AT&T/DirecTV merger will usher in heightened competition

AT& T’s proposed mega acquisition of DirecTV is currently being mulled over by the Federal Communications Commission, following the submission of the regulatory filing this month.

In the detailed submission AT&T has vowed to drop pay TV prices, offer greater broadband availability in rural areas in addition to promising extended compliance with 2010 net neutrality legislation.

“This merger occurs against the backdrop of fundamental shifts in the ways consumers obtain broadband and video services. Through this combination, the companies will marry complementary assets to achieve what they could not achieve separately or through a contractual arrangement: a compelling bundle of video and broadband services," the AT&T FCC filing states.

In addition to committing to adhere by 2010 net neutrality legislation for three years after the consummation of the merger, AT&T pledged increased consumer benefits which include rolling out high-speed broadband to at least 13 million locations, via fixed wireless local loop technology mostly in rural areas.

"Because the products and assets of the merging companies are primarily complementary, economic theory predicts that this transaction will put strong downward pressure on the prices for the combined company's bundled products. That, in turn, will trigger competitive responses from competing cable providers, to the further benefit of consumers," the carrier adds.

Earlier in the month, the carrier told its investors that the merger would reduce content acquisition costs by 20 percent.

“There will be significant downward pressure on the prices of the new integrated bundles of AT&T broadband and DirecTV video, even without factoring in the improved quality such bundles will offer consumers,” the submission contends.

AT&T’s summary of its filing also notes that there may be “upward pressure” on the prices of video or broadband services that aren’t bundled together. But it says if that’s the case it will be “significantly outweighed by the downward pressure on the prices of bundles of AT&T broadband and DirecTV video that will now be available at improved quality and attractive prices.”