per month:

"I'm not surprised [by the criticism]. They're uninformed comments," Stephenson said in response to a question from Wall Street Journal editor Rebecca Blumenstein at the newspaper's WSJDLive Conference. "Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we're trying to do here, again a $35 product we bring into the market."

That $35 price point was used again and again by AT&T lobbyists and executives in selling the deal before Congress, the company insisting that only this new mega-merger could possibly make this kind of offer possible. Stephenson at several points proclaimed that the lower-cost option was "a way to drive pricing down in the marketplace," -- a surefire example of AT&T's dedication to intense video competition.

It's ironic then that the company is already backtracking and raising rates on its new streaming TV service.

As it turns out, that $35 for 100 channel offer was only a limited-time promotion. AT&T has already jacked the price of the service up to $60 per month as of January 9, and the company is already indicating that pricing for all of its streaming TV service tiers (despite now owning Time Warner content) will be going up sometime in the near future:

"After Jan. 9, new subscribers who sign up for DirecTV Now’s Go Big tier with after Jan. 9 will pay $60 per month. Existing subs will continue to pay the $35-per-month rate for now, but the company also said the fees may increase at some future date. In addition, “channels, features, and terms (are) subject to change & may be discontinued without notice,” AT&T said in a notice on the DirecTV Now website."

And this comes as the outgoing FCC is clearly warning that AT&T is using usage caps to give this new content an unfair advantage over streaming alternatives. So while AT&T is busy claiming the Time Warner Merger will help it disrupt and compete with traditional cable, it's clear AT&T executives are more interested in building cable 2.0: the same old anti-competitive shenanigans and TV price hikes we all know and love, just with a shiny new layer of public relations paint. AT&T has a long history of bogus promises to get big deals approved, but it's rare to see the company already falling short on its promises before the ink is even dry.

Filed Under: merger, promises, tv
Companies: at&t, directv, time warner

Mark Cuban Falsely Tells Congress AT&T's Latest Mega-Merger Will Be Really Wonderful For Consumers

from the you're-not-helping dept

Earlier this year, AT&T announced that it planned to shell out $100 billion to acquire Time Warner. That comes on the heels of the company spending $70 billion to acquire DirecTV. Why is AT&T spending countless billions on content and a legacy satellite TV provider when the lion's share of the company's broadband network desperately needs upgrading? Because fixed and wireless broadband subscriber growth has slowed, and telco executives believe they need to turn to content and advertising (read: slinging videos at Millennials) to please investors.

Under fire for the anti-competitive repercussions of its latest deal, AT&T testified this week before the Senate Judiciary Subcommittee on Antitrust, Competition Policy & Consumer Rights. As you might expect, AT&T and Time Warner both breathlessly insist that there are absolutely no downsides to the companies' merger, adding the deal would be an incredible boon to consumers and the video market alike:

"Together, AT&T and Time Warner will disrupt the entrenched pay-TV models giving customers more options, creating more competition for cable TV providers,” AT&T CEO Randall Stephenson said.

“By joining forces, we will accelerate the development and delivery of the next generation of video services that provide consumers with greater choice, convenience, value, and affordability,” Time Warner CEO Jeff Bewkes told lawmakers in prepared testimony.

The problem is that's not really true. Most streaming providers are worried that AT&T, which just launched its new "DirecTV Now" streaming service, will make it harder than ever for streaming competitors to license the content (HBO, etc.) they need to compete. Similarly, many (including the outgoing FCC) are concerned that AT&T's decision to zero rate this DirecTV Now content (exempting AT&T's content from usage caps while still penalizing competitors) twists and distorts the open market. AT&T already effectively eliminated a TV market competitor when it acquired DirecTV. Now it's tilting the playing field unfairly in its favor.

These concerns received fleeting lip service at this week's hearing. Instead, the committee spent a significant amount of time listening to folks like Mark Cuban, who attended the hearing to lavish praise on AT&T's latest mega-merger:

“We need more companies ... with the ability to compete with Apple, Google, Microsoft, Amazon and Facebook. Delivering content to consumers in this app-driven world is not easy, it is very expensive and difficult. ... Alone, it will be very difficult, if not impossible for either AT&T or Time Warner to compete with any of the companies I've mentioned. Together it will still be difficult, but a combined entity at least gives them a chance to battle the dominant players in the marketplace and increase consumer choice and competition for consumer attention."

