AT&T, Directv team up against their customers
Just when you thought the information infrastructure industry in America couldn’t be consolidated any further, AT&T has announced another merger. It’s one more mega deal that promises to provide the giant carrier with more opportunities to increase its profifits, while not moving the country any closer to being competitive on the global informational stage. We can do better. This time the target is satellite TV operator DirecTV, for $48.5 billion. The arrangement is good news for DirecTV: The satellite business is declining, and it’s unlikely that the Department of Justice would let it merge with the only other member of that sector, Dish.
It’s also good news for AT&T because adding more video subscribers means greater leverage in negotiating with the highly concentrated programming industry. And the cash produced from DirecTV customers will help AT&T sustain its extraordinary shareholder dividends.
We’ll become two Americas: poorer people and people in rural areas depending on wireless smartphones, and richer people paying through the nose for expensive bundled services.
None of this is evil. It’s just the result of a decade of deregulation and consolidation. AT&T isn’t planning capital investments that will upgrade the 76 million households it serves with wires to fifiber. Instead, it’s selling a second-rate wire (legacy copper wires connecting homes to neighborhood fifiber nodes) and wants to lower its costs of providing pay TV programming over that wire. Buying DirecTV will lower AT&T’s persubscriber programming costs because distributors get bulk discounts. These discounts won’t necessarily be passed on to subscribers.
Buying DirecTV also allows AT&T to offlffload the pay TV portion of its U-Verse bundled service, now made up of video plus data and available in a quarter of the country, onto satellites. That will free up the entire pipe for data, which will make AT&T’s bundle slightly more competitive with bundled products now offffffffffffered by cable services, such as Comcast and Time Warner Cable, which also plan to merge.
We should be on an entirely different trajectory. AT&T, Verizon, Comcast and Time Warner Cable made $1.4 trillion from 2009 to 2013, and invested just 15 percent of that amount on capital improvements. Rather than merely overseeing mergers and abandoning Americans to those companies’ rational incentives to divide markets and harvest increased profifits, we should set a high standard for an upgrade to ubiquitous fifiber connectivity and shape our policies to make sure this happens.
That includes mandating infrastructure fifinancing, tax incentives, uniform federal standards and policies eliminating carriers’ power to bundle content with conduit so as to ensure that we have both vibrant competition in urban areas and cheap open fifiber connections to as many Americans as we can. That will unleash innovation across the country and create an enormous market for new highcapacity online services.
China expects to have fifiber available to 200 million households by 2015 and to 300 million by 2020. We can compete with that. Right now, we’re not even trying. Susan Crawford is the John A. Reilly visiting professor at Harvard Law School and a fellow at the Roosevelt Institute.