AT&T claims the deal would open the door for rural Americans to gain access to
high speed broadband Internet, and the FCC announced on Friday that it would
approve the pending AT&T-DirecTV merger; the Justice Department gave the merger
its own seal of approval earlier in the week.
But in order for the deal to go through, the FCC said in a press release that
the companies had to consent to a four-year agreement that included providing
“high-speed, fiber optic broadband Internet access service” to “E-rate eligible
schools and libraries,” which are subsidized through discounts funded by the
Universal Service Fund.
And despite Wheeler assuring agency-watchers in June that the FCC would not
“micromanage networks,” as Watchdog.org previously reported, the new
AT&T-DirecTV is “prohibited from using discriminatory practices to disadvantage
online video distribution services and will submit its Internet interconnection
agreements for Commission review.”
AT&T-DirecTV is also expected to “offer broadband services to low-income
consumers at discounted rates.”
The merger conditions solidify the agency’s net neutrality rules into
AT&T-DirecTV’s business model, which are a way to insulate the rules should the
agency once again be overruled in federal court.
In an interview on Friday with USA TODAY, John Stankey, CEO of AT&T
Entertainment & Internet Services, said that the company supported an open and
fair Internet but took issue with its classification under Title II of the
Communications Act of 1934.
“We think Title II is a regulatory overreach and its adds a degree of
uncertainty into an investment marketplace (when the) FCC at any time can choose
to reach in and reset the rules or regulate the price or change performance
metrics that create problems for consistency in business models,” said Stankey.
“This transaction doesn’t change anything about our challenge around that,” he
said.
In June, the FCC used the transparency clause of its 2010 Open Internet order to
propose leveling a $100 fine against the AT&T for “misleading its customers
about unlimited mobile data plans.”
Whereas several groups supportive of the agency’s net neutrality rules felt the
FCC did not go far enough with the merger conditions, Berin Szoka, president of
the free market think tank, TechFreedom, condemned the agency’s merger
conditions as “extortion.”
“The FCC is using a deal that in no way reduced broadband competition and
actually created a stronger competitive alternative to cable to recreate the
regulatory regime designed for the old AT&T, a true monopoly,” wrote Szoka.
Concerns over top industry players’ market dominance have led the federal
government under the Obama administration to view intra-industry mergers such as
the failed AT&T-T-Mobile and Comcast-Time Warner Cable mergers with an
unfavorable eye.
In order to respond to pressures from consumer demand for high-quality services
on any device they own at anytime they want, however, companies are looking to
cross-industry mergers as a viable solution.
AT&T will gain access to DirecTV’s subscribers and its programming, it also wins
access to the satellite TV company’s spectrum, or broadcast frequencies. A
similar deal between Dish Network and T-Mobile USA is speculated to have stalled
until after next year’s incentive auction takes place.
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Verizon’s recent $4.4 billion acquisition of AOL, while not
necessarily spectrum-related, also allows the wireless giant to
expand into the content space.
That these kinds of deals are even fathomable in the
telecommunications space is a direct consequence of Clinton-era
Telecommunications Act of 1996, which allowed communications
businesses to compete with one another across different markets.
But such competition is not relegated to conventional network
services, either. Google, for example, not only owns content and
media properties, but also provides Internet access services through
its Google Fiber product, and is looking to use thousands of
high-altitude balloons to provide broadband Internet access to
remote and rural areas of the globe.
And while Google and Facebook both bailed on plans to build
satellite-Internet services, both Google and Fidelity invested $1
billion in Elon Musk’s SpaceX for the private space-company looked
to build a satellite Internet service of its own.
CTIA-The Wireless Association, the wireless industry’s trade
association, has been on a summer-long campaign promoting awareness
of the need for more licensed spectrum.
Consumer demand for mobile data services is expected to outpace the
industry’s supply of currently available spectrum, and the federal
government lacks a plan to help meet demands past 2020.
And according to estimates the organization published this week in a
white paper, “it takes, on average, 13 years to reallocate spectrum
for use.”
In at least two examples cited, it took 18 years, meaning that a
nearly 20 year timeline could slow down the rapid pace of innovation
consumers have grown accustomed to in the past decade.
Competition for spectrum licenses is so high that in the last FCC
auction earlier this year, Dish bid $13.3 billion through two
subsidiaries, hoping to leverage to its advantage of a
small-business subsidy technicality to the tune of $3.3 billion, a
move the FCC would consider denying after protests were raised about
the fairness of Dish’s strategy.
AT&T bid a total of $18.2 billion, Verizon and T-Mobile bids were
$10.4 billion and $1.8 billion, respectively. The chairman’s office
reportedly circulated a draft order last week to deny the small
business credit that has yet to gain approval from a majority of the
commissioners before it can be enforced.
The fight over more spectrum, however, is about more than just about
being able to seamlessly stream Netflix-videos from a smartphone
during peak hours.
The so-called Internet of Things, which includes smart homes and
connected cars, will need vast swaths of licensed and unlicensed
spectrum to work smoothly.
Although surveys gauging consumer demand for driverless cars have
been mixed so far, ZDNET reported estimates in May that AT&T’s
connected car business, which has deals with automakers such as
General Motors and Ford, could become a $1 billion “revenue stream
this year” for the U.S. wireless carrier.
And virtual doctors visits are also expected to increase demands on
networks as consumers become more comfortable with the idea of
video-conferencing with their doctor over the Internet and insurance
companies consider these kinds of “visits” eligible for coverage.
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