AT&T, DirecTV merger could make it harder to cut the cord

AT&T and DirecTV on Wednesday said in a federal application that their combined companies would be able to offer lower prices for bundles of satellite television and high-speed Internet, putting pressure on cable companies to also cut fees. The companies say that's great for consumers and should be a key reason to approve their $49 billion deal.

But that's only true for consumers who want to keep on paying for television services like satellite and cable. And many polls, including this recent one, show consumers are moving in the opposite direction. Cable subscriptions have been flat or declining for decades, and consumers say they would cut the cord if there was more content -- particularly live sports -- available online.

If anything, the major telecom and cable mergers under federal review highlight those industries' long-term commitment to the very model of bundling that consumers say they want to leave. And if approved, those bundles will be harder for customers to abandon, analysts say.

Take AT&T's bid for DirecTV, which hinges on the satellite company's ability to renew its exclusive contract with the National Football League for the Sunday Ticket. AT&T intends to extend the availability of live NFL Sunday Ticket games to its customers who subscribe to the bundle of high-speed Internet, wireless and paid television services.  The company said DirecTV subscribers will be offered stand alone television service for three years after the merger is approved. Consumers will also be offered only high-speed Internet if they choose.

But to fully take advantage of the most popular television content, consumers won't get it outside the pay television wall, analysts say.

"For many many consumers, the decision whether to become or remain a pay-tv subscriber indeed may largely turn on high-value sports programming," said Jeffrey Silva, a telecom and media analyst. "It's gold, just huge."

Comcast's and Time Warner Cable's $45 billion merger would create a cable behemoth with 30 percent of the cable market and 40 percent, giving it even greater power over negotiations television programmers. Comcast wants to put all that content on any devices, but only for customers who buy into their cable and high-speed Internet packages.

In its filing, AT&T argues its merger with DirecTV will create much-needed competition in the consolidated cable market.

"The combined AT&T and DIRECTV will be able to offer new and better service bundles, creating a stronger competitor to the cable bundle," AT&T wrote. "Cable has long been the dominant provider of broadband and video services in the United States, and if the Comcast/Time Warner Cable/Charter transactions are completed, that dominance will swell even further."

With just 5 million subscribers to its U-Verse television service, AT&T said it has struggled to get acquire licensing deals with networks. DirecTV's customers and long-relationship with broadcast and cable networks will help it compete with cable firms.

"By uniting AT&T’s wireline and wireless broadband infrastructure and DIRECTV’s nationwide video service under common ownership, the combined company will be able to bundle broadband and video (as well as wireless) services in ways that it could not without the transaction."

As a condition to merger approval, AT&T promised to extend fiber high-speed Internet services to 2 million more customers. It also promised to bring wireless high-speed Internet to 13 million largely rural customers outside of areas the company already serves. The technology it plans to use for those rural locations is wireless local loop technology that it said would deliver broadband speeds of 15 to 20 mbps.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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