So one, AT&T is a massive telecom conglomerate that not only owns its own core and last mammoth nationwide network, but also is already the biggest TV provider in the country after its DirecTV acquisition. This scale provides AT&T immeasurable benefits in content negotiations, and the idea that it was in any way difficult for AT&T to compete in this space is laughable. That's before you even mention AT&T's incredible and often comedic lobbying influence on state and federal telecom and media policy. A helpless little daisy, AT&T is not.

And while DirecTV Now might bring some added streaming competition to the space, it's not like Apple, YouTube, Hulu, Sling TV, Sony, HBO and countless other companies aren't flooding into the streaming video space as well. The competition is already coming to this market. Another mega-merger doesn't help this competition, it actively harms it. AT&T is a company with a long, rich history of anti-competitive behavior and defrauding its own customers on multiple occasions. That it will use this expanded size and power in an anti-competitive fashion isn't theoretical. This is what AT&T does.

But zero rating is complicated. Understanding the perils of vertical integration and the threat of one company owning the content and the conduit is difficult. Realizing that AT&T all but owns state and federal government is inconvenient. As such, Cuban tried to trot out a somewhat bizarre little story in which he argues that the AT&T merger would be really wonderful for joe, beer-drinkin' consumer, because, uh, algorithms:

"I would also like to point out one other important element of consumer choice that an AT&T and Time Warner merger would improve.

Each of the largest content companies I have mentioned so far, Facebook, Google, Amazon, Microsoft and Apple present much if not all of their content algorithmically. As a Facebook user I don’t get to pick what content I get to see in my newsfeed. I can try to influence it, but Facebook algorithms control what I see.

In the future, it won’t be algorithms that choose what we see, our choices will be driven by some form of Artificial Intelligence learning from trillions of disparate inputs.

Meanwhile, for those of us who still enjoy our TV the old-fashioned way, on our couch, cold beverage in one hand and remote in the other, there is a lot to be said for having a company that can afford to continue to offer us that choice. As much of a geek as I am, I like having the choice of searching through a programming guide to see what’s on rather than an algorithm telling me what I should watch. I think a lot of consumers would like to see that choice continue as well."

So one, that entire story makes no goddamned sense. Because Apple, Google and Facebook use algorithms in their news feeds, it's a good idea to let a company with a massive history of anti-competitive behavior grow immeasurably larger? AT&T somehow will provide us with purer access to programming guides free of the nefarious influence of Silicon Valley artificial intelligence? That's so illogical I can't even deconstruct the point Cuban's trying to make. It's like arguing that forest fires are good because pineapples exist.

Granted we've noted a few times that while Cuban has a solid grasp of a number of issues, net neutrality, telecom and media issues aren't among them. As such, he should probably be the last person testifying on the subject before Congress. In fact in writing this piece, I stumbled upon something I wrote for Techdirt back in 2014 when (again) trying to highlight that Cuban doesn't really understand net neutrality:

"Of course Cuban has already made his fortune. Were we to take 1995 Mark Cuban (who was busy building Broadcast.com) and transplant his business into the modern era under AT&T, Verizon and Comcast -- you can be damn sure he'd be taking a very different approach to these issues. Cuban has spent a decade making it abundantly clear he doesn't understand net neutrality, the telecom market or the potential pitfalls of these new cap exempt business models. Perhaps we should put Mark Cuban, Donald Trump and all the rest of the billionaires with plenty to say but little actual understanding in charge of the telecom industry. At least we'd get some entertainment value out of the equation while the Internet burns.

Clearly I opened a portal to another dystopian dimension, and for that I'm truly sorry.

Filed Under: consumers, internet, mark cuban, mergers, tv
Companies: at&t, directv, time warner

AT&T Tells FCC That Giving Its Own Content An Unfair Market Advantage Is Good For Consumers

from the the-death-knell-of-net-neutrality dept

We've noted a few times that the whole net neutrality debate truly started back in 2005, when then AT&T CEO Ed Whitacre proudly proclaimed that he wasn't going to let Google "ride his pipes for free." While AT&T's rhetoric has mutated slightly over the years, its core objective has remained the same: use its monopoly over broadband to extract unnecessary "troll tolls" from competitors, giving its own services an unfair advantage. It's precisely this kind of behavior that triggered the creation of net neutrality rules in the first place; an effort that took more than a decade of fighting tooth and nail to come to fruition.

