AT&T to buy DirecTV for $67 billion

The massive combined company of Comcast and Time Warner Cable, if it happens, could be getting some stronger competition from AT&T and its new best pal, DirecTV. AT&T announced yesterday its intention to buy DirecTV in deal worth $67 billion, all told.

Such large numbers are kind of hard to grok, but we can confirm that amount is really a lot of money. The announcement further explains: "This purchase price implies a total equity value of $48.5 billion and a total transaction value of $67.1 billion, including DIRECTV’s net debt." If only I had known the key to success was ending one word with the first letter of another one.

Obviously, this deal sets up AT&T to compete with the big cable companies for a range of residential telecom and video services. Since there's been quite a bit of concern lately about equal access to Internet data over the services provided by these firms, I think it's worth sharing exactly what AT&T says it will do if this transaction closes. Directly from the announcement:

With the benefits of the transaction, AT&T is able to commit to do the following, when the deal closes:
  • 15 Million Customer Locations Get More High Speed Broadband Competition. AT&T will use the merger synergies to expand its plans to build and enhance high-speed broadband service to 15 million customer locations, mostly in rural areas where AT&T does not provide high-speed broadband service today, utilizing a combination of technologies including fiber to the premises and fixed wireless local loop capabilities. This new commitment, to be completed within four years after close, is on top of the fiber and Project VIP broadband expansion plans AT&T has already announced. Customers will be able to buy broadband service stand-alone or as part of a bundle with other AT&T services.
  • Stand-Alone Broadband. For customers who only want a broadband service and may choose to consume video through an over-the-top (OTT) service like Netflix or Hulu, the combined company will offer stand-alone wireline broadband service at speeds of at least 6 Mbps (where feasible) in areas where AT&T offers wireline IP broadband service today at guaranteed prices for three years after closing.
  • Nationwide Package Pricing on DIRECTV. DIRECTV’s TV service will continue to be available on a stand-alone basis at nationwide package prices that are the same for all customers, no matter where they live, for at least three years after closing.
  • Net Neutrality Commitment. Continued commitment for three years after closing to the FCC's Open Internet protections established in 2010, irrespective of whether the FCC re-establishes such protections for other industry participants following the DC Circuit Court of Appeals vacating those rules.
  • Spectrum Auction. The transaction does not alter AT&T’s plans to meaningfully participate in the FCC’s planned spectrum auctions later this year and in 2015. AT&T intends to bid at least $9 billion in connection with the 2015 incentive auction provided there is sufficient spectrum available in the auction to provide AT&T a viable path to at least a 2x10 MHz nationwide spectrum footprint.

Notice the commitment to provide stand-alone broadband services capable of carrying data for Netflix and Hulu, along with a commitment to preserving "net neutrality" regardless of how the FCC's current regulatory battle ends. Both of these promises are attached only to a three-year term, but that's probably all that anyone could reasonably expect in a changing business landscape.

Also, looks like the first item above means AT&T will do further overbuilding to compete with existing cable and telco services, though it will be located "mostly in rural areas."

It's hard to think of AT&T as the good guys in any given scenario, really, but perhaps this is the avenue for otherwise-captive consumers to avoid Comcast-Time Warner Cable. Where I live, AT&T offers U-Verse as direct competition to Time Warner's cable TV and Internet services. If Comcast finishes the acquisition of TWC and imposes a draconian data cap on our service, I'm hoping AT&T will respond by making us a better offer. Then maybe we can ride that out until Google Fiber finally arrives.

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