Two House Democrats on Tuesday called for U.S. congressional hearings to look at how proposed acquisitions by AT&T Inc. and Comcast Corp. will affect consumers and the Internet.
Reps. Anna Eshoo and Doris Matsui, both of California, told Federal Communications Commission Chairman Tom Wheeler that the size of the deals merits congressional scrutiny. AT&T this week announced a $67.1 billion bid -- including debt -- to buy satellite-TV provider DirecTV. Comcast announced its takeover of Time Warner Cable in February for about $68 billion, which includes net debt.
"Both are some of the largest mergers in our nation's telecommunications history," Matsui said at a hearing about FCC oversight held by the House Energy and Commerce Committee's telecommunications and Internet subcommittee.
Eshoo asked, "Can anyone here today piece together the effects of the Comcast-Time Warner merger and the AT&T-DirecTV merger on consumers and a free and open Internet?"
Eshoo added that "these are massive decisions."
The cable-TV and telecommunications-provider deals requiring regulatory approval now total more than $130 billion. That's the highest amount of pay-TV assets to have sat in front of regulators including the FCC at one time, according to Bloomberg Industries. It might not stop there, as analysts see Dish Network Corp. searching for a merger partner and Sprint Corp.'s parent SoftBank continues to vie for T-Mobile US Inc.
"This pushes back all the deals because now the regulators have to struggle to understand a more volatile marketplace," said Tom Eagan, a New York-based analyst at Telsey Advisory Group. "They may be wondering, is there going to be a third deal in this space? They don't want to make their decision in a vacuum."
Of the two deals now up for review, Comcast and Time Warner Cable have an easier path to approval because they don't compete with one another, said Eagan, who pegs the chances of the deal closing at 75 percent to 80 percent. Merging AT&T and DirecTV, however, would mean removing an option for subscribers in certain markets, which makes the decision more difficult for regulators, he said.
The odds for AT&T and DirecTV are 50/50, Michael Hodel, a Chicago-based analyst for Morningstar Inc., wrote in a report Monday. Meanwhile, Buckingham Research Group put the odds at about 90 percent.
A new report issued by the FCC on cable TV rates gives an indication of the factors driving AT&T's bid to purchase DirecTV.
The FCC report noted DirecTV is often able to negotiate lower fees for channels than its smaller rivals because of its size and national reach. By acquiring the satellite provider, AT&T would get access to 20 million more homes around the country -- and the clout to demand lower rates from cable networks and other content providers.
Along with gaining more programming, AT&T also believed that it needed to get bigger to compete with Comcast.
Comcast's move to buy Time Warner, announced in February, played a part in Randall Stephenson, AT&T's chairman and chief executive, reigniting talks with DirecTV chief executive Mike White about a sale. Stephenson said the two have had on-again, off-again discussions for years but that the talks heated up again early this year.
One of the unintended consequences of the consolidation spree is that those left without a new partner might end up paying more for content. Programmers who get squeezed by the big broadcasters then turn around and squeeze the smaller players.
Getting content -- at the best price possible -- is increasingly what the game is all about, media analysts said. They pointed to a clause in the deal between the two companies that would allow AT&T to terminate the acquisition if DirecTV can't renew its contract with the National Football League for Sunday Ticket, its sports package that enables subscribers to watch every Sunday game across the country.
Sunday Ticket might have relatively few subscribers, but it is exclusive sports content -- and providing that kind of programming will be crucial for media and telecommunications companies going forward as they navigate a constantly shifting media landscape.
"Consumers want everything everywhere and faster," said Boston University School of Management Professor Samina Karim. "That's really where we are going."
Media analysts and industry leaders have long been trying to figure out the best pipeline to get content to consumers. With its purchase of DirecTV, based in El Segundo, Calif., AT&T is making a bet on all pathways. The combined company would reach consumers from satellite service, broadband Internet and wireless platforms. It would also have AT&T's more traditional U-Verse video service.
"The next six years are going to be about delivering video over these networks," Stephenson said, adding that "you will see the experiences beginning to merge and user interfaces will all look and feel the same."
Information for this article was contributed by Todd Shields, Tara Lachapelle, Elizabeth Wasserman and David McLaughlin of Bloomberg News and by Joe Flint and Jim Puzzanghera of the Los Angeles Times.
Business on 05/21/2014