**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in Q1 2014.**
AT&T CEO Randall Stephenson this week told lawmakers on Capitol Hill his company’s proposed $49 billion acquisition of DirecTV is unlike most mergers because the companies have complementary assets.
AT&T, which has 5.7 million U-verse TV customers, and DirecTV – with roughly 20 million subscribers – don’t compete against each other in most of the country, Stephenson said in prepared statements before the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law on Tuesday.
Comcast has made the same pitch to the FCC about its pending acquisition of Time Warner Cable. The No. 1 cableco has said the nation’s two largest cable companies don’t battle for business because their territories don’t overlap.
The Comcast-Time Warner Cable merger, if approved, could exert competitive pressures on AT&T. Through the $45 billion acquisition, Comcast will be able to offer rival services to two-thirds of AT&T’s U-verse video homes, according to AT&T’s public interest statement filed with the FCC.
In his statement to the antitrust committee, Stephenson said the DirecTV deal will make AT&T a stronger competitor in the television market, reduce content costs and exert pressure on prices in the market. But upon questioning from Sen. Richard Blumenthal (D-Conn.), Stephenson stopped short of promising that the company would pass on all the savings to consumers, the New York Times reported.
The FCC and U.S. Justice Department are reviewing the merger to determine whether it is in the public interest and passes antitrust scrutiny.
John Bergmayer, senior staff attorney with the non-profit Public Knowledge, told subcommittee members that antitrust regulators should block the deal because the merger would remove a pay-TV competitor from a number of local markets. He also brushed aside any implication that a standalone pay-TV offering such as DirecTV is becoming somewhat inconsequential, noting that millions of customers still subscribe to only pay-TV rather than a bundle of offerings.
Another organization worried about the deal is the American Cable Association, which represents small and mid-sized operators. Ross Lieberman, senior vice president of government affairs, argued the programming affiliates of the merged company will have a greater incentives to charge higher rates to rival cable operators that need to access to programming in which DirecTV has an interest, such as the Game Show and MLB Network.
“If all the pending MVPD deals are approved, the largest video distributors will grow even larger, creating an even greater disparity with the smallest providers with whom they compete,” Lieberman said. “Moreover, the programming market is likely to respond to large video distributors getting larger by getting larger themselves, which will give these programmers even greater bargaining leverage over the smallest cable operators.”
Lieberman said nearly 100 million homes in the United States purchase subscription TV, with 850 small and medium-sized operators serving a combined 7 million video customers. By comparison, AT&T, DirecTV and Comcast serve nearly 49 million video customers.