FCC likely to approve AT&T’s $49 billion acquisition of DirecTV

Wednesday, Jul 22, 2015

Approval would clear path for AT&T to close deal.

Federal regulators are poised to approve AT&T Inc.’s $49 billion acquisition of DirecTV, ending a review process that lasted more than 12 months and clearing the way for the biggest media deal of the past year.

Federal Communications Commission Chairman Tom Wheeler said an order has been circulated to the agency’s other four commissioners recommending approval of the deal. The agency has attached numerous conditions, including requirements that AT&T expand its fiber-optic broadband service.

The company will also be required to apply any broadband-data caps it imposes on customers to its own over-the-top video service and content to eliminate any chance that it can take advantage of rivals. No requirements were included related to net neutrality.

The Justice Department also signed off on the transaction.

The acquisition, which was announced in May 2014, will make AT&T the nation’s largest pay-television provider at a time when companies are navigating huge shifts in television as video consumption moves online.

AT&T is betting that acquiring DirecTV with its 20 million satellite customers and $33 billion in revenue will give it access to programming relationships that could put it in a better position to expand into online TV as more Americans “cut the cord.”

Earlier this year, rival Verizon Communications Inc. bought AOL Inc. for $4.4 billion as a way to access AOL’s digital-advertising technology for a mobile-first video service it is launching later this summer.

The DirecTV deal will be AT&T’s biggest acquisition under Chief Executive Randall Stephenson and the carrier’s largest since its 2006 purchase of BellSouth for $85 billion. It lifts the shadow from its failed attempt to buy T-Mobile US Inc. in 2011, which was blocked by the Justice Department, a misstep that cost the company more than $4 billion in break-up fees and other penalties.

This time around, AT&T had an easier go of it with regulators, who killed Comcast Corp.’s $45 billion deal for Time Warner Cable earlier this year. The AT&T deal didn’t raise the same regulatory problems as Comcast’s combination, which would have created a giant service provider controlling access to more than half of what the FCC considers high-speed broadband Internet service.

The deal with DirecTV will pair AT&T’s regional U-verse pay-TV business with DirecTV’s satellite operation, which is nationwide but lacks a robust broadband offering.

The combination has raised concerns among rival companies and industry groups, including Netflix Inc., Dish Network and Cogent Communications, which told the FCC that the combination would give AT&T the ability and incentive to squeeze online-video rivals. Netflix has said it doesn’t oppose the combination as long as there are conditions imposed to protect online video companies.

The FCC added no requirements to the terms covering so-called interconnection agreements, which cover how other networks connect to AT&T’s. The company will have to file its interconnection agreements with the commission for review.

AT&T is also required to offer standalone broadband service at set prices to low-income individuals who meet certain criteria, people briefed on the matter said.

AT&T has said the deal will give it more scale in television, which could help its U-verse video service become profitable. Owning DirecTV may also advance AT&T’s ambitions in online video. The company has said it plans to offer an over-the-top video product and has formed an online video venture with media mogul Peter Chernin.