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Prices May Not Drop, but Increases Would Slow, AT&T Chief Says of DirecTV Deal

AT&T and DirecTV CEOs visit Capitol Hill to defend their $48 billion deal


Lawmakers expressed concerns about what AT&T’s $48 billion deal to acquire DirecTV would mean for consumers and competition in the pay-TV market at hearings on Capitol Hill Tuesday, although none called for it to be denied.

“There’s been a flurry of deals either announced or rumored,” said Rep. John Conyers, D-Mich., at a House hearing, referring to both AT&T’s deal as well as Comcast’s deal to acquire Time Warner Cable and Sprint’s rumored deal to acquire T-Mobile. “Where does it end?”

Congressional hearings generally have little impact on whether merger deals are approved by regulators, in this case the Justice Department and Federal Communications Commission. They mostly give both sides a chance to vent about how the other side is wrong in whether a deal should be approved or denied.

Lawmakers from both the House and Senate judiciary committees mostly questioned how consumers would benefit from the deal since the companies have not promised that it would lead to lower prices. As in similar hearings of Comcast’s deal to acquire Time Warner Cable, lawmakers generally didn’t say the deals should be rejected by regulators.

Several Democrats noted that AT&T’s DirecTV deal had been endorsed by the Communications Workers of America. AT&T’s workforce is partly unionized, and AT&T CEO Randall Stephenson said Tuesday that the company would continue its hands-up approach to allowing workers to decide if they want to unionize. DirecTV, by comparison, is not unionized, but unions could try to pick up new members from among its workforce.

Georgia Rep. Hank Johnson, a Democrat, said the deal would create “considerable public interest benefits,” without “substantially decreasing competition.” Republican Rep. Spencer Bachus of Alabama noted that “for the most part the companies before us today engage in very different businesses.”

“The proposed combination of AT&T and DirecTV appears to combine services that are largely complementary,” agreed Sen. Amy Klobuchar, D-Minn., at an afternoon hearing. “But our inquiry cannot stop there. We know robust competition keeps prices in check. This merger will result in some consumers losing choice in video providers.”

As the companies told regulators earlier this month, consumers’ monthly bills may not go down as a result of this deal, but the rate of price increases will slow.

“I think a lot of consumers would find that answer unsatisfying,” said Sen. Richard Blumenthal, D-Conn., in response to Stephenson’s answer that he couldn’t guarantee consumers will see lower prices, even though AT&T is expected to cut the amount it pays to air cable channels.

AT&T argues that its deal would lead to “downward” pricing pressure on cable companies because the telecommunications giant would be better able to compete with Comcast* and other large pay-TV providers.

Lawmakers in both the House and Senate mostly questioned how the deal would help consumers. With lower prices off the table, the executives suggested the deal was appealing for subscribers in other ways (although it’s not clear consumers would agree with them).

The companies argued that their businesses are mostly complementary because the only overlap comes from AT&T’s five million or so U-Verse pay-TV subscribers. The companies have argued that a combination would allow AT&T to lower its programming costs and bundle DirecTV’s pay-TV service with AT&T’s high-speed Internet service.

Stephenson and DirecTV CEO Michael White said consumers would benefit from being able to buy bundled TV and broadband services from one company (instead of having to call separate companies for service).

Stephenson noted AT&T has promised to offer high(er)-speed wireless broadband service to upwards of 15 million households in rural America who currently don’t have many high-speed options.

Consumer groups have raised questions about those promises, and several have said the deal shouldn’t be approved. “There is nothing to this transaction but more concentration, less competition and the same old string of promises used to sell such bad deals to the public,” said Matt Wood, policy director of Free Press, a public interest group.

*Comcast Corp.’s NBCUniversal is an investor in Revere Digital, Re/code’s parent company.

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