And yet here we are a decade later, with the entire concept of net neutrality in the United States about to implode in truly spectacular and depressing fashion (assuming you like markets that function properly).

We've been talking about how AT&T intends to exempt its upcoming "DirecTV Now" streaming service from the company's own, arbitrary usage caps -- while still penalizing competing services. In other words, if you use AT&T's TV service you won't run into caps, throttling, or surcharges. But use a competitor and you will be penalized, whether that's Netflix or instructional videos from a non-profit or educational institution. This is precisely why people urged the FCC to join countries like India, Japan, Norway and The Netherlands and ban zero rating entirely. The FCC didn't listen.

But last week the FCC appears to have woken briefly from its year-long slumber on the subject; long enough to pen a letter to AT&T informing them that the agency had finally realized that this sort of behavior was horrible for the streaming video market:

"In the letter to AT&T from the FCC's Jon Wilkins, the agency states that this behavior "may obstruct competition and harm consumers by constraining their ability to access existing and future mobile video services not affiliated with AT&T."

"It is not difficult to calculate usage scenarios in which an unaffiliated provider's Sponsored Data charges alone could render infeasible any third-party competitor's attempt to compete with the $35 per month retail price that AT&T has announced for DIRECTV Now," the letter said. "Unaffiliated video providers not purchasing Sponsored Data would likewise face a significant competitive disadvantage in trying to serve AT&T Mobility's customer base without zero-rating."

AT&T responded in a letter back to the FCC This week (pdf), claiming that giving its own content an unfair market advantage is going to be really wonderful for consumers:

"These initiatives are precisely the kind of pro-consumer challenges to cable that the Commission heralded in approving AT&T's acquisition of DIRECTV...DIRECTV’s sponsorship of that content through Data Free TV allows DIRECTV to better compete against the cable incumbents by ensuring that its subscribers receive the mobile video experience they increasingly demand in the most consumer-friendly manner possible.

Sure, unfairly distorting the market so your content and services get a leg up on competitors is great for AT&T, but it comes at the cost of dismantling the level streaming video playing field. Of course that has been AT&T's goal all along. All of the lawsuits, misleading rhetoric, and farmed studies have always been about one thing for AT&T: protecting its ability to abuse its stranglehold over the broadband last mile to unfair advantage. Calling this molestation of functional markets a consumer benefit only adds insult to obvious injury.

Amusingly, AT&T also tries to tell the FCC that it's not a big deal that it's giving its own content an unfair advantage, because other companies can get the same priority treatment -- if they're willing to pay AT&T for the privilege:

"The suggestion that Data Free TV creates “significant disadvantages” for online video distributors who wish to reach AT&T’s wireless subscribers is likewise off-base. Any unaffiliated content provider can participate in AT&T’s Sponsored Data program on the same terms and at the same rate as DIRECTV, and the sponsored data rate is as low as the market based rates AT&T currently offers even to wireless resellers who commit to significant purchase volumes."

That's AT&T intentionally pretending that it doesn't own DirecTV, if you're playing along at home. Sure, you can get the same exact deal as AT&T's own company gets, but you have to pay a premium to do so. But that again distorts the streaming video market, given that large companies are far more likely to be able to afford AT&T's troll toll than startups, non-profits, or other competitors. There's simply no planet where what AT&T's doing shouldn't be seen as anti-innovation and anti-competitive.

And while it's nice that the FCC at least woke up a little bit to the threat of usage caps and zero rating, this entire mess is, in large degree, thanks to the FCC's failure to craft tougher net neutrality rules. The agency ignored net neutrality advocates and didn't ban zero rating outright. And despite claiming it would take a "case by case" approach to anti-competitive behavior on this front, the FCC turned a blind eye while Comcast, Verizon and AT&T all began taking advantage of the omission to give their own content a leg up. Now, it's incredibly unlikely we'll see actual FCC enforcement on this subject anytime soon, if ever.

