AT&T and DirecTV's chief executives rushed up to Capitol Hill Tuesday to sell their proposed $48.5 billion merger, contending that it would expand bundled pay-TV and Internet options for more customers and keep the companies competitive in the rapidly evolving business.
'It's about fueling investments that bring new and faster broadband connections to millions more Americans,' AT&T CEO Randall Stephenson told members of the U.S. Senate Judiciary Committee at a hearing Tuesday afternoon. 'By integrating DirecTV's video capabilities with our strength in fixed and mobile broadband delivery, we will create a new competitor with unprecedented capabilities.'
Seated on the same table, the merger's opponents issued their warnings about the anti-competitive outcomes that could be unleashed by pay-TV company mergers that would reduce the number of service providers in local markets.
Pay-TV providers that have gotten larger through mergers would have heightened negotiating powers over content providers and would seek to lower payments in buying their movies and TV shows. Depressed licensing revenues would worsen content quality and will likely spur additional consolidation among content providers, Christopher Keyser, president of Writers Guild of America, West, told the Senate committee members.
'The writers whom I represent have experienced two decades of consolidation, which has reduced a once vibrant market of independent producers to one in which seven companies control almost all of television,' Christopher Keyser, president of Writers Guild of America, West, told the Senate committee members.
It was a full day of lobbying for Stephenson and DirecTV CEO Michael White, as they also spoke earlier in the day before the Regulatory Reform, Commercial and Antitrust Law Subcommittee of the House Judiciary Committee.
The post-merger company would bring high-speed broadband connectivity to an additional 15 million rural Americans and help bring prices down, Stephenson said at the House hearing. 'What we firmly believe is there will be downward pricing pressure in this industry as we become a more viable competitor,' he said.
The deal would increase competition, too, White said, because up to 70 million homes will be able to get a better priced bundle of AT&T and DirecTV services and benefit from the reduced pricing by cable competitors. 'AT&T having a profitable video business will support them to continue to invest in increasing speeds in broadband,' he said.
Seeking to differentiate the proposed AT&T-DirecTV merger with Comcast's $45.2 billion deal to buy Time Warner Cable, Stephenson emphasized that DirecTV's pay-TV business would be integrated with AT&T's broadband and wireless services. 'This is not two cable companies getting together and this is not Sprint-T-Mobile,' he said, referring to the third and fourth largest U.S. wireless carriers that are in talks to merge.
Ross Lieberman, senior vice president of government affairs for the American Cable Association, argued that consumer prices would actually rise and that competition will lessen with the proposed mergers.
When service distributors, such as AT&T and DirecTV, combine their businesses, 'they get more influence over programmers,' he said.
'That drives programmers to want to get larger as well,' Lieberman said. 'If we want to have a market that is dominated by larger players where consumers in rural areas don't have options, then that may be the market that we are going to look at.'
Raising the topic on the minds of millions of DirecTV customers, Subcommittee chairman Rep. Spencer Bachus (R-Ala.) asked White about the satellite company's relationship and contract to broadcast all NFL games live.
DirecTV's current deal with the NFL expires at the end of the 2014-2015 season, but the two parties are 'in active discussions' on the NFL Sunday Ticket, White said.
'Our relationship is excellent,' White said. 'We're very hopeful and optimistic that that will happen and I am confident we will get that done by the end of the year.'
AT&T's argument that the acquisition of DirecTV would boost its video and bundled offerings echoes one AT&T previously made when it tried to buy wireless carrier competitor T-Mobile, Matthew Wood, policy director for advocacy group Free Press, told the Senate committee. AT&T dropped the bid in 2011 after it failed to gain approval from regulators.
'While trying to persuade regulators of the benefits from its attempted buyout of T-Mobile, AT&T continually recited the preposterous claim that it could not afford to deploy LTE (AT&T's fastest data network) to 97% of the country without first spending some $39 billion on its rival,' Wood said. 'Then as now, it is hard to accept the claim that AT&T can only justify spending on broadband deployment if the government first approves an anti-competitive merger.'