Klobuchar, Lee Letter May Indicate Conditional Support for AT&T-DirecTV Merger

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By Lydia Beyoud

Nov. 4 — The leadership of the Senate Judiciary subcommittee in charge of antitrust review asked the FCC and DOJ to take several issues into account during their review of AT&T-DirecTV's proposed $48.5 billion merger, according to a letter released Nov. 3.

The Federal Communications Commission and the Department of Justice should consider the extent to which telecommunications giant AT&T's bid to acquire satellite provider DirecTV is necessary to provide bundled service, wrote Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights Chairwoman Amy Klobuchar (D-Minn.) and ranking member Michael S. Lee (R-Utah).

The merger could allow consumers to get a better deal on bundled service, and spur competition in the marketplace, the letter cited AT&T and DirecTV as saying in subcommittee hearings.

However, the senators said not all consumers prefer bundled service, particularly for broadband Internet, and asked the DOJ and FCC to consider whether AT&T's three-year commitment to continue offering standalone service was sufficient to protect consumer choice.

Sports Programming Access

The senators also hit on one of the key drivers of the merger—DirecTV's lucrative sports programming deals. Over the past two decades, DirecTV has held the exclusive rights to the National Football League's Sunday Ticket programming. DirecTV also owns three regional sports networks (RSNs).

“Due to the ‘must have' nature of sports programming, competitive cable operators are concerned that the proposed merger will lead to an incentive for the combined entity to increase its MVPDs' costs for RSNs,” the letter said. MVPDs are multichannel video programming distributors.

The lawmakers asked the agencies to consider the merger's ability to create program-access issues, and whether any conditions should be required to address those concerns.

Protecting Independent Programming 

The letter also asked the agencies to consider whether the merger would protect consumer access to independent programming. Klobuchar and Lee said they had heard extensive concerns about “most favored nation” (MFN) clauses used across the MVPD industry.

“Such clauses can, of course, serve procompetitive functions—particularly when applied to lower prices charged by large content sellers with ample bargaining power,” they said. They added, however, that they were concerned about the use of certain types of MFN clauses to negatively impact competition for independent programming.

Possible Conditional Support

The bipartisan letter may indicate implicit support for the high-profile merger, based on seeking conditions of the merger rather than outright rejection, Paul Gallant, Washington-based managing director for Guggenheim Securities, said in an e-mailed statement.

“Congressional input typically doesn't drive merger outcomes,” said Gallant. “But in a high-profile merger like this where regulators could take some criticism for approval, this implicit support (at least in our view) from the top Democrat and Republican on the Senate Antitrust Subcommittee could help the merger.”

Gallant added that a merger decision could come in March, due to a current dispute over outside parties' ability to view the merging companies' programming contracts during the review process.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

Text of the senators' letter is at http://media.bloomberg.com/bb/avfile/r4gHtb0EPjzw.