The Federal Communications Commission, or FCC, has conditionally approved the AT&T’s purchase of DirecTV. These conditions are designed such that the new combined entity, which will have somewhere close to 26 million subscribers and will be the largest American TV company, will allow subscribers to use rival video services online. The new combined business will need to include affordable Internet packages for customers. The US Justice Department has concluded its investigation into AT&T’s acquisition whereas the FCC is taking a keen interest in AT&T’s promise to deliver high speed Internet access for an additional 15 million customers living away from the major cities. This commitment will help the FCC achieve their stated goal of giving all Americans access to high speed Internet access. Indeed, this appears to have helped the FCC announce that this deal is in the public interest.
When the deal was first announced, a key part is DirecTV’s NFL Sunday Ticket, which was so important to AT&T that the telecom provider had a clause in the pre-agreement that allowed it to call off the purchase, if DirecTV lost the Sunday Ticket. Logically, AT&T will be wanting to use the NFL Sunday Ticket to boost smartphone sales and will help the combined business push into the digital video market. With 26 million customers on its books, this gives the new combined business plenty of clout. In the past, DirecTV and AT&T have teamed up to offer customers Internet and TV bundles and this partnership will now be even stronger. Bundled packages are a favorite of companies because there are economies of scale that work on both sides – the reduced price to customers acts to help protect the business from competitors, plus these tend to be higher margin products for the business in question and so lead to greater profits.
That the FCC has approved AT&T’s purchase of DirecTV is good news given the other developments in the industry, such as Verizon Wireless’ acquisition of AOL earlier in the year. Verizon has already discussed how it is planning on using AOL’s digital video business to encourage customers to take larger data allowances with contracts. Verizon and AOL might seem to have something of a head start, but AT&T’s long-standing arrangements with DirecTV should help them to catch up. It’s going to be an interesting twelve months for digital television customers.