The American Cable Association has petitioned the FCC to impose merger conditions on AT&T and DirecTV (NASDAQ: DTV), mandating that the combined company charge cable competitors reasonable prices to carry its five regional sports networks.
If the $49 billion merger is consummated, the ACA said, "it will have significant deleterious competitive effects by enhancing the existing harms of DirecTV's vertical integration with 'must have' RSN programming."
Greater scale and leverage, the memo added, "will give AT&T an increased incentive to charge greater fees for its RSNs to rival MVPDs, which will raise their costs. These rate increases will be passed down to subscribers in various ways."
The ACA also noted that previous remedies to resolving RSN disputes between rival pay-TV operators, such as baseball-style arbitration, "are not adequate to alleviate the harms raised by this combination, particularly for small and mid-sized MVPDs. In many cases, due to the widespread use of non- disclosure agreements by programmers, small and medium-sized MVPDs lack the critical information to even assess whether AT&T/DirecTV is acting on their incentive to charge higher prices due to their vertical integration."
Since it first proposed the merger 13 months ago, AT&T (NYSE: T) has said the deal could save the combined outfit around $1.6 billion in program licensing costs in the first three years due to improved scale. For its part, the ACA is arguing that leverage could also be enjoyed by AT&T/DirecTV as a program licensor.
Currently, DirecTV operates Root Sports Pittsburg, Root Sports Northwest, Root Sports Southwest and Root Sports Rocky Mountain.
Root Sports Houston was recently taken over by DirecTV and AT&T as part of a joint venture. This came after the channel, originally launched as CSN Houston by Comcast (NASDAQ: CMCSA), in partnership with Houston's Rockets and Astros, went bankrupt following the refusal by DirecTV and AT&T to carry it.
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