AT&T-DirecTV: 4 Takeaways From the $49 Billion Deal

This story first appeared in the August 7 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.

AT&T’s $49 billion acquisition of DirecTV received FCC approval July 24, creating the nation’s largest pay TV service, with more than 26 million subscribers — 20 million from DirecTV and 6 million from AT&T’s U-verse. Here are four reasons the deal matters.

1. More clout with programmers

Unfavorable U-verse contracts with content owners eventually will be replaced with DirecTV’s better ones. Pivotal Research Group analyst Jeffrey Wlodarczak, though, still thinks Comcast, with its TV networks and its 22 million cable subscribers, will continue to boast more clout than the combined AT&T-DirecTV.

2. A quadruple play

The “triple-play” service of fixed-line telephone, TV and Internet offered by cable operators, AT&T and Verizon suddenly seems passe. AT&T makes about $170 a month from each triple-play subscriber, though newly merged with DirecTV, it seems poised finally to add a mobile-phone offering into the mix. After that, some observers predict a wireless OTT video service. Quintuple play?

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3. Underclass Internet access

In exchange for its approval, the FCC has demanded the merged AT&T-DirecTV expand its deployment of high-speed, broadband Internet access to 12.5 million customer locations — 10 times more than what exists today via AT&T — while also offering low-income consumers discounted broadband. It also must build out its capacity to more schools and libraries.

4. Net neutrality wins

The FCC also insisted that the giant new company play nice with Netflix, Hulu, Amazon.com and other streamers by not engaging in “discriminatory practices to disadvantage online video distribution services.”