NEW YORK (AP) — The head of the Federal Communications Commission has recommended approving AT&T’s $48.5 billion purchase of DirecTV. The deal would create the country’s largest provider of cable or satellite TV.
FCC Chairman Tom Wheeler said in a statement Tuesday that he approved the deal with certain conditions. The other four commissioners still have to vote on the proposal.
The Department of Justice approved the deal, saying Tuesday that it doesn’t “pose a significant risk to competition.”
The company would have 26.4 million cable and satellite TV subscribers in the U.S., topping Comcast as well as a possible new giant, Charter, which wants to buy Time Warner Cable. It would also include AT&T’s nationwide network of tens of millions of wireless customers, its Internet and landline phone services and DirecTV’s millions of customers in Latin America, where AT&T wants to grow.
Consolidation has swept the industry as people increasingly turn to the Internet for video and content costs rise for cable and satellite TV companies. A bigger AT&T would have more leverage in negotiations with big media companies over the price paid for popular channels. It would also combine a nationwide satellite TV service with a nationwide wireless network, giving it the ability to sell new kinds of video packages as people increasingly watch on their mobile devices.
But regulators have not given the green light to all deals in the TV and Internet space. Comcast earlier this year walked away from a $45 billion attempt to buy cable rival Time Warner Cable after regulatory pushback.
The AT&T-DirecTV combination did not generate the same level of concern as the Comcast deal from consumer advocates and regulators.
That’s because regulators were concerned that a bigger Comcast would have had too big a chunk of the country’s high-speed Internet customers, which are seen as the future of the industry. That would give it the ability to undermine online video rivals.
The bigger AT&T wouldn’t have a significant entertainment arm like Comcast’s NBCUniversal, and buying DirecTV does not add to AT&T’s U.S. wired Internet subscriber count of just over 16 million. It still trails Comcast’s roughly 22 million Internet customers, and would lag a larger Charter as well.
Even so, there are conditions attached to Wheeler’s approval. He wants to bar AT&T from excluding any of its own video services from a data cap for home Internet customers. If AT&T were allowed to do that, it could undermine an online video company like Netflix. Streaming lots of Netflix video could potentially tip a user over an AT&T Internet data cap and trigger additional charges, while streaming video from a service from AT&T wouldn’t. AT&T’s website says its U-verse high speed Internet service includes 250 gigabytes of data each month.
Wheeler also proposed that AT&T must submit to the FCC commercial Web traffic arrangements it makes with companies like Netflix or Internet backbone companies like Cogent “to bring greater transparency” to such deals.
The FCC has become concerned about the potential of fights over such traffic agreements, called “interconnection” deals, to disrupt service for consumers. Charter Communications Inc. earlier this month pledged not to charge companies to connect to its network in a bid to appease regulators combing over its proposed $67.1 billion bids for time Warner Cable and Bright House.
The FCC would also require that 12.5 million customer locations have access to a speedy fiber Internet connection and make an “independent officer” regulate compliance with the deal’s conditions.
AT&T’s TV business pipes in cable to 6 million households, while DirecTV supplies more than 20 million households in the U.S. and 19.5 million customers in Latin America.
The Dallas company said in a release Tuesday that it looks forward to FCC approval of its purchase of DirecTV.