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FCC Approves AT&T-DirecTV Union

24 Jul, 2015 By: Erik Gruenwedel

Government mandates against “discriminatory practices” for third-party OTT video services

The Federal Communications Commission July 24 granted — with conditions — approval of AT&T’s $48.5 billion acquisition of satellite operator DirecTV.

The approval allows AT&T to merge the two companies into one combined entity. The FCC said an order detailing its reasoning and the conditions will be issued shortly.

John Stankey will become CEO of AT&T Entertainment & Internet Services, responsible for leading the combined DirecTV and AT&T home solutions operations. Stankey will report to AT&T CEO Randall Stephenson. DirecTV CEO Mike White announced his plans to retire.

As part of the merger, AT&T will be required to expand its deployment of high-speed, fiber-optic broadband Internet access service to 12.5 million customer locations, as well as schools and libraries. In addition, AT&T is prohibited from using discriminatory practices to disadvantage online video distribution services — such as Netflix, Amazon Prime Instant Video and Hulu Plus — and will submit its Internet interconnection agreements for FCC review.

AT&T will appoint a compliance officer to develop and implement a plan to ensure compliance with these merger conditions. Also, the telecom will engage an independent, third-party compliance officer to evaluate the plan and its implementation, and submit periodic reports to the FCC.

Finally, AT&T will offer broadband services to low-income consumers at discounted rates.

"The conditions imposed by the commission address potential harms presented by the combination of AT&T, one of the nation's largest telephone and Internet service providers, and DirecTV, the nation's largest satellite video provider," the FCC said in a statement.

Indeed, in April the FCC denied Comcast’s $45 billion acquisition of Time Warner Cable — largely due to the No. 1 and No. 2 cable operators’ alleged market control of the Internet.

Netflix, which loudly advocated against the Comcast-TWC deal, appeared less vocal in opposition to the AT&T-DirecTV pact.

The SVOD service in May said it would be amenable to the transaction provided certain conditions were met.

"We are not opposed to the merger but urge the FCC to consider appropriate remedies," spokesperson Marie Squeo wrote in an email.

Specifically, Netflix contended that through the merger AT&T would become the nation's largest ISP, while at the same time having a vested interest in maintaining DirecTV's bundled channel business.

Meanwhile, in May, Charter Communications announced a $55 million acquisition of TWC, which is still under regulatory review.

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