AT&T’s merger bid unscathed by hearings

Members of Congress on Tuesday gave a warm reception to AT&T’s $49 billion proposal to buy DirecTV and suggested regulators should let the deal proceed. 
 
Executives from the two companies told lawmakers in the House and Senate that they need to combine in order to stay competitive with rivals such as Comcast and Verizon, and lawmakers from both parties seemed to agree.
 
The mild treatment stands in stark contrast to the more hostile reception given to Comcast when it recently testified about its $45 billion proposal to buy Time Warner Cable. The lack of pushback from lawmakers could signal a relatively smooth ride to approval for AT&T and DirecTV in the coming months.
         
Rep. Hank Johnson (D-Ga.), the ranking member on the House Judiciary’s Antitrust subcommittee, said “the bulk of the evidence demonstrates that each company primarily serves different markets with different services,” which should protect them from fears about antitrust violations.
 
“Although the proposed merger represents a concerning trend towards industry consolidation, there is ample evidence that this transaction would create considerable public-interest benefits,” he said.
 
Judiciary Chairman Bob Goodlatte (R-Va.) indicated that federal regulators ought to butt out and let the merger move forward.
 
“It has been demonstrated repeatedly that a free and competitive marketplace yields lower prices, greater innovation, increased investment and better services,” he said. “We should strive to ensure that proposed transactions result in enhanced competitive marketplaces so that the attendant benefits continue to run to consumers.”
 
AT&T and DirecTV executives faced members of the House in the morning and then sat for a follow-up in the Senate later on Tuesday afternoon.

Sen. Amy Klobuchar (D-Minn.), the chairwoman of the Senate Antitrust subcommittee, expressed concerns about higher bills for subscribers and the potential for fewer choices with increased consolidation, but agreed with her House colleagues that the deal, “in many respects, seems to combine services that are largely complementary.”

The companies portrayed their need to merge as a business imperative.

AT&T offers high-speed Internet and phone service, but its U-verse television service is not profitable and can’t match competitors at places like Comcast. DirecTV offers satellite TV but not Internet or phone service.

“This transaction gives AT&T the capabilities to be a more effective competitor to cable,” AT&T CEO Randall Stephenson told lawmakers in the House.

More specifically, the merger would allow the two companies to better bundle TV, phone and Internet offerings, just like other cable companies do.

So-called “synthetic” bundles that currently allow consumers to get Internet from AT&T and television separately from DirecTV, “make, frankly, for a bad customer experience,” DirecTV chief executive Michael White said. Customers, he claimed, dislike having to deal with two separate billing and customer service offices and have to wait for two different sets of installation.  

Despite many lawmakers’ openness to the deal, some Democrats expressed a sense of merger fatigue, especially in light of the proposed deal between Comcast and Time Warner Cable and Sprint’s rumored intentions to buy T-Mobile. 

Taken together, House Judiciary ranking member Rep. John Conyers (D-Mich.), feared the industry might be becoming too consolidated.
 
“Where does this end?” he asked.
 
The AT&T merger, he said, “may in fact spur further consolidation in the telecommunications industry as part of what might be viewed as a race to the bottom.”
 
Sen. Al Franken (D-Minn.) a frequent critic of media consolidation, said that the bundling trend often allows companies to hide extra charges and make people pay for services they don’t use.
 
“I’m not sure that’s what consumers want,” he said. “Many of my constituents complain to me about bundles; they say they’re getting a raw deal.”
 
The merger would also allow the companies to save enough money by eliminating redundant services and negotiating for better rates to buy content, which would allow AT&T to build out high-speed broadband to 15 million households, many of them in rural areas.  
 
Still, subscribers’ bills would probably not go down as result of the merger, Stephenson acknowledged. If anything, they would only rise more slowly.
 
“We hope that will be the byproduct of this,” he said.
 
Ultimately, the final say over the proposed merger falls to regulators at the Federal Communications Commission (FCC) and the Justice Department, who will spend months going over the details.
 
To try and soothe any concerns they might have, AT&T has promised to live up to the FCC’s former regulations requiring companies treat all content treatment equally inline, even though a court threw those rules out earlier this year. 
 
Plus, the merger would allow DirecTV’s 16,000 employees to join a labor union, as 41,000 AT&T employees have already done. Some House Democrats were pleased by that and indicated it would go a long way toward winning their support.
 
“Given the television industry’s famous reputation for opposing organized labor, this merger would have transformational benefit for thousands of employees in this industry, giving labor a strong foothold in the industry,” Johnson said.

— This story was last updated at 6:04 p.m.