Last week, AT&T (T), the second largest wireless provider in America, announced its intent to purchase satellite television provider DirecTV (DTV) for $50 Billion. The takeover will allow AT&T to bundle more television, mobile, and Internet plans while improving the quality of its overall services. By acquiring DirecTV, AT&T will now serve more than 26 million video users in the United States.
The combination of the second largest wireless carrier and the top satellite provider has consumers worried over potential price-fixing issues due to a less competitive market environment (especially after Sprint revealed its commitment to acquire T-Mobile). Anticipating such fears, AT&T has already released a statement promising that it will not raise rates for the next three years; however, it is unclear what will happen after the three-year limit expires. With programming costs rising, and increased market consolidation, all signs point to higher future costs.
The deal also reduces the likelihood of an “a la carte” option. Instead of individually selling channels to its customers, AT&T will bundle some of its more popular channels with some of its less popular channels in an attempt to increase viewership. This will inevitably lead to higher prices and subscription fees for customers.
Other consumers are less skeptical, and are more enthusiastic about the deal. There is a chance of higher quality programming because AT&T will have more bargaining power when negotiating with content providers. Viewers may also receive a broader range of shows than is currently present; AT&T is also now more likely to pursue Ultra-HD. Since satellite is more efficient than cable, the quality and sharpness of the image from DirecTV’s service will be much clearer than that of Comcast (CMCSA).
Ultimately, there are benefits and consequences for consumers. They get better quality programming, and more of it. However, AT&T’s acquisition of DirecTV will cost consumers in the long run. This popular trend of large cap consolidations is now leading to less competition in the markets. Without competition, consumers are left powerless, while companies rake in profits.