AT&T-DirecTV deal gets approval from FCC's Wheeler, with conditions

FCC Chairman Tom Wheeler recommended that the five-member agency approve AT&T's (NYSE: T) $49 billion purchase of DirecTV (NASDAQ: DTV), clearing the penultimate regulatory hurdle for the deal, first proposed in May 2014, to finally be approved.

A perfunctory vote of the FCC's five commissioners is now all that is needed to close the deal; the Department of Justice said it also approved the transaction.

In a statement, Wheeler also outlined conditions placed on AT&T in order to gain the agency's blessing.

"If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection," Wheeler wrote. "This additional build-out is about 10 times the size of AT&T's current fiber-to-the-premise deployment, increases the entire nation's residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve.

"In addition, the conditions will build on the Open Internet Order already in effect, addressing two merger-specific issues. First, in order to prevent discrimination against online video competition, AT&T will not be permitted to exclude affiliated video services and content from data caps on its fixed broadband connections," Wheeler added. "Second, in order to bring greater transparency to  interconnection practices, the company will be required to submit all completed interconnection agreements to the commission, along with regular reports on network performance."

Wheeler said the FCC will commission an independent auditor to ensure compliance with the deal conditions. 

"We are pleased that an order to approve our DirecTV transaction with certain conditions is circulating at the FCC," AT&T said in a statement. "We hope the order will be approved by the Commission quickly and we expect to close shortly thereafter."

Telecom industry trade group Comptel applauded Wheeler's moves, noting, "We're pleased to see interconnection taking center stage in the commission's order on AT&T/DirectTV. The transparency condition gained in this merger will give the Commission the tool it needs to review AT&T's interconnection practices to determine whether it is living up to the industry's standard of no access fees."

Advocacy group Public Knowledge also lauded Wheeler's effort, but said the conditions stop short of solving the problem of limited competition in the U.S. broadband market.

"While acknowledging the effort made by chairman Wheeler to protect existing competition, encourage fiber deployment, and address affordability, no one should imagine that this has solved the underlying problem of our lack of competition," the group said in a statement. "While we hope the proposed merger conditions are effective and enforced, they appear to show the limits of what certain types of merger conditions can do."

Meanwhile, the American Cable Association said the FCC hasn't done enough to ensure that the combined AT&T and DirecTV won't exert unfair pricing leverage on regional sports networks (RSNs).

"ACA believes that FCC approval of the AT&T-DirecTV merger along the lines proposed by FCC Chairman Wheeler in an order circulated last night would lack key consumer protections and result in all pay-TV subscribers paying higher prices for their television service in major markets (Pittsburgh, Denver, Seattle, and Houston). It's disappointing that the Chairman does not seek to protect the competitive pay-TV market from the increased incentive of the combined company to charge its pay-TV rivals higher prices for the four Root Sports regional sports networks that AT&T and DirecTV will control post-merger.

"By charging higher prices for its RSNs to its pay-TV rivals, the new AT&T-DirecTV will not only drive up its rivals' customers' subscription fees, but it will reduce their funds available for deploying high performance broadband services in new areas," the ACA wrote. "Now is the time for the other four commissioners to become actively involved in reviewing the proposed merger order, and we hope they will insist that conditions are adopted to mitigate these concerns as part of any order approving the transaction."

For more:
- read this FCC press release

Related articles:
AT&T, DirecTV extend merger end date … again
AT&T to offer $5-per-month Internet service to low-income customers to close DirecTV deal
FCC poised to approve AT&T-DirecTV deal, create top pay-TV service in the U.S.