(Chicago Tribune (IL) Via Acquire Media NewsEdge) May 20--Another mega-merger is poised to reshape the media landscape, leaving consumers to wonder if they're about to be gouged.
Huge deals like AT&T's plan announced Sunday to buy DirecTV for nearly $50 billion never will be popular with the public. Same goes for the still pending $45 billion deal announced three months ago for Comcast to take over Time Warner Cable.
Are most customers, after all, absolutely delighted with the bills they pay and the customer service they receive from Comcast or AT&T? It's only natural to greet the latest merger news with skepticism.
Given how fast technology is changing the media industry, however, these deals make sense. If mature media companies are going to keep up with the next wave of innovation, they need every advantage they can get from scale and synergy.
American consumers never have had so many options for digital news and entertainment, and those options are growing. It will be to everyone's benefit if media companies can make their operations more efficient to meet the competition they will face in a digital future that looks to be increasingly mobile and wireless.
Government antitrust watchdogs have yet to weigh in, but we have hunches that the Comcast and AT&T transactions will, eventually, win their approval. There are compelling reasons to let both deals proceed.
We supported the Comcast-Time Warner deal partly because the nation's No. 1 and No. 2 cable systems in effect do not compete: Each serves a different territory, with little overlap.
We also took into account the rising competition among delivery platforms. For years now, cable has lost market share to telecom and satellite operators. Online services such as Netflix are coming on strong. Those fast-arriving options will reduce the ability of a post-merger Comcast to charge consumers more, or to drive significantly tougher bargains with content providers such as ESPN. As new platforms materialize, the content providers have new, non-cable ways to reach audiences.
The AT&T deal is different: The company competes head-on with DirecTV for pay television. Millions of Americans currently have a choice between one company or the other. That makes the antitrust review all the more critical. If a merger were to enable the combined company to raise prices with impunity, that would be bad for the public.
We don't see that happening though. The deal will save the combined company $1.6 billion in annual overhead costs as of year three, making it a stronger competitor and giving it more latitude to invest in technological innovations. The deal also will offer more options for many customers of DirecTV, at a time when the pay TV industry is starting to lose subscribers.
As is, DirecTV doesn't offer "bundled" services combining TV, phone and Internet, which have proven popular with consumers. Also, DirecTV offers no stand-alone Internet option, even as the marketplace is embracing Netflix and other online video services. By adding DirecTV's customers to its own, AT&T would be able to offer new bundled options, as well as stand-alone high-speed broadband service, to 15 million more American households (most in under-served rural areas). By increasing consumer choice in that way, the merger would provide a significant public benefit.
These big communications companies need to compete more aggressively with Silicon Valley upstarts aiming for their business. If they don't, in years to come, Google, Amazon or some company yet to be named just might put them out of business.
How competitive would the landscape look then?
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