Critics Are Mercilessly Slamming the AT&T-DirecTV Deal

Prominent public interest groups criticized AT&T’s plan to buy satellite giant DirectTV in a deal worth about $48.5 billion, calling it an example of out-of-control media consolidation that will do little to benefit consumers.

AT&T’s proposed purchase of DirecTV comes as U.S. broadband leader Comcast is trying to convince federal regulators to let it buy Time Warner Cable in a $45 billion deal. That merger would combine the two largest U.S. cable companies.

“AT&T’s takeover of DirecTV is just the latest attempt at consolidation in a marketplace where consumers are already saddled with lousy service and price hikes,” Delara Derakhshani, policy counsel for Consumers Union, the advocacy arm of Consumer Reports, said in an emailed statement. “The rush is on for some of the biggest industry players to get even bigger, with consumers left on the losing end.”

AT&T will add its five million U-verse television subscribers to DirecTV’s 20 million satellite customers, in a deal that will “redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens – mobile devices, TVs, laptops, cars and even airplanes,” AT&T CEO Randall Stephenson said in a statement.

“The captains of our communications industry have clearly run out of ideas,” Craig Aaron, president and CEO of Free Press said in a statement. “Instead of innovating and investing in their networks, companies like AT&T and Comcast are simply buying up the competition.”

Both mergers will face intense scrutiny from the Justice Department, which is charged with ensuring the deal doesn’t violate antitrust laws, and the Federal Communications Commission, which must ensure that the tie-ups don’t harm the public interest.

DirecTV has the second largest pay-TV subscriber base in the country but lacks a competitive broadband Internet offering. AT&T is forging ahead with its own broadband plans but wants DirecTV’s satellite-TV business. “The industry needs more competition, not more mergers,” John Bergmayer, senior staff sttorney at Public Knowledge, said in a statement “The burden is on AT&T and DirecTV to show otherwise.”

Taking a page out of the Comcast-Time Warner Cable playbook, AT&T said it would abide by the FCC’s now-defunct 2010 Open Internet order for three years, in a concession aimed at winning over federal regulators. But that pledge rang hollow for some open Internet supporters.

“I don’t think the open Internet should come with an expiration date,” says Josh Stearns, a veteran public interest advocate. Interestingly, AT&T said it will use the merger to build and enhance high-speed broadband service to 15 million customer locations, in an effort “to be completed within four years after close.”

A combined AT&T-DirecTV would hold a vast swath of wireless spectrum — the public radio signals that make smartphones and tablets work — and would also be better positioned to compete against Comcast, the industry giant.

“AT&T already has overwhelming spectrum holdings relative to most of the wireless industry,” says Bergemeyer. “AT&T will need to explain how this merger wouldn’t harm wireless competition, and how whatever new services it plans to offer by combining with DirecTV would offset any harms to wireless and video competition.”