AT&T Promises to Protect Net Neutrality — If It Gets to Buy DirecTV

The telecom giant appears to have learned from its failed bid for T-Mobile.

 A DirecTV sattelite dish sits on a roof on May 19, 2014 in New York City. AT&T agreed May 18, to buy DirecTV for $48.5 billion.  
National Journal
Brendan Sasso
May 19, 2014, 10:07 a.m.

AT&T is of­fer­ing up a slew of good­ies to try to con­vince reg­u­lat­ors to let it buy Dir­ecTV.

The pro­pos­als tar­get some top pri­or­it­ies of the Obama ad­min­is­tra­tion in an at­tempt to grease the wheels for reg­u­lat­ory ap­prov­al of the $48.5 bil­lion deal.

For three years, AT&T prom­ises to abide by the 2010 net-neut­ral­ity reg­u­la­tions, even though those rules were thrown out by a court earli­er this year. The com­pany also prom­ised to ex­pand high-speed In­ter­net ac­cess in rur­al areas, and it won’t force con­sumers in­to buy­ing lar­ger bundles of TV and In­ter­net ser­vices for at least three years.

On a con­fer­ence call Monday, AT&T CEO Ran­dall Steph­en­son said the con­di­tions are de­signed to al­low the com­pan­ies to “get out in front” of po­ten­tial reg­u­lat­ory con­cerns.

The tele­com gi­ant ap­pears to have learned some les­sons from its failed 2011 bid for T-Mo­bile. AT&T es­sen­tially offered no con­ces­sions up front for that mer­ger — des­pite the fact that the com­pany was try­ing to take out one of its main com­pet­it­ors, an ob­vi­ous red flag for reg­u­lat­ors.

Op­pos­i­tion from the Justice De­part­ment and Fed­er­al Com­mu­nic­a­tions Com­mis­sion forced AT&T to aban­don its bid for T-Mo­bile, ul­ti­mately cost­ing the com­pany bil­lions of dol­lars.

John Bergmay­er, a staff at­tor­ney with Pub­lic Know­ledge, said of­fer­ing no con­di­tions in its T-Mo­bile deal “made them look ar­rog­ant.”

Com­cast, on the oth­er hand, quickly offered up con­ces­sions such as giv­ing up sub­scribers and an ex­pan­ded net-neut­ral­ity com­mit­ment in its bid for Time Warner Cable. The massive cable mer­ger is still un­der re­view.

“Com­cast is really savvy, and I think AT&T is learn­ing,” Bergmay­er said.

Wal­ter Piecyk, an in­dustry ana­lyst with the firm BTIG, agreed that AT&T is try­ing to use car­rots rather than its typ­ic­al “loud, in-your-face ap­proach.”

“You learn from your mis­takes,” Piecyk said.

Un­like the T-Mo­bile deal, AT&T is not re­quired to pay Dir­ecTV any money if the deal falls apart. 

It’s un­clear ex­actly what AT&T’s net-neut­ral­ity prom­ise means. The FCC is un­der fire be­cause it is try­ing to write new net-neut­ral­ity rules that would likely al­low In­ter­net ser­vice pro­viders to charge web­sites for faster ser­vice in some cases.

{{ BIZOBJ (video: 4950) }}

But a top Com­cast ex­ec­ut­ive re­cently said he be­lieves even the stronger 2010 rules al­lowed for In­ter­net “fast lanes.” FCC Chair­man Tom Wheel­er also sug­ges­ted that the old rules wouldn’t have totally barred paid pri­or­it­iz­a­tion of In­ter­net traffic.

AT&T didn’t provide any de­tails about how it in­ter­prets the old rules. Ad­di­tion­ally, the 2010 or­der largely ex­emp­ted cell-phone ser­vice — AT&T’s main busi­ness.

AT&T also said it plans to bid at least $9 bil­lion in the FCC’s up­com­ing auc­tion of air­wave li­censes. The prom­ise is not con­di­tion­al on get­ting ap­prov­al of the Dir­ecTV deal, but Piecyk ar­gued there’s an im­pli­cit link.

“It’s a pub­lic prom­ise to spend $9 bil­lion wheth­er it’s con­di­tioned or not,” he said. “It’s a mes­sage sent to the FCC say­ing, “Here’s what we’re do­ing for you.’”

The gov­ern­ment is re­ly­ing on rev­en­ue from the air­wave auc­tion to build a na­tion­wide high-speed com­mu­nic­a­tions net­work for first re­spon­ders.

AT&T’s prom­ise to provide broad­band ser­vice to an ad­di­tion­al 15 mil­lion con­sumers mostly in rur­al areas fits with the ad­min­is­tra­tion’s goal of uni­ver­sal In­ter­net ac­cess and could be a hit with rur­al state law­makers.

But Bergmay­er ques­tioned wheth­er that com­mit­ment has any con­nec­tion to the Dir­ecTV deal.

“Why couldn’t they just do that any­way?” he asked.

AT&T says the “syn­er­gies” of the Dir­ecTV deal will en­able the ex­pan­sion of its net­work.

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