Congress Readies Hearings on AT&T, DirecTV Tie-up
WASHINGTON (The Deal) -- House and Senate hearings will be held Tuesday to examine AT&T's
The House Judiciary Committee will go first with a 10:30 a.m. hearing to discuss AT&T's plan to combine the second-largest U.S. cellular operator with the largest U.S. satellite TV provider to form an integrated telecom company that can compete with Comcast
The deal comes as Washington is also grappling with Comcast's $45 billion bid for Time Warner Cable
The committees' announcements follow the companies' submission of their public interest statement to regulators Tuesday describing the purported benefits the merger would bring to consumers. Topping their list is the ability to bundle broadband, video and wireless services, particularly in areas where cable monopolies are the only providers of bundled services.
Also the companies said the savings and synergies created by combining their operations would allow them to expand their broadband footprint to at least 15 million new customer locations within four years of closing the transaction. The majority of those locations would be in rural areas currently with no or limited broadband service.
They also said the added competition for bundled services will drive down overall prices for bundled services.
Despite the companies' touted benefits, Guggenheim Securities LLC analyst Paul Gallant said the Federal Communications Commission and the Department of Justice will continue to be concerned about potential upward pressure on stand-alone pay-TV prices.
"We suspect the DOJ and FCC will have concerns with the increased concentration in the pay TV market that would result from this merger," he wrote in a note to clients Friday.
Gallant said that in markets where AT&T already offers its bundled U-Verse product, the merger would exacerbate concentration in a pay TV market that is already considered highly concentrated by antitrust standards. "Pay TV prices are a politically sensitive issue," he said. "Reduced pay TV competition and potential upward pressure on prices represent the biggest risk to this merger."
He acknowledged, however, that the extension of bundled services probably reduces the extent of harm caused by the deal. In the end, he predicted that the FCC and the DOJ will approve the deal because of the purported benefits and AT&T's pledge to offer DirecTV video service available as a standalone service at nationwide prices that do not differ between customers in AT&T's wireline footprint and customers outside the footprint.