DirecTV to Hike Prices After Owner AT&T Promised Cheaper Bills
(Bloomberg) -- AT&T Inc. is hiking prices on its pay TV services for the second time since January, even after telling a judge during the U.S. antitrust trial last year that prices would go down if it was allowed to buy Time Warner Inc.
Next month, most of the 1.6 million subscribers of DirecTV Now, a live TV streaming service, will be charged $10 a month more as AT&T changes its programming packages. That follows a price increase in January for its traditional satellite service.
The higher bills could fuel a growing debate over whether Washington’s antitrust watchdogs are too permissive in allowing corporate consolidation. While companies seeking approval for mergers argue their deals won’t hurt consumers, research shows their claims often don’t pan out.
“This is yet another example of how merging companies make promises that agencies will not and cannot enforce,” said Gigi Sohn, a former official at the Federal Communications Commission and now a fellow at Georgetown University’s law school.
The risk that a merger could lead to higher bills for consumers is now center stage in T-Mobile US Inc.’s $26.5 billion proposed takeover of Sprint Corp., which would combine the No. 3 and No. 4 national mobile carriers. T-Mobile Chief Executive Officer John Legere has repeatedly vowed lower prices and better service would result from the deal.
Democrats who won control of the House in the fall elections were skeptical at a hearing Tuesday on the merger. Representative David Cicilline of Rhode Island, chairman of the House antitrust panel, said the deal would likely give the combined company the incentive and ability to raise prices and lower wages.
“The only thing preventing the merging parties from raising prices, lowering quality and depressing wages are promises for a limited period of time,” he said.
Members of Congress don’t have a direct role in merger reviews, but seek to influence authorities who directly vet the deals: Justice Department antitrust officials and FCC commissioners.
The question of higher prices was at the core of the government’s antitrust lawsuit last year seeking to block AT&T from buying Time Warner in its bid to create a media powerhouse. AT&T countered that prices would drop instead.
University of Chicago economist Dennis Carlton testified on behalf of the company that “AT&T is going to have an incentive to get more customers and in particular AT&T’s price -- the DirecTV price -- will go down to consumers,” Carlton said. “That’s clear.”
U.S. District Judge Richard Leon rejected the Justice Department’s arguments that buying Time Warner would lead to higher prices for cable and satellite-TV subscribers, delivering a victory to AT&T.
Dallas-based AT&T defended the price increase in a statement Wednesday. The company said that the DirecTV acquisition provided the scale to acquire programming rights which allowed it to offer DirecTV Now at “significantly lower” prices than its traditional DirecTV service.
Critics said the higher bills are a consequence of the merger that was foreseen.
“The price increase is precisely the type of harm the Justice Department warned the court about,” said Gene Kimmelman, a former antitrust official who is president of the policy group Public Knowledge. “Unfortunately, Judge Leon did not adequately credit this antitrust reasoning and the result is big price hikes for consumers.”
AT&T’s arguments about pricing also helped persuade the FCC and the Justice Department to approve the company’s purchase of DirecTV in 2015, adding about 20 million new U.S. customers. The FCC said in its order approving the $48.5 billion deal that the combined company will be a more effective competitor, “offering consumers greater choice at lower prices.”
Randall Stephenson, AT&T’s chief executive officer, testified to Congress in 2014 about “downward pressure” on prices that would result from the acquisition of DirecTV, but didn’t commit to lowering bills.
In December, Stephenson said that the company was reworking the DirecTV Now product. “We’re thinning out the content, getting the price point right, getting it to where it’s profitable,” Stephenson said at a media and communications conference.
AT&T kicked off 2019 with higher prices on its DirecTV service, raising rates on all English-language video packages by between $3 to $8 a month, while raising fees for regional sports networks by $1 to $1.90 in most markets.
Next month, most DirecTV Now subscribers will see a $10 a month increase. New customers have a choice of a 40 channel package that includes HBO for $50 or a $70 package with 50 channels including HBO and Cinemax. Existing customers can keep their plans, but many will see a $10 increase.
©2019 Bloomberg L.P.