Post Video Marketplace

The FCC Must Work to Ensure the Public Interest in the Wake of the AT&T/DirecTV Merger

July 28, 2015 , ,

The FCC has recently released the full text of its Order approving the merger of AT&T and DirecTV, with conditions. While we’re pleased that the Commission has addressed many of the most important competitive issues we have raised with this merger, we remain concerned that FCC has not done everything we believe would have been helpful to prevent competitive harms.

Public Knowledge has had two areas of concerns with this merger. First, by buying DirecTV, AT&T would gain an increased incentive to discriminate against competing video services. We have argued that the FCC could not approve this merger without taking steps to counter those harms. Second, especially in light of the consolidating communications marketplace, we have argued that the FCC needs to take seriously its legal responsibility to block mergers unless it can be assured of a concrete public interest benefit. Under the Communications Act, it’s not enough for the companies to show how they would benefit from a merger. The FCC needs to identify concrete ways that a merger would benefit the public.

The FCC has not gone as far as we’d like in imposing conditions on AT&T to protect the Open Internet. It is true that the FCC’s existing net neutrality rules will protect consumers from much anticompetitive harm, and we are confident those rules will withstand the legal challenge that is currently underway. But we have argued that the FCC should, as a matter of caution, insist that AT&T agree to follow the principles embodied in those rules regardless of the outcome of any litigation. Additionally, we advocated that the FCC add an additional level of protection for online video services, that goes beyond the generally-applicable Open Internet rules. The FCC has adopted additional protection for online video services, which prohibits AT&T from favoring its own services even in ways that might not clearly run afoul of the Open Internet rules—this includes, for instance, zero-rating, or AT&T exempting only its own broadband video service from data caps or metering. However, the FCC has only applied this additional level of protection to fixed networks, not mobile networks. The FCC will have to make sure AT&T does not exploit this gap, since many of the practices involving exempting some services but not others from data metering have been happening on mobile networks, not fixed networks.  Finally, while the FCC has addressed broadband interconnection, the reporting and monitoring regime is not as forward-looking as the commitments AT&T’s ISP peer, Charter, has recently agreed to. While we wish the FCC had gone further in these areas, we hope the FCC ensures that the measures it has imposed are effective.

The FCC has tried to get AT&T to be more specific about its fiber upgrade plans, and it has set up an independent reviewer to monitor AT&T’s broadband buildout promises, as well as its other commitments. This could be a very important enforcement tool if appropriately implemented.  Although Public Knowledge remains skeptical of broadband buildout or upgrade promises that are predicated on a merger, the FCC can use this opportunity to ensure that the commitments AT&T has made actually happen. That said, the Order’s requirement that AT&T deploy fiber to 12.5 million locations, as the FCC states, includes “pre-transaction planned deployment”—that is, deployment AT&T was already going to do. AT&T has only committed to deploying to 2 million more locations than their existing plans. The FCC deserves credit for making those existing plans public—but when calculating potential benefits of the FCC’s conditions, it’s best not to overstate them.

Although everyone should have access to affordable, truly high-speed broadband, in the short term AT&T’s commitment to offering a low-cost basic connectivity option to qualifying subscribers will be beneficial. Commissioner Clyburn deserves much credit for ensuring that this commitment was part of the final deal. Of course, the implementation matters. We would expect AT&T to make sure that people who qualify for this program know about it, while making the sign-up process as seamless as possible. A low-cost connectivity program should still provide first-class customer service and support.

While this merger should help AT&T offer a more attractive package of services that, in some markets, enables it to compete more effectively against cable, this by itself is not enough to ensure that this deal is in the public interest. No matter the conditions and commitments the FCC could put on this or any merger, the broadband, video, and communications marketplaces remain very concentrated, with inadequate competition, and more consolidation cannot be the answer to ever-rising costs and increasing disparities between broadband-haves and broadband-have-nots.

Finally, we are encouraged by Commissioner Clyburn’s statement that the Commission will open a Notice of Inquiry into programming practices. Now, as one of the nation’s largest TV distributors, AT&T will have the ability to control the evolution of video competition by way of its business relationships with programmers. Large programmers, too, sometimes have excessive leverage against smaller and emerging TV distributors. The activity around mergers in the video marketplace suggests it is time for the Commission to examine the marketplace to ensure the interests of viewers come first.

In this transaction, the FCC didn’t adopt all of the proposals that Public Knowledge asked for. This means it’s all the more important that it work to make sure that what is has adopted does, in fact, work.  We hope it does. But ultimately, there is only so much the FCC can do in the context of a merger review to promote the public interest. The FCC should continue to work in other proceedings on issues such as Universal Service and opening the door to broadband and video competition that could improve the marketplace and increase access.

 

Image credit: Flickr user OpenSourceWay


About John Bergmayer

John Bergmayer is Legal Director at Public Knowledge, specializing in telecommunications, media, internet, and intellectual property issues. He advocates for the public interest before courts and policymakers, and works to make sure that all stakeholders — including ordinary citizens, artists, and technological innovators — have a say in shaping emerging digital policies.