AT&T, DirecTV merger promises better Internet access. Lower prices? No.


The ongoing debate whether the proposed billion-dollar AT&T and DirecTV merger should be given the green light continues, with the telecommunication company promising improved Internet access.

For the uninitiated, as we reported earlier in June, AT&T had filed documents with the Federal Communications Commission to persuade regulators to approve its intended acquisition of satellite TV provider DirecTV.

The proposed deal is valued at $48.5 billion and would result in the merger of DirecTV with AT&T. However, the intended deal is being strongly opposed by consumer groups as they assert that the merger may not be beneficial for consumers in the long term. The merger will likely decrease the competition, which may have a domino effect and lead to a price hike for the services.

On the other hand, AT&T, which is the second-largest wireless carrier in the United States, claims that the deal will be advantageous for consumers as it will result in the lowering of price of services.

On Tuesday, June 24, AT&T and DirecTV clarified to the members of Congress that the intended merger would benefit rivals and would be instrumental in bringing about a first -- pressuring cable companies to decrease their prices.

"Econometric analysis confirms that by making us more competitive, the merger will put downward pricing pressure on cable products -- cable bundles, cable video and cable broadband," said Randall Stephenson, CEO of AT&T, to antitrust subcommittees in both the House of Representatives and the Senate.

Both AT&T and DirecTV, however, did not commit to offering lower prices. The subcommittee was not convinced by the claims and elicited tough reactions.

"I am very, very skeptical as a senator, not just as a consumer," said Sen. Richard Blumenthal (D-Conn.) at the hearing.

Blumenthal also queried Stephenson whether he was able to pledge if the savings from the lower content fee charged as a result of the merger would be passed on to consumers, to which the AT&T CEO said he could not commit and cited "market pressures." However, Stephenson said he hoped the deal would bring about a sluggish price increase for consumers.

DirecTV's CEO Michael White anticipated the emergence of better value bundles for consumers as result of the merger. He, too, found it "pretty hard" to commit to low prices for pure-play TV because of the "price of content."

While both AT&T and DirecTV argue that the proposed merger will enable them to provide improved Internet services in rural areas, as well as compete with rival cable companies, smaller cable operators aver that the deal will not be favorable for their future as the two companies may hold an advantageous position and, in turn, control the distribution, creation and cost of programming.

The fate of the merger rests in the hands of the Justice Department and the FCC.

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