AT&T gets green light to buy DirecTv, FCC gets a press release

by Steve Blum • , ,

Potemkin would be proud.

AT&T has the blessing of the Federal Communications Commission to buy DirecTv. That’s the big regulatory hurdle that the deal had to clear – the federal justice department already seemed okay with it – and yesterday the FCC said yes, with conditions

As part of the merger, AT&T-DIRECTV will be required to expand its deployment of high-speed, fiber optic broadband Internet access service to 12.5 million customer locations as well as to E-rate eligible schools and libraries. In addition, AT&T-DIRECTV is prohibited from using discriminatory practices to disadvantage online video distribution services and will submit its Internet interconnection agreements for Commission review. Finally, AT&T-DIRECTV will offer broadband services to low-income consumers at discounted rates.

There’s less substance to those conditions than either the FCC or AT&T would like you to believe. The fiber commitment is characterised as “fiber to the premise”. Probably true enough, but what they’re not saying is that building a single fiber line to a 50-story central business district office building – as AT&T is aggressively doing – gets you a lot of customer locations. As does installing fiber in newly built housing developments and multiple dwelling units – two more high potential market segment that AT&T is happy to serve.

Typically, the FCC didn’t released the details of what it’s requiring of AT&T, instead floating a happy talk press release from America’s lobbyist-in-chief that points to hollow commitments. For example, the e-rate promise only applies to schools and libraries “where AT&T-DIRECTV deploys FTTP service”.

Well, duh. If they have fiber-based service available, they’ll sell fiber-based service (but not the fiber itself). Remember, an e-rate hook-up is not free, it’s semi-market rate service that’s subsidised by federal dollars. AT&T is already all over that.

That said, I think approving the deal – with or without Potemkin conditions – is the right call. It makes AT&T a more plausible competitor to the mega-cable companies that are increasing their monopoly hold on minimum standard – 25 Mbps down/3 Mbps up – service. The problem isn’t that AT&T lacks competitive will in lucrative markets, it’s that it’s letting copper networks that serve less money-dense communities rot on the poles. That’s another regulatory battle for another time.