It seems possible the FCC expected it would have time to examine the issue further under a Clinton administration. But with Trump's surprise win of the Presidency, it's not only likely that anti-competitive abuses of zero rating will never be banned, Trump's FCC transition team is giving every indication that they intend to dismantle the net neutrality rules we do have, entirely. With no hyperbole intended, you're witnessing the death of net neutrality, and it's arriving not with a bang but with a whimper, some smug AT&T platitudes, and the thunderous applause of a misled populace that thinks it's getting something for free.

Filed Under: competition, consumers, fcc, zero rating
Companies: at&t, directv

DOJ Sues DirecTV, Calling It A 'Ringleader' of Collusion Over Regional Sports Programming

from the room-full-of-villains dept

Back in 2013, Time Warner Cable (now Charter Communications) struck an $8.35 billion deal with the LA Dodgers to create LA SportsNet, the exclusive home of LA Dodgers games. To recoup that money, Time Warner Cable began demanding exorbitant prices from competing cable providers if they wanted access to the channel. Unsurprisingly, all of Time Warner Cable's competitors in the region balked at the $5 per subscriber asking price for the channel. As a result, for three years now a massive portion of Los Angeles hasn't been able to watch their favorite baseball team, since Time Warner Cable's asking price not only kept competing cable operators from delivering the channel, but prohibited over-the-air broadcasts of the games.

Fast forward to this week, when the Department of Justice announced it was suing DirecTV for being the "ringleader" in a collusion effort involving the channel. According to the full DOJ complaint (pdf), DirecTV (now owned by AT&T), worked covertly in concert with local competitors Cox, Charter (before it owned Time Warner Cable) and AT&T (before it owned DirecTV) to coordinate a refusal to pay Time Warner Cable's high prices. The DOJ's statement notes that these companies engaged in "unlawful information exchanges" to coordinate this refusal in violation of antitrust law:

"As the complaint explains, Dodgers fans were denied a fair competitive process when DIRECTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team,” said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department’s Antitrust Division. “Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."

Right, except calling any of this "competition" is being rather generous. It's an interesting case in that Time Warner Cable had been broadly considered the bad guy in this equation for the last three years by Dodgers fans, 70% of which couldn't watch their favorite team despite living in Los Angeles. And even after the DOJ lawsuit was filed this week, outlets like the Los Angeles Times were perfectly willing to ignore the illegal behavior, claiming that collusion was ok because it punished Time Warner Cable's cash grab to the indirect benefit (sort of) of consumers:

"At a time when there’s open rebellion against soaring pay-TV prices, these companies were clearly acting out of self-interest. The last thing they wanted was to give people another reason to cut the cord. Whatever their primary motive, though, they also were defending their customers’ interests. That’s rare and welcome behavior from an industry that all too often regards consumers as ATMs from which it can make frequent withdrawals."

And while some of that may be true, collusion is still collusion, and the fact that Dodgers fans still can't watch their favorite team can hardly be seen as a win. For whatever it's worth, AT&T, currently trying to sell its $85 billion acquisition of Time Warner (not to be confused with Time Warner Cable) to regulators, was quick to remind everybody that it didn't own DirecTV at the time this occurred:

"The reason why no other major TV provider chose to carry this content was that no one wanted to force all of their customers to pay the inflated prices that Time Warner Cable was demanding for a channel devoted solely to LA Dodgers baseball. We make our carriage decisions independently, legally and only after thorough negotiations with the content owner. We look forward to presenting these facts in court."

It's an amazing case where in reality everybody is the bad guy, and despite companies colluding and covertly exchanging sensitive data, nobody really wound up benefiting. Well, except perhaps those that were able to cut the cord because they don't watch baseball.

Filed Under: baseball, collusion, doj, prices, tv
Companies: at&t, charter communications, directv, la dodgers, time warner cable

AT&T's Already Making Things Up To Get Its Massive New Merger Approved

from the witness-the-firepower-of-this-fully-armed-and-operational-battle-station dept

Over the years, we've noted how AT&T has a nasty habit of lying to sell the public, press and regulators on the company's neverending attempts to grow larger. Whether it's promising broadband expansions that never arrive, or using astroturf to try and argue anti-consumer mergers are good for toddlers, AT&T's lobbyists, lawyers, and policy tendrils work tirelessly to argue that up is down, black is white, and any skepticism of its claims are unfounded hysteria. As we saw with the blocked T-Mobile merger, this sort of behavior doesn't work quite as well as it used to.

