AT&T says merging with DirecTV would help it challenge Comcast. But how?
[Commentary] AT&T hit Capitol Hill to sell Congress on its proposed merger with DirecTV. Among its arguments? If the merger goes through, we can go head-to-head with Comcast.
AT&T's case boils down to two arguments when it comes to challenging Comcast: A bigger AT&T will lower programming costs and offer a more efficient bundle of services. Testifying before a House subcommittee, AT&T chief executive Randall Stephenson dropped a fascinating statistic. He claimed that for every dollar the company makes off of its video subscribers, $0.60 goes straight to the people who make the content.
In other words, 60 percent of AT&T's video revenue turns right around and leaves.
This brings us to AT&T's second argument, which is that a DirecTV merger would promote cheaper bundles. AT&T took aim at what it and DirecTV called a "synthetic bundle" -- taking, for example, broadband from one company, combining it with video from another, and then selling that as a package to consumers. Because AT&T and DirecTV each have to visit a home to make two separate equipment installations for the synthetic bundle to work, that drives up costs.
AT&T says merging with DirecTV would help it challenge Comcast. But how? AT&T tells US lawmakers DirecTV deal is not Comcast/Time Warner (Reuters)