Wednesday, July 23, 2014

Why you shouldn't freak out about AT&T buying DirecTV

Andrew Burton

In the coming months, federal regulators need to decide on two big mergers: Comcast's proposed acquisition of Time Warner Cable and AT&T's proposed purchase of DirecTV. The deals are similar in size and both involve big pay-television companies getting even bigger. But the deals have produced strikingly different reactions.

The Comcast deal attracted immediate condemnation from a broad range of left-leaning groups such as Public Knowledge, which quickly condemned the merger and called on regulators to stop it.  Public Knowledge's reaction to AT&T's proposed purchase of DirecTV also sounded a skeptical note, but it was much more muted.

What explains the difference? A big factor is the different ways the two deals would reshape the internet. Comcast and Time Warner Cable are two of the nation's largest broadband providers, and the combined company would control a third of all home broadband subscriptions. Given the way Comcast has been  throwing its weight around in recent interconnection disputes, there's reason to worry about the nation's biggest broadband provider getting even bigger.

AT&T is also a fairly big broadband provider — it has 16 million subscribers compared with Comcast's 20 million. But DirecTV is not a significant broadband provider, so combining the two firms won't increase AT&T's leverage in negotiations with the rest of the internet. And 5 million of AT&T's subscribers are on low-speed DSL connections, not the kind of connection consumers are likely to use for video streaming.

That matters because the internet is the future of media innovation. Negotiations over traditional television services typically pit large, sophisticated telecom companies against equally large and sophisticated media conglomerates. Disney and News Corp. can hold their own in negotiations with Comcast or AT&T. Television is a relatively mature market, there's little reason to worry about small, innovative firms getting squeezed out.

The internet is different. If broadband providers divide the internet up into proverbial fast lanes and slow lanes, it could make it difficult for the next YouTube or Netflix to break into the market.

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