AT&T told a federal judge this year that its landmark merger with Time Warner would probably result in lower prices for its DirecTV customers. But the telecom giant is saying that it will raise the price of DirecTV’s online streaming service, DirecTV Now, by $5 a month for new and existing customers, according to an AT&T spokesman.
The decision affects all service tiers of the product, according to Cord Cutters News, which first reported the change. That brings the base tier to $40 per month and the top tier to $75. In a statement, AT&T said its decision was driven by industry trends.
“To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market — which starts at a $40 price point,” AT&T said in the statement.
AT&T’s move mirrors price increases among other online streaming services. Last week, Dish Network’s Sling TV announced that it was raising the price of its base package, Sling Orange, by $5 per month, to $25. Another competitor, YouTube TV, raised its price by $5, to $40 per month, in March.
AT&T’s price hike takes effect July 26 for new customers and possibly later for existing customers, based on their billing dates. If applied across DirecTV Now’s entire userbase of nearly 1.5 million customers, the price increase could mean more than $87.5 million a year in new revenue for AT&T. The announcement comes days after an industry analyst said AT&T had also increased an “administrative fee” on its wireless customer bills in a recent move that could generate almost $1 billion a year in additional income. The analyst speculated that some of the fee could be intended to cover the costs of the Time Warner merger.
How AT&T’s merger with Time Warner could ultimately affect consumer prices became a key battleground in the Justice Department’s antitrust suit to block the deal earlier this year. Government lawyers did not allege that AT&T would directly raise prices on DirecTV customers, but instead claimed the merger was anti-competitive because it would indirectly force other TV providers to raise their prices in an industry-wide shift that could end up costing consumers hundreds of millions of dollars a year in new charges.
But lawyers for AT&T and Time Warner called those allegations “preposterous” and based on faulty economics. The companies contended in closing arguments at court that the deal would allow DirecTV to lower prices to consumers.
“Doesn’t that create more competition in the marketplace?” Judge Richard Leon interrupted.
Yes, said AT&T and Time Warner attorney Daniel Petrocelli, because other TV providers would need to make similar moves to keep pace with AT&T. The telecom giant went on to win the suit in a complete rout, with Leon ruling against the Justice Department.
AT&T’s announcement for DirecTV Now does not appear to extend to customers of DirecTV’s legacy product, its satellite TV service. Technically speaking, that means AT&T still has not raised prices for traditional pay-TV customers, the market with which the Justice Department’s case was most concerned. Still, AT&T has made no secret of its desire to phase out its declining satellite business by shifting even those customers to online streaming.
Asked whether the price increase to DirecTV Now may contribute to a Justice Department appeal, an agency spokesman didn’t immediately respond to a request for comment.