Audio Video News

The proposed merger between AT&T and DirecTV would create the nation’s second largest pay-TV company. With the telco bringing 5.7 million U-verse subscribers to the table, and the satellite operator a considerably greater 20.3 million, the merged entity would have 26 million video subscribers, ranking just below the proposed merger of Comcast and Time Warner Cable with 30 million subscribers.

While DirecTV has a national audience, AT&T operates its video service in 22 states, so the merger’s overlap is likely to stifle competition in those states. But AT&T makes several I’ll-be-a-good-boy pledges: DirecTV would continue as a standalone service for three years. Ditto AT&T broadband. High-speed Internet access would be extended to 15 million homes on top of AT&T’s current 70 million. AT&T would abide by the FCC’s 2010 Net- neutrality order (despite its having been struck down in court)—so no nasty network-related bottlenecks for Netflix. And the company would sell its stake in a Latin American wireless carrier to trim its North American base to more regulator-friendly dimensions.

Consumer groups slammed the merger: “The industry needs more competition, not more mergers,” said John Bergmayer of Public Knowledge. “You can’t justify AT&T buying DirecTV by pointing at Comcast’s grab for Time Warner, because neither one is a good deal for consumers,” said Delara Derakhshani of Consumers Union.

Among financial analysts, sentiment was mixed. “Satellite is kind of a doomed technology,” said Jim Nail of Forrester Research to The New York Times. But Jan Dawson of Jackdaw Research was more upbeat in an interview with Bloomberg News: “Strategically, this makes a lot of sense for AT&T. It lets them go national with a video offering that matches their wireless reach.”

AT&T would buy DirecTV for $48.5 billion (with a B) in cash and stock.