AT&T's DirecTV deal includes plums to woo regulators and consumers

15M more homes, mostly rural, would get fast broadband

AT&T's mega-bid to buy DirecTV for $48.5 billion and take on another $18.6 billion of DirecTV debt, includes several deal sweeteners designed to win over government regulators and customers.

In a conference call today, AT&T CEO Randall Stephenson called the offer and its special provisions "very, very good for consumers.... Together, I' m confident we'll drive innovation. We have an exciting future ahead of us."

An exhaustive review of the regulatory environment led AT&T to be "more confident this [deal] will pass regulatory muster," Stephenson said. "What allowed us to catch momentum [in regulatory reviews] was our belief that the deal can be designed to be consumer friendly and serves the public interest."

However, consumer advocacy groups immediately attacked the consumer-focused provisions, which include a plan to provide broadband to 15 million homes -- mostly in rural areas -- once the closes. That would come atop an existing AT&T high-speed Project VIP broadband rollout now slated to reach 57 million customers by the end of 2015.

The 15 million homes would be served within four years after the deal closes by a combination of technologies, including fiber optic cable to the home and fixed wireless local loop, AT&T said. Fixed wireless local loop typically refers to a technology to provide small routers inside or near homes that take a fast wireless signal from a carrier and forward it to a user in a home or business.

"That 15 million sounds like a lot, but AT&T could pass that same number of homes with gigabit fiber for far less than the cash they're spending in this deal," said Derek Turner, research director for Free Press, a consumer lobbying group.

Turner attacked the plan to use fiber and fixed wireless instead of using AT&T's advanced DSL technology within its U-verse TV service to the reach the 15 million.

"Translation: this means AT&T is going to be offering the same expensive fixed 4G wireless in the same areas where it refused to upgrade its wired networks," Turner said. "This commitment is not even close to offering real [wired] broadband to 15 million homes. This deal doesn't value consumers at all."

Even investors aren't really benefiting with the deal, Turner said, since he estimated it would cost AT&T $1,500 to connect a single home with gigabit fiber, compared to the cost he calculated of $3,350 per home that AT&T is essentially paying for access to 20 million U.S. DirecTV video subscribers.

"It's a head-scratching deal," he said.

Other commitments AT&T has made once the deal closes -- in possibly a year -- include:

  • A standalone wired AT&T broadband service of over 6 Mbps at prices guaranteed for three years.
  • A standalone DirecTV TV service based on nationwide pricing for at least three years.
  • A commitment for three years to the Federal Communications Commission Open Internet protections created in 2010.
  • Continued plans by AT&T to participate in two upcoming FCC spectrum auctions, including a bid of at least $9 billion in a 2015 auction.

Turner called AT&T's promise of standalone wired broadband service for three years a "sign of market failure." He termed AT&T's Net Neutrality commitment a "joke" since it is a short-term commitment to a set of "loophole-ridden rules."

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