What is the deal with AT&T and DIRECTV?
To be specific, in May 2014, AT&T declared an agreement to acquire the company by DIRECTV for $48.5 billion. This merger would directly result in the formation of the biggest pay-TV company in the United States and globally in terms of video subscribers where the firm would be able to access over 26 million video subscribers in the United States alone and more than 190 countries worldwide. However, the question that arises is, why did AT&T intend to purchase DIRECTV, and what does it entail for consumers? OK, let’s zoom in a little bit.
Why did AT&T Corporation seek to acquire DIRECTV?
AT&T has been focusing on building up its wireless network assets and is actively expanding in the video entertainment segment. For AT&T to achieve the strategic fit it’s seeking, it now has the video distribution infrastructure it initially lacked after it acquired DIRECTV. Specifically, some key reasons why AT&T desired the merger include: Specifically, some key reasons why AT&T desired the merger include:
- Immediate Growth in Video Market Share: Acquiring DIRECTV provided AT&T not only with the leading market share in the United States of pay-TV companies but also with the opportunity to leave behind Comcast and Charter. This will offer an increase in revenues as the customers will always need video content to watch.
- Bundle Services to Compete with Cable: Due to the mergers and acquisitions, AT&T can now provide wireless, high-speed Internet, telephony, and video all from a single platform. This also provides AT&T the ability to compete effectively against cable companies.
- Enhanced Video Delivery: This WISP will integrate the wireless network with DIRECTV video content delivery to support new integrated video services that AT&T has planned. This includes possible mobile live and on-demand modes of DIRECTV programming.
- Targeted Video Advertising: Like other tech giants, AT&T Internet also has the motivation to monetize its customer data and ad space of DIRECTV through targeted video advertisement services.
With this new policy in place, how will it impact consumers?
Well then, what can customers anticipate from this telecom and video entertainment conglomerate of the century? Here are some potential consumer implications: Here are some potential consumer implications:
- More Bundles: Customers should expect AT&T to try to grow its share of bundled wireless and home-Internet service, phone, and DIRECTV’s video. This could be advantageous in providing more convenience but again it will be disadvantageous in so far as it will reduce consumer sovereignty.
- Better Access to Content: Recently, AT&T has considered making DIRECTV its flagship video offering, improving content availability for mobile and internet subscribers rather than current disjointed offerings like U-Verse.
- More Exclusive Deals: Unlike wireless exclusives, AT&T can negotiate new DIRECTV video exclusives, making some content available only to customers. This could minimize the options that the consumers have, and make the customers subscribe just to get access to the required material.
- Net Neutrality Impacts: New mechanisms for controlling distribution infrastructure for Mobile, Home Internet and video increases AT&T’s capability to technically and financially discriminate on content. This could be a violation of net neutrality as it allows prioritization of specific content on the internet.
- Higher Prices: The total cable and telephone subscribers Alcatel and AT&T have are 25 million, thus less competition could result in higher prices being set for services. Subscribers may have fewer options, particularly the lower-cost ones that could, in turn, impact the company.
The Bottom Line
Nonetheless regulatory uncertainty, AT&T finalized the DV acquisition in July 2015. What this ultimately means for consumers would therefore depend on how aggressively AT&T pursues integrated bundles, how it monetizes DIRECTV content across these platforms, and if the FCC decides on violations of net neutrality. Readers may experience advantages from the ease of access but may be burdened by exclusivity affiliation, pay-per-view, and other options where the total cost of the services might be cheaper when taken as a whole than paying individually. Still, we will have to wait and see over the coming years as the deal progresses.
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