TV picture looks fuzzy for consumers in AT&T-DirecTV deal

Wed May 21, 2014 4:59pm EDT
 
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By Liana B. Baker and Marina Lopes

(Reuters) - AT&T Inc's (T.N: Quote) planned takeover of DirecTV DTV.O has been touted as a deal that will redefine video and broadband, but translating that to reality for a potential 70 million subscribers could take a while.

Combining the second-largest U.S. wireless carrier with the No. 1 satellite TV provider could give the merged company greater leverage to negotiate prices with sellers of TV programming. One exciting benefit to consumers, AT&T has said, involves new service packages with DirecTV, Internet and home phone on one bill.

"We all know from a customer standpoint the more you bundle the more advantageous it is from a value standpoint, from a pricing standpoint," AT&T Chief Executive Randall Stephenson said on a media call on Sunday.

But SNL Kagan cable analyst Ian Olgeirson pointed out that sale prices for new customers who sign up for combined services tend not to last. "Where we've seen the industry be aggressive is in the bundled promotions and not on regular rates and I don't think this changes that," he said.

AT&T said it will offer a three-year price guarantee on its standalone broadband service while DirecTV also pledged to keep its service available for the next three years, but not at a fixed cost.

Bundles with DirecTV service, Internet and phone will only be available where AT&T is planning to expand its network, but not for every DirecTV customer. AT&T's U-Verse service, which includes Internet, television and home phone, is available in 22 states including Texas, Louisiana, Florida, Connecticut, Michigan and Ohio.

AT&T has 11 million Internet subscribers out of 25 million homes in its service area, and has previously said it plans to extend its total reach to about 57 million homes by 2015. After the merger closes, AT&T would extend its broadband service to 15 million more homes within four years.

AT&T said the plan would bring its total broadband reach to about 70 million U.S. households. Analysts said this would be viewed as a major public benefit and help smooth the way for regulatory approval of the merger.   Continued...

 
A DirecTV satellite dish is seen on a home in the mountains outside Golden, Colorado May 18, 2014. REUTERS/Rick Wilking