Purge the Merge! Part 2

So, in my previous Purge the Merge! post, I commented on the negative impact of the merger/takeover of TimeWarner Cable and Comcast, and as if that was not enough, then came the proposed acquisition of DirecTV by AT&T. And this time, the request for a comment came from the E-Commerce Times, and here was my response:

The proposed acquisition of DirectTV by AT&T comes on the heels of the proposed purchase of TimeWarner Cable by Comcast, and both moves represent a consolidation of the telecommunications industry that favors corporations, not consumers. While there might be some gains in efficiency of service from the mergers, they give the companies more power, more control over pricing and over the content they provide.

The loss of competition, even indirect competition, in any industry is bad news for consumers, and for citizens. It is true that the differences between cable, satellite, and phone service have all but dissolved, and because of the historic bias of these services, telephone companies have fallen behind cable companies in providing content, that is, television programming and other forms of entertainment. Acquiring the second largest Satellite TV company would help AT&T catch up as a content distributor, but at the cost of consumer choice regarding which services they might obtain.

The most troublesome issue in all this is the continued assault on net neutrality, and consolidation of the telecommunications industry can only the strengthen the hand of the corporations that are trying to undermine the founding principles of the internet as a public service, choke off services, channels, and sites that they do not have a financial agreement with or do not care for, and give special fast service to those that they favor, either economically or politically.

The FCC is the only government agency empowered to regulate the telecommunications industry, and during Reagan's presidency it was stripped of much of its powers, and has never quite recovered, but it still has the potential to slow down or maybe even stop these acquisitions. 

Now, let's take a look at the actual article that was published, entitled AT&T May Be Suiting Up to Battle Comcast, by Erika Morphy, dated May 13th. The article begins with this highlighted paragraph:

If AT&T were to acquire DirecTV, it would be bad news for consumers, said Entrevo Managing Director Topher Morrison, author of Collaboration Economy. "The advantages are almost all for AT&T, and very few for the customers. They will bill this as their ability to provide better service and wider selection, but that's just a fancy way of saying they will charge the consumer more."

It then begins in earnest with the following explanation:

AT&T has been negotiating to buy DirecTV for close to US$50 billion, based on reports that surfaced Monday. The deal, which has not been confirmed by the companies, could close within a few weeks.

The current option on the table, according to anonymous sources, would be largely a stock trade but it would include some cash, with AT&T offering in the low- to mid-$90s per share for DirecTV. That would be roughly a 20 percent premium over its current stock price, and it would value the company at close to $48 billion.

Some sources have put the reported offer at $100 per share, but also have noted that the amount of the offer and other terms related to the deal could well change.

The merger would be the largest in the telecom sector in years, and if it were to go through, it would significantly realign the players in the industry, placing AT&T in an optimal position to compete against Comcast, which currently is trying to get its own $42 billion acquisition of Time Warner Cable past regulators.

Now, how about a colorful metaphor from a reputable academic source (but no, not me):

"Think of it as Gorgon upscaling to meet Godzilla, otherwise known as 'Comcast,'" said Rich Hanley, associate professor and director of the graduate journalism program at Quinnipiac University.

"The DirecTV acquisition would give AT&T a steady revenue stream and more customers to upsell other services to present a suite of entertainment and broadband offerings that can help in its battle with Comcast," he told the E-Commerce Times.

The regulator issues could take a while to work through, he added, "so don't expect anything new any time soon."

Not a very critical view, maybe even a little sympathetic to AT&T. Indeed, at this point a new heading appears, "A Regulatory Obstacle Course," and here we see a glimmer of hope for the situation:

AT&T certainly can expect just as rigorous an examination from the Justice Department and the Federal Communications Commission as Comcast is receiving.

Regulators will be seeking to ensure that an AT&T-DirecTV combination won't increase prices or lead to restricted options for consumers, Marc Price, CTO for the Americas at Openet, told the E-Commerce Times.

Some reasons regulators might be more likely to favorably view this merger include the emerging competition for video content from Amazon, Apple and Netflix, as well as the prospect of nationwide services from Comcast, he said. "Competition will ensure choice and competitive pricing."

In fact, one reason AT&T likely is pursuing this idea -- a reason that could become a talking point as it negotiates with regulators -- is that if it wants to be competitive, AT&T will need a nationwide video delivery service to complement U-Verse, Price pointed out.

"DirecTV's satellite service provides this capability," he said.

And now, on to the next section, "The Question of Net Neutrality," and an excerpt from the comments that I provided:

However, that analysis assumes that telecom providers would be unable to restrict consumers from viewing content from any source, including a competitor's.

Acquiring the second-largest satellite TV company would help AT&T catch up as a content distributor, but at the cost of consumer choice regarding available services, Lance Strate, professor of communications and media studies at Fordham, told the E-Commerce Times.

The consolidation of the telecommunications industry "can only strengthen the hand of the corporations that are trying to undermine the founding principles of the Internet as a public service, choke off services, channels and sites that they do not have a financial agreement with or do not care for, and give special fast service to those that they favor, either economically or politically," he said.

 And that's it for me, but there is one last section to the article, one that echoes my sentiments, "The Consumer Loses":

Even leaving the ongoing battle surrounding Net neutrality out of the equation, a DirecTV acquisition is bad news for consumers, according to Topher Morrison, author of the book Collaboration Economy, and managing director of Entrevo.

"The advantages are almost all for AT&T, and very few for the customers. They will bill this as their ability to provide better service and wider selection, but that's just a fancy way of saying they will charge the consumer more," he explained.

Consumers don't even need DirecTV anymore, he said, pointing to the very competitors that are likely motivating AT&T in this move.

"I can watch every show I want online through collaboration apps like Netflix, Hulu and Amazon Prime," said Morrison. "AT&T needs to ask themselves how they can partner up with their customers—not their competitors."

And hats off to Morrison, really, I couldn't have said it better myself. Why not see your customers as partners and collaborators, rather than products and patsies? 

And of course, the point here is not in how much I get quoted, I just provide my raw comments so that they don't go to waste, and also to show how journalism works. But the important point here is the disservice being done to us as consumers, and more importantly to us as citizens, by all this merger-mania.

Newton Minow, where have you gone? The sharks in the water are circling all around us!