AT&T: DirecTV takeover good for consumers

From left, Michael White, chief executive of DirecTV, and Randall Stephenson, chief executive of AT&T, testify Tuesday before the House Judiciary Committee on Capitol Hill in Washington regarding their firms' proposed $48.5 billion merger.
From left, Michael White, chief executive of DirecTV, and Randall Stephenson, chief executive of AT&T, testify Tuesday before the House Judiciary Committee on Capitol Hill in Washington regarding their firms' proposed $48.5 billion merger. Stephen Crowley/The New York Times

Washington - AT&T says its growing power will be its customers' gain.

The second-biggest U.S. mobile-phone carrier and operator of the television and Internet business U-verse took its case for its $48.5 billion takeover of satellite-TV provider DirecTV to Congress Tuesday.

"This transaction will allow us to price more competitively and provide consumers with a higher quality experience," AT&T Chief Executive Officer Randall Stephenson told a House Judiciary Committee panel.

The committee is examining the impact of the AT&T deal announced last month, a transaction that with Comcast Corp.'s plan to buy Time Warner Cable Inc. stands to reconfigure U.S. telecommunications.

There may be too much consolidation happening too quickly, Rep. John Conyers, a Michigan Democrat, said at the hearing. The concept that merging allows companies to better compete may spur further deals, he said.

Future mergers "will without question result in fewer firms and may harm consumers by limiting choices and raising prices," he said.

Consumer groups have sought to block approval, saying AT&T hasn't shown that combining with the nation's largest satellite-TV company wouldn't hurt competition.

"The proposed merger would remove a pay-TV competitor from many local TV markets - a direct competitive harm," John Bergmayer, senior staff attorney with the policy group Public Knowledge, said in his prepared testimony. "Yet it offers only to do some limited price-matching for three years."

DirecTV is in every state, and AT&T sells U-Verse, its bundled broadband and television product, in parts of 21 states.

AT&T would gain 38 million video subscribers in the U.S. and in Latin America to compete as cable-TV providers such as Comcast bulk up. Comcast, the largest U.S. cable-TV company, proposed buying No. 2 Time Warner Cable Inc. in February. In addition, Japan's SoftBank Corp. is eyeing T-Mobile US Inc. after buying control of Sprint Corp. last year.

AT&T and DirecTV would combine their complementary services and allow the new company to meet demands from consumers, who want bundled services that combine pay TV and broadband services, Stephenson told the panel.

"This transaction gives AT&T the capability to be a more effective competitor to cable," he said.

Stephenson and DirecTV CEO Michael White were also scheduled to testify Tuesday before the antitrust subcommittee of the Senate Judiciary Committee.

Members of Congress could raise objections about the effect of the merger on content providers and about the reduction of pay-TV providers in cities covered by U-Verse, Paul Gallant, an analyst at Guggenheim Securities, said in a research note.

The AT&T deal, like Comcast's merger, needs approval from U.S. regulatory agencies that opposed AT&T's unsuccessful bid in 2011 for T-Mobile, saying it would damage competition. Congress doesn't have a vote on the mergers. It oversees the regulatory agencies, approving their budgets.

AT&T, in announcing its deal May 18, promised the new company wouldn't raise rates for at least three years on stand- alone broadband service and DirecTV video purchased separately.

The Dallas-based provider pledged to roll out more high- speed broadband connections, a sweetener for the administration of President Barack Obama, which has made more broadband a policy priority.

AT&T said it will commit to abiding by the principles of net neutrality for three years, meaning it won't block websites or selectively speed or slow Internet traffic.

The Federal Communications Commission is writing new net- neutrality rules to replace regulations it passed in 2010 that were rejected by a court this year.

DirecTV, based in El Segundo, California, is the largest U.S. satellite-television company.

With assistance from Scott Moritz in New York.

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