Enter AT&T's latest $85 billion planned acquisition of Time Warner. Consumer advocates worry AT&T could use its size and leverage to make content more expensive, while the usage caps and zero rating give AT&T's own upcoming streaming video service an unfair market advantage. Wall Street hasn't exactly been bullish on the idea either, noting how AT&T's $69 billion acquisition of DirecTV, followed by its $85 billion acquisition of Time Warner is not only a giant risk on the eve of the cord cutting revolution, but it saddles AT&T with an absolute mountain of debt that will potentially damage the company's credit rating.

But AT&T being AT&T, the telco is already busy trying to claim the merger will create all manner of amazing consumer benefits. One of the top early claims is that buying a massive media empire will somehow speed up AT&T's fifth-generation (5G) wireless deployments:

"Stephenson this week tried to claim that the $85 billion acquisition of a broadcaster will somehow speed up the company's deployment of fifth generation (5G) wireless broadband. "We would probably have a desire to move faster on 5G, certainly not slower," Stephenson claimed on the company's earnings call this week. AT&T CFO John Stevens agreed, claiming that the massive deal "brings us a lot more financial flexibility... or revenue enhancements and growth that will allow us to fund 5G."

Except that 5G is an evolutionary step up for wireless, one AT&T was unquestioningly-dedicated to before this merger was even announced. AT&T doesn't really have a choice in working toward 5G, which doesn't even have an official standard yet -- and likely won't see any meaningful commercial deployment until 2020. As for "financial flexibility," buying a massive media empire, saddling yourself with debt, having your credit downgraded and potentially hamstringing your ability to participate in current spectrum auctions -- doesn't magically make your wireless network appear more quickly.

AT&T also appears to be trying to convince the press, public and regulators that the deal is somehow making it possible for AT&T to launch its new "DirecTV Now" streaming service, which is expected to launch this Friday. AT&T executives have been claiming repeatedly that the service's $35 per month price point is somehow thanks to a merger that technically doesn't even exist yet:

"AT&T CEO Randall Stephenson today defended his company's proposed acquisition of Time Warner, saying that critics who claim the merger will raise prices are "uninformed." As proof, he said the AT&T-owned DirecTV will soon launch a $35-per-month streaming service called DirecTV Now.

"I'm not surprised [by the criticism]. They're uninformed comments," Stephenson said in response to a question from Wall Street Journal editor Rebecca Blumenstein at the newspaper's WSJDLive Conference. "Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we're trying to do here, again a $35 product we bring into the market."

Right, except this new streaming service was actually first announced eight months ago. And the licensing contracts supporting this $35 price point (which you know won't be anywhere near $35 once AT&T saddles it with fees and caveats) were already in place long before the merger was even announced. While AT&T is surely going to get better rates for content now that it owns the cow, there's absolutely no historical evidence to suggest that savings will be passed on directly to the consumer. If anything, consumers could pay more as AT&T uses its broadband mono/duopoly power to try and hamstring streaming alternatives.

This is just AT&T getting warmed up. Over the next few months, media outlets will be hammered with op-eds from lawyers, lobbyists, politicians, policy wonks, "consultants" and think tankers (all with undisclosed financial ties to AT&T) happily claiming that this new merger will cure cancer, protect toddlers, and keep the nation's puppies warm and happy. And while it's understandable that ISPs want to get into content and ads as broadband growth slows, the $150 billion spent on DirecTV and Time Warner could have brought fiber optic connections to American homes several times over.

Filed Under: 5g, broadband, content, lies, merger, wireless
Companies: at&t, directv, time warner

AT&T's Already Happily Tap Dancing Around Its DirecTV Merger Obligations

from the ye-olde-merger-condition-two-step dept

If you've followed the telecom sector for any amount of time, you've probably noticed that the merger conditions affixed to its rotating crop of mega-mergers are usually hot garbage. Frequently the ankle-height goals are proposed by the companies themselves, and are usually something the companies planned on doing anyway. Telecom companies also know full well that regulators historically can't be bothered to check their math on such promises, letting them essentially trot out a rotating crop of feel good, but totally hollow "obligations" before they get to work laying off redundant employees and raising rates.

It's a win-win relationship of dysfunction, where giant companies get to grow ever larger, and regulators score cheap political points for "toughness" thanks to a media that can't be bothered to actually read the fine print of such deals, lest readership get bored.

