AT&T-DirecTV Merger Approved by FCC

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DirecTV CEO Mike White, AT&T CEO Randall Stephenson

Among the many stipulations is that the merged company may not engage in "discriminatory practices to disadvantage online video distribution services."

AT&T's $49 billion acquisition of DirecTV has been approved by the FCC, though the presumably soon-to-be merged company will have to submit to several costly concessions.

The FCC said that a merged AT&T-DirecTV is "required" to expand its deployment of high-speed, fiber optic broadband Internet access service to 12.5 million customer locations, roughly 10 times more than exists today via AT&T. It must also build out that capacity to more schools and libraries.

Also, the combined company must offer broadband services to "low-income" consumers at a discount, and it must agree not to engage in "discriminatory practices to disadvantage online video distribution services."

That last item is a nod to so-called "Net neutrality" and it is a concession that will conceivably benefit the likes of Netflix, Hulu, Amazon.com and others. For four years, AT&T will have to disclose its "interconnection" agreements so FCC regulators can determine whether or not they are fair to all online providers of video.

Since the Justice Department had already blessed the transaction, Friday's move by the FCC paves the way for the merger — announced more than a year ago — to close in the next week or so, assuming AT&T and DirecTV agree to abide by the FCC's demands and, judging from AT&T's website, the two companies already have.

"DirecTV is now part of the AT&T family," a note to consumers at the website reads. "We'll give you more options to watch your favorite TV shows, entertainment, movies, and sports at home or on the go, plus stream Internet video to your favorite device."

The new company will boast 26 million video customers in the U.S., making it the nation's top pay-TV provider, ahead of Comcast with 22 million video customers.

The merger is also expected to spur innovation in mobile video, given it will couple AT&T's mobile network and expertise with DirecTV's television prowess. 

"Soon, we'll bring new offers of TV, wireless and high-speed Internet that are simple and flexible. So please stay tuned. We'll be rolling out much more for you in the weeks and months ahead," AT&T says in its note posted to its website Friday.

AT&T's merger with DirecTV might also pressure others to grow through acquisition, as has been the case in recent months: Charter Communications is purchasing Time Warner Cable and Comcast is reportedly in discussions to snap up some digital-media companies.

AT&T says the merger will save the combined company about $2.5 billion within three years.

After the FCC's approval, shares of DirecTV were up 2 percent to $93.97 while AT&T stock also rose 2 percent, to $34.65.

"The Commission's decision is based on a careful, thorough review of the record, which includes extensive economic analysis and documentary data from the applicants, as well as the comments from interested parties," the FCC said Friday. "The Commission has determined that granting the application, subject to certain conditions, is in the public interest."

Email: Paul.Bond@THR.com

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