AT&T has filed documents with the Federal Communications Commission (FCC) in a bid to convince the regulator to acquire DirecTV on a multi-billion deal.
The proposed deal is worth $45.8 billion, which will merge the telecommunication giant AT&T with the satellite television provider DirecTV. The merger will give stiff competition to other cable companies such as Time Warner Cable and Comcast.
However, consumer advocates are opposing the merger between the two companies as such a big merger may harm consumers by reducing competition that may result in hike of prices for the services. On the other hand, AT&T has argued that the merger may result in lowering of prices for consumers.
"The rationale for this transaction is simply stated," per the documents filed with the FCC. "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."
DirecTV has more than 20 million customers in the U.S. but it cannot offer broadband services with its video packages. AT&T has a solid broadband consumer base in the U.S. with around 17 million customers, but the company has struggled to provide video services. The two companies claim that many customers want a package with broadband and video services included.
Both the companies also debate that combined together they will also get an advantage to negotiate effectively with programmers. The companies claims that bigger distributors are sometimes able to get better rates to show certain channels like ESPN or Comedy Central when compared to smaller providers. AT&T claims that the cost involved with acquiring content for its U-Verse service is relatively higher when compared to bigger players.
"AT&T has only one reliable option to lower its content costs in a reasonable frame to compete effectively with Comcast: expand its customer base significantly," per AT&T.
DirecTV is also facing issues as it is unable to provide broadband that are attractive to customers. DirecTV has already formed marketing partnership to offer broadband services; however, it says that the company has limitations such as "smaller discounts for bundling, uncompetitive broadband speeds and consumer inconvenience and confusion."
AT&T and DirectTV claim that if the merger proposal gets a go ahead from FCC, the new entity will be able to offer cost savings to customers by bundling video services and broadband.
The FCC and the Justice Department are studying the proposed multi-billion deal between AT&T and DirecTV.