When Comcast was pushing for its 2011 acquisition of NBC Universal it crafted a new wrinkle in this old story. It proposed offering $10, 5 Mbps broadband to low-income homes if regulators signed off on the deal. And while regulators were happy to promote this as yeoman's work in bridging the digital divide, it didn't take long before low-income families began protesting in the streets, pointing out the plan was hard to find, hard to qualify for, and difficult to sign up for. Still, Comcast's "Internet Essentials" plan has been a PR bonanza, with the cable giant holding an endless barrage of PR junkets advertising its selfless altruism.

To get regulators to sign off on its $69 billion DirecTV acquisition, AT&T proposed a similar $10 low-income broadband program it calls "Access." Under Access, low-income homes can get discounted, slow DSL service for an unspecified limited time -- provided they are in AT&T territory, have no outstanding debt with AT&T, and have at least one resident who participates in the US Supplemental Nutrition Assistance Program (SNAP). Under the program, users can get 5 Mbps or 10 Mbps DSL for the $10 price point, or 3 Mbps for $5 a month, which certainly sounds promising.

But the National Digital Inclusion Alliance this week issued a report noting that the company oddly omitted homes that can only get speeds of 1.5 Mbps. Given ISPs' tendency to refuse to upgrade many low-income areas, this naturally exempted a significant number of inner city applicants that might otherwise qualify for the service:

"You might think we're talking about a few isolated rural areas here. Think again. According to data published by the FCC from its Form 477 surveys of providers, AT&T's fastest reported download connection for VDSL (its current version of Digital Subscriber Line service) was 1.5 mbps or less for households in about 21% of all Census blocks in the cities of Cleveland and Detroit. Those blocks are mostly in inner-city neighborhoods with many low income households."

In a city like Cleveland, where AT&T has had little competitive incentive to upgrade its low-income urban networks, you're ultimately talking about a significant number of the poorest communities being unable to get speeds much faster than 1.5 Mbps: So the group asked AT&T if they wouldn't mind, you know, actually offering the discounted service to these slower-lines, and found their request flatly refused:

"About two months ago, NDIA contacted senior management at AT&T and proposed a change in the program to allow SNAP participants living at addresses with 1.5 Mbps to qualify for Access service at $5/mo. Yes, we know we were asking for the minimum speed to be lower than it should be, but paying $5/mo is better than paying full price and in many neighborhoods, both urban and rural, Access is the only low-cost broadband service option.

I'm sorry to report that, after considering NDIA's proposal for over a month, AT&T said no. “AT&T is not prepared to expand the low income offer to additional speed tiers beyond those established as a condition of the merger approval."

That shouldn't be too surprising. These low-income programs sound great upon shallow inspection, but once you've weeded out consumers that already have service, or owe their phone or cable company money (kind of common when you're struggling to pay the bills), you've already eliminated a huge swath of qualified applicants. AT&T apparently thought they could shave off another few million qualified households countrywide by refusing to provide service to its slower 1.5 Mbps DSL customers, hoping nobody would notice.

Of course, it's possible that AT&T will buckle should this story gain some mainstream media attention (unlikely), and promote its inclusion of 1.5 Mbps as just another generous act of altruism in the company's neverending quest to protect the poor.

AT&T's other "major" DirecTV merger condition was that it would deploy fiber to millions of additional homes, but as we've long noted, the company has a long history of fiddling with numbers to falsely inflate its deployment projections for such services. When it comes to fiber deployments, AT&T's often just lighting up some existing, already buried fiber at high-end housing developments, then crowing in a rotating crop of press releases that it has "launched" yet another market -- despite the fact that few can actually get the service.

After more than a generation, AT&T is the master of the merger condition two-step, having effectively tap danced around conditions affixed to most of its previous acquisitions, including BellSouth. For that deal, AT&T promised stand alone DSL at a discounted rate, then went out of its way to hide the offer from consumers. Regulators often don't bother to fact check or enforce such flagrant middle fingers after the fact since it would be an admission that the conditions -- and the mega-mergers they help prop up -- quite often actively harm the consumers regulators are supposed to be looking out for.

Filed Under: broadband, doj, fcc, low income, merger, requirements
Companies: at&t, directv