AT&T tells Congress that buying DirecTV to benefit consumers

Wednesday, June 25, 2014

WASHINGTON -- AT&T Inc., the second-biggest U.S. mobile-phone carrier and operator of the TV and Internet business U-verse, took its case for its $48.5 billion takeover of satellite-TV provider DirecTV Group Inc. to Congress Tuesday.

Chief Executive Officer Randall Stephenson told a panel of the House Judiciary Committee that the deal will be a positive move for AT&T's customers.

"This transaction will allow us to price more competitively and provide consumers with a higher quality experience," Stephenson said.

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

There may be too much consolidation in the industry happening too quickly, Rep. John Conyers, D-Mich., said at the hearing. The concept that merging allows companies to better compete may spur further deals, he said.

"What's to stop competitors from using the same argument to justify even further consolidation," he said. Future mergers "will without question result in fewer firms and may harm consumers by limiting choices and raising prices."

Consumer groups have sought to block approval, saying AT&T has failed to show that combining with the nation's largest satellite-TV company wouldn't harm 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 Washington-based policy group Public Knowledge, said in his prepared testimony for the hearing. "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 TV 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 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.

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, Calif., is the largest U.S. satellite-TV company.

Information for this article was contributed by Scott Moritz of Bloomberg News.

Business on 06/25/2014