By Mintimer Avila |Online Editor|
AT&T has placed a bid to purchase DirecTV for nearly $50 billion.
Consumer reports for 2013 placed AT&T in last position as a result of voice quality issues and low customer satisfaction while Verizon was voted as the top provider.
They are hoping to get access to the 20 million homes that DirecTV has already acquired.
DirecTV is able to negotiate lower fees for channels than its smaller rivals because of its national reach, according to The Los Angeles Times.
This would give them more power to demand lower rates from cable networks.
FCC antitrust reviewer Amanda Wait believes that the AT&T merger would give them an equal playing field to compete with Comcast Corp. and Time Warner Cable.
Comcast is currently the nation’s largest video and broadband company with approximately 21.7 million residential and business customers.
With the Time Warner Cable deal, they would be expected to have about 30 million subscribers.
If the deal goes through, AT&T would soon be able to reach consumers through various means such as satellite, broadband Internet and wireless platforms.
Besides owning DirecTV subscribers, AT&T would also get exclusive rights to various programs such as NFL Sunday Ticket and then might offer those services in their own deals, according to Engadget.
If DirecTV is not able to renew these rights by the end of the year, AT&T has stated they would walk away from the deal.
Approximately one out of ten DirecTV subscribers has a sports package which starts at $240 a year, according to The Wall Street Journal.
AT&T would receive more money from consumers who pay these premiums as a result of the deal.
“The next six years are going to be about delivering video over these networks. You will see the experience beginning to merge and user interface will all look and feel the same,” said Randall Stephenson, AT&T chairman and chief executive.
Investors from both companies, however, were not happy as DirecTV and AT&T saw their shares decline slightly after the deal was announced.
Some analysts question whether buying DirecTV is the best approach to staying competitive in a world mostly dominated by online streaming services such as Netflix and Hulu, according to The Los Angeles Times.
To make the process easier, AT&T has said it will respect net neutrality for three years if the FCC approves the deal.
This would mean that consumers would pay a flat fee and could not be charged extra for using large amounts of data on popular streaming sites or online gaming.
AT&T also had interest in pursuing Dish Network Corp. but Stephenson argues that DirecTV’s “premium content relationships” would be the best fit for the company.
Senator Al Franken has also voiced his opinion about the buyout and said he was skeptical.
“We’re moving toward an industry with fewer competitors where corporations are getting bigger and bigger and gaining more and more control over the distribution of information. This hurts innovation, and it’s bad for consumers, who have been getting squeezed by higher bills,” said Franken.
Companies like AT&T and Verizon have begun to move away from unlimited data plans to charge consumers more money as they consume more data, according to the Wall Street Journal.
Many fear that buyouts such as these would give companies the power to monopolize the market and would only end up hurting the consumer’s wallets.