In a few weeks, federal regulators are likely to approve AT&T's $49 billion purchase of DirecTV. To seal the deal, AT&T is expected to make several promises to soothe concerns that the acquisition could hurt consumers.
Among the deal's so-called conditions is expected to be something fairly simple. AT&T is prepared to accept aspects of the net neutrality rules adopted by the Federal Communications Commission earlier this year, according to people familiar with the negotiations, who declined to be named because the deliberations are private.
AT&T has publicly opposed making the agency's newest net neutrality rules a condition of the acquisition. It said when it first proposed the merger that it was prepared to abide by an older version of net neutrality. But in negotiations with the FCC, which must approve the deal, AT&T may be willing to go further.
If AT&T ultimately followed the newer rules for Internet providers, it would be committing to at least three things. It would honor the FCC's ban on the slowing of Web sites, as well as a ban on blocking Web sites. It would also comply with a ban against taking payments from Web site operators to speed up their content, a practice known as "paid prioritization."
It is unclear how long AT&T would be required to abide by such a commitment, said the people familiar with the plans.
AT&T is part of an industry coalition suing to roll back the net neutrality rules. But if regulators approve the deal with an AT&T commitment to net neutrality, the compamy would be bound by the rules for the duration of the agreement no matter what happens to the court case.
Analysts predict that the FCC could make a final decision on the AT&T-DirecTV deal by as early as mid-month depending on how the negotiations go, though approval is not guaranteed. AT&T and FCC officials declined to comment.
AT&T's willingness to honor the FCC's net neutrality rules is not a major surprise. But getting this issue out of the way allows negotiators to focus on some of the remaining — and more controversial — issues in the merger. Here are a few of them.
One of the more contentious proposals is one that would forbid AT&T from charging companies such as Netflix for depositing content at the Internet provider's doorstep.
This type of networking, called interconnection, helps move online videos and other data across the Web so that consumers can experience them without hiccups. But surges in consumer demand for Internet access have pitted Internet providers against content firms in a fight over who should pay for growing the network. (This is where you get deals such as the kind Netflix struck with Comcast, AT&T and others last year to make sure its videos loaded smoothly on consumers' devices.)
Critics of the DirecTV acquisition have asked that, as part of the deal, the FCC require AT&T to route incoming content to consumers without levying a fee on the companies sending the traffic. In reply, AT&T has said that its recent deals with content delivery firms such as Level 3 show that the current system of privately negotiated contracts is working properly.
"Opponents seek to mandate a one-size-fits-all approach to interconnection," AT&T wrote in a regulatory filing last week.
AT&T's argument signals the company is prepared to fight an interconnection condition fiercely.
As part of the DirecTV deal, AT&T is willing to provide an Internet-only product to consumers who don't want to buy a more traditional television bundle, according to two people familiar with the matter. But at what speed, price and for how long has yet to be hammered out, they said.
Offering a standalone Internet plan will give AT&T's customers a chance to embrace cord-cutting, critics of the acquisition say. Pay-TV providers view cord-cutting warily, as it threatens to undercut their traditional business model of offering many channels — some more popular than others — for a lump sum.
The DirecTV tie-up gives AT&T more incentive than before to protect that business model, said content delivery firm Cogent in a recent FCC filing. To address that, Cogent and others want AT&T to offer a 25 megabit-per-second plan in all its markets for $29.95 a month, for at least seven years.
AT&T's counter, as described in its own filings, is 6 Mbps service at $34.95 per month, offered for three years.
Data caps and exemptions
Should AT&T be allowed to exempt some companies' data, including music and video, from counting against a subscriber's monthly data plan?
Opponents have said no, arguing that all content companies should be treated the same and that letting some pay for an advantage would hurt competition.
AT&T argues that its decision to grant exemptions from data caps won't hurt emerging online services and can in some cases be good for consumers. But the FCC could impose a condition on AT&T in the merger review that restricts this practice, known as zero-rating.
More broadly, the FCC hasn't weighed in on the question, leaving it to be decided on a case-by-case basis. This deal may prove to be one of them.