AT&T: Buying DirecTV would cut our costs — but probably not yours

Randall Stephenson, chief executive officer of AT&T, speaks during a House Judiciary Subcommittee hearing in Washington on Tuesday about the company's plans to buy DirecTV for $48.5 billion. (Andrew Harrer/Bloomberg)

Could an AT&T merger with DirecTV result in savings for consumers?

Senate lawmakers pressed the two companies' chief executives on that question Tuesday. But although both firms said that the acquisition would lower their operating costs, consumers wouldn't likely see those savings reflected in their monthly bills immediately, if ever.

The most that TV viewers can expect right now, said AT&T chief executive Randall Stephenson, would be that prices simply rise less quickly. That didn't seem very comforting to members of the Senate Judiciary Committee, who kept asking variations of the same question in an attempt to secure a commitment by AT&T to price relief.

"Can you commit that those cost savings will be passed onto the consumer, dollar for dollar?" asked Sen. Richard Blumenthal (D-Conn.), one of several skeptical lawmakers on the panel that included Sens. Amy Klobuchar and Al Franken (D-Minn.).

"Dollar for dollar?" replied Stephenson. "No sir, I can't. … That prices will go down — I don't think we want to intimate that."

AT&T expects the DirecTV deal would eliminate the need for both companies to seek profits on the products they each sell to consumers separately. That would give AT&T greater bargaining leverage with content companies. AT&T might be able to save as much as 15 percent on programming costs, said Stephenson. (In his own testimony, Writers' Guild executive Christopher Keyse said that the downward pressure on content fees would hurt the creative class.)

But citing complexities in the programming industry, Stephenson stopped short of predicting any effects on consumers' bills.

"Any projection as to how much mitigation, how much of a reduction in the rate of increase?" Blumenthal asked.

"As I mentioned, it's a bit episodic. It's a bit specific," said Stephenson.

"I think a lot of consumers would find that answer unsatisfying," said Blumenthal.

"We believe one would have to believe in the market, and market pressures, and that market pressures will drive down margins," said Stephenson. "Cost savings will find their ways into prices."

Video distributors largely blame programming costs for the continued rise in prices. AT&T says 60 percent of its revenue from video subscriptions goes to content companies. For similar reasons, Comcast has declined to commit to reducing prices in hearings about its proposed merger with Time Warner Cable.

Brian Fung covers technology for The Washington Post, focusing on telecommunications and the Internet. Before joining the Post, he was the technology correspondent for National Journal and an associate editor at the Atlantic.



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Brian Fung · June 24, 2014