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ACA: FCC Must Impose Targeted Conditions To Address Harms Of AT&T-DirecTV Deal

Effective Non-discrimination and Commercial Arbitration Terms Critical for Independent Cable

PITTSBURGH, January 7, 2015 - The American Cable Association called on the Federal Communications Commission to adopt remedial conditions that offer small and medium-size multichannel video programming distributors (MVPDs) meaningful protections against the harms stemming from AT&T's proposed takeover of DirecTV to form the second-largest traditional pay-TV provider in the country.

"The AT&T-DirecTV transaction is a significant deal, and consumers and competition will be harmed if it is approved without accessible, effective, and long-lasting remedial conditions.  The deal will increase the new company's incentive and ability to charge higher prices for its regional sports programming assets that are ‘must have' for in-region MVPDs," ACA President and CEO Matthew M. Polka said.

ACA spelled out its key conditions in comments filed with the FCC on Jan. 7 as part of the agency's review of a $45.5 billion merger that would see AT&T take control of about 26 million traditional video subscribers and inherit DirecTV's competitively significant stable of regional sports networks.

As a threshold matter, ACA said the FCC needed to impose the two types of conditions that the FCC has found necessary to adopt in previous mergers to address vertical harms similar to those that will result from the current deal:

  • A non-discriminatory access condition that expressly prohibits the merged company's programmers from striking exclusive deals or charging discriminatory rates, terms, and conditions to MVPDs; and
  • A commercial arbitration remedy that protects MVPDs against the combined company extracting prices, terms, and conditions that are above fair market value through a uniform price increasing strategy.

ACA stressed that while these two types of conditions are necessary, they will be insufficient to address fully the competitive harms presented by AT&T's acquisition of DirecTV unless the FCC corrects fundamental flaws in the mechanisms it has traditionally relied upon to enforce the conditions.  The FCC must put sharper teeth in them, said ACA, to ensure that small and medium-sized MVPDs are not left unprotected from increases in AT&T-DirecTV's greatly enhanced bargaining position post-transaction.

Under ACA's proposed conditions: 

  • An MVPD seeking to enforce the non-discriminatory access condition must have the right to bring a complaint comparing itself to a peer programming purchaser, regardless of whether the comparable distributor is the complainant's direct competitor or serves in the same geographic area;
  • AT&T-DirecTV-affiliated programmers must provide requesting MVPDs evidence that the rates, terms, and conditions offered are comparable to those charged similarly situated distributors;
  • MVPDs must have the opportunity to audit AT&T-DirecTV-affiliated programmers to ensure against discrimination, including post-agreement discrimination;
  • MVPDs' bargaining agent shall have the protections under, and the right to utilize, the non-discriminatory access condition just as MVPDs have been given the right to use a bargaining agent to utilize their commercial arbitration remedies; and
  • AT&T-DirecTV-affiliated programmers shall not withdraw any programming from an MVPD during the pendency of a non-discriminatory access complaint.

ACA said these conditions, along with others proposed to improve the commercial arbitration remedy, are targeted to address the demonstrable harms of the transaction and crafted finely to address flaws and shortcomings with the types of remedial conditions the FCC has imposed in the past.

ACA has urged that the conditions last for at least nine years, and after that time, require AT&T to return to the FCC to demonstrate that the conditions are no longer needed.

"We feel these conditions are utterly essential to protect MVPD competition and consumers of MVPD services should AT&T and DirecTV go forward with their merger," Polka said.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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