FCC Formally Approves AT&T DirecTV Merger, With Weak Conditions -

As expected, the FCC has formally announced its approval of AT&T's $69 billion acquisition of DirecTV. The deal will create the largest pay TV company in the United States with 26 million TV subscribers. While the deal does eliminate a pay TV competitor, the agency clearly didn't see this as a serious problem. Unlike the blocked Comcast deal, there were also no vertical integration concerns to factor into the equation.

According to the FCC announcement, the agency found the deal serves the public interest after a lengthy review.

"The Commission s decision is based on a careful, thorough review of the record, which includes extensive economic analysis and documentary data from the applicants, as well as comments from interested parties," the FCC said. "Based on this review, the Commission has determined that granting the application, subject to certain conditions, is in the public interest."

Wimpy conditions with a coat of PR paint

But is it? The FCC's conditions, as outlined so far, seem relatively dubious. One prohibits AT&T from using its fixed-line usage caps anti-competitively, but that's not a problem since AT&T doesn't enforce its usage caps for U-Verse users. AT&T does cap its DSL users at 150 GB per month, but is in the process of kicking many of these unwanted users to the curb anyway. As such, a cap-related condition is somewhat irrelevant, especially since it expires in four years.

Recognizing that the merger reduces AT&T-DIRECTV s incentive to deploy FTTP service, the Commission adopts as a condition of this merger the expansion of FTTP service to 12.5 million customer locations. -AT&T

The FCC's also requiring AT&T subject its interconnection agreements to FCC review, but the threat of neutrality rules already had AT&T behaving on this front. AT&T's currently engaged in two lawsuits to kill the FCC's net neutrality rules, the only thing promising to keep AT&T on its best behavior once these conditions expire.

The FCC also crows that as a merger condition AT&T will deploy its "high-
speed, fiber optic broadband Internet access service to 12.5 million customer locations," a move the agency somehow insists "responds to the harm of the loss of a video competitor
in areas where AT&T and DIRECTV had directly competed before the merger."

But AT&T had already promised (even before the DirecTV deal was announced) to deliver these services to 11.7 million subscribers. In other words, the AT&T and FCC are trying to claim this expansion is courtesy of the merger, when most of it was already planned by AT&T some time ago. Some of these deployments are already finished. Fiddling with deployment math is a favorite AT&T pastime.

Why?

So why was the deal approved? The FCC likely believes AT&T's decision to buy a satellite TV provider on the eve of the cord cutting revolution will in time be made irrelevant in the face of increased competition from Internet video. The agency's also been fighting with the industry on numerous fronts (net neutrality, the new 25 Mbps broadband definition, municipal broadband), and likely thought this was one opportunity to give the industry a few crumbs with the minimal amount of market damage.

Still, in the interim the deal kills a direct competitor and will likely not only result in higher rates for TV viewers, but the loss of a notable number of jobs at DirecTV as redundancies are eliminated. That's likely why the FCC timed the announcement of the deal's approval for late Friday afternoon, hoping to minimize public backlash to what is, by any measure, likely a bad deal for consumers and employees alike.
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