Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Commentators call approval of AT&T/DirecTV deal “bad news for consumers”, (Jul 27, 2015)

By Michael Menzhuber, J.D., LL.M.

Commenting on AT&T’s acquisition of DirecTV, Warren Grimes and Chris Sagers, Senior Fellows of the American Antitrust Institute (AAI), described the order for Federal Communications Commission (FCC) approval of the acquisition and the Justice Department Antitrust Division’s announcement that the acquisition would not be opposed, as “short-sighted.” They suggested that the agencies’ decisions were “bad news for consumers” because the acquisition would result in ensuring less competition and more regulation.

Regulatory agencies, according to Grimes and Sagers, are “risk averse”, often preferring settlements that only partially address competitive concerns and “more often than not” result in compromises that sacrifice public interest. In their view, compromising in maintaining competition was not an acceptable way of enforcing antitrust laws, particularly in the area of telecommunications.

The commentators consider the telecommunications industry to be nowhere near the competitive ideal. They suggested that a competitive telecommunications industry would provide meaningful choices to consumers, including multiple firms offering access to cable TV programming and high speed access to the internet. In addition, it would end channel-bundling practices which would allow consumers to choose what they want to purchase. They also suggested that, although consumer sovereignty would not necessary lower costs for everyone, competition, as opposed to abusive conduct by power-wielding firms and government regulation, would best ensure the proper mix of programming and the proper distribution of wealth.

According to Grimes and Sagers, the conditions that the FCC would impose on AT&T are a clear step toward more regulation, not toward more competition. However, for cable TV subscribers, there is a clear loss. For any consumer currently served by AT&T, the deal will decrease the number of available distributors. This undermines consumer choice and makes lock-step packaging and pricing by distributors more likely.

The commentators did see, as a positive step, the FCC requirement that AT&T to expand its fiber optic network to include 12.5 million potential subscribers, allowing each a possible second choice (beyond their cable carrier) for high speed Internet access. However, they noted that there is an irony in having a regulator “order” more competition and that competition ordered by regulation is industrial policy. They suggested that there is sound reason to wonder how genuine that competition will be when AT&T did not choose that route. They also observed that: (1) Americans only have two choices for high speed Internet access; (2) meaningful competition requires more than two choices; and (3) the AT&T settlement does not offer any promise of achieving meaningful competition.

Grimes and Sagers concluded that, despite FCC Chairman Wheeler’s statement that the FCC’s “strong measures will protect consumers, expand high-speed broadband availability, and increase competition,” any competition that will result from the regulatory decree will be comfortable, oligopolistic pricing and service that will enhance AT&T profits. While recognizing that some regulation can increase competition, they noted that the history of government regulation is laced with examples of evasions and abuses.

Companies: AT&T Inc.; DirecTV, LLC

News: Antitrust