‘DIRECT’ TO HELL
Prices spike after AT&T’s Time Warner buy
DirecTV prices are surging — and AT&T boss Randall Stephenson may have some explaining to do.
Monthly rates for new customers of the satellite-TV service have surged by more than 20 percent during the past year-and-a-half — a time period that happens to coincide with DirecTV owner AT&T’s ownership of Time Warner.
The telecom giant’s controversial, $85 billion purchase of Time Warner won approval from a federal judge in June 2018 — despite vigorous opposition from the US Department of Justice, which had warned that the deal would reduce competition and expose consumers to higher prices.
“On its face, the premise is absurd,” Stephenson had defiantly said in April 2018, brushing off the government’s concerns. “It literally defies logic to me.”
But after the merger got cleared, DirecTV began a series of price hikes, including in January of this year, according to screen grabs of DirecTV’s Web site. A two-year contract for its cheapest option, Select, now costs $70.50 a month on average — a 25 percent increase versus $56.50 a month for subscribers who started in June 2018.
DirecTV’s priciest option, Premier, has meanwhile surged 11 percent to $162 a month for a two-year contract, up from $145.50. Yet another DirecTV price hike is slated for next month, TV news blogger Phillip Swann reported last week.
The jacked-up rates have spurred a customer stampede. As of the end of September, DirecTV had 17 million subscribers — down from 20 million at the time of the merger. AT&T doesn’t break out DirecTV’s sales or profits in its financial reports.
“@DIRECTV raising prices
The premise (of higher prices) is absurd. It literally defies logic to me.
again,” Twitter user Cheryl Ham griped last week. “Not a surprise considering since AT&T took over their service has gone straight to hell.”
“Our prices are in line with others in the industry and reflect the increased cost of the content that we carry. We are committed to providing highquality content to consumers at a fair price,” an AT&T spokesman said.
AT&T said prices for existing DirecTV customers went up 4 to 6 percent a year.
The hikes have likewise spurred outrage inside the Justice Department, sources said. US prosecutors on the case — who had weathered accusations that they were merely going after Time Warner’s CNN network on behalf of President Trump — are now snidely calling the increases the “Leon tax,” sources said.
That’s a bitter swipe at US District Judge Richard Leon, who ruled against them to OK AT&T’s merger with Time Warner.
“The consumers are stuck paying the ‘ Leon tax,’ ” one federal prosecutor griped, noting that since the deal was cleared on antitrust grounds with no conditions, law enforcement is now powerless to clamp down on DirecTV.
During the trial, AT&T’s expert witness Dennis Carlton, a professor at the University of Chicago, predicted that prices would fall for DirecTV after the merger, prompting rivals to do the same.
DirecTV, Carlton argued, would no longer be forced to pay Time Warner a premium for CNN, TNT and TBS since both would be part of the same company. Likewise, Carlton argued AT&T would be incentivized to lower DirecTV prices and gain more customers.
“I conclude that Professor Carlton’s … analysis of the pricing effects … can be afforded probative weight in predicting the potential pricing effects of the challenged merger,” Leon ruled in his pro-AT&T decision.
It hasn’t worked out that way. Even as DirecTV prices have surged, a spokesman for DirecTV rival Dish Network confirmed that the price of its least expensive satellite package has risen 6 percent over the past two years.
Neither Carlton nor Leon responded to requests for comment.
In response to the uproar over the price hikes last week, the company claimed its programming costs have gone up — without saying whether that was partly because of price hikes from the former Time Warner channels, now under the WarnerMedia umbrella.
“It’s pretty much exactly what those opposed to the deal predicted would happen,” said Harold Feld, Senior VP of nonprofit group Public Knowledge.
AT&T can profit by raising prices for its TV channels even if it hurts DirecTV, whose satellite technology is seen as outdated and doomed to eventually lose out to Webbased video streaming anyway, Feld said.
Likewise, DirecTV’s pricey broadcasts of WarnerMedia channels can help AT&T comply with US regulations that require equal treatment of broadcast distributors, even as it looks to extract higher rates for networks like CNN from rival cable-TV companies, Feld said.
University of California at Berkeley Professor Carl Shapiro, the feds’ expert witness who had argued unsuccessfully against the AT&T-Time Warner deal, is now the lead expert witness for a group of state attorneys general in a suit brought in New York federal court against T-Mobile’s planned merger with Sprint.
Last week, Shapiro predicted in the trial that T-Mobile will stop lowering prices if it merges with Sprint since there will be less competition. He noted that prices are now falling industrywide by 6.3 percent annually.