Of Merger Rumors and Mayhem

Posted by Gary Wilson, Product Manager

May 13, 2014; 1:30 PM

Cloud_ChaosAs if AT&T wasn’t content enough with trying to buy pretty much everyone, now the rumors are they might be considering buying DirecTV. What chance would an acquisition like that have? Well, one just needs to look back at some of the groundwork done by the band of Merry Men at the FCC. In 2010, the FCC wrote a paper titled, “The Broadband Availability Gap” (OBI Technical Paper No. 1). One interesting find was that there were 7 million housing units underserved with broadband, meaning they didn’t meet the minimum requirements laid out by the FCC (4Mbps download and 1Mbps upload). So, for those areas, satellite was considered an excellent choice. If you think about it, according to the FCC, offering more satellite broadband at the newer improved data rates is a “good thing.”

Now AT&T has been selling off all its fixed line assets in many of these markets where satellite is considered a “good thing.” With one acquisition, AT&T would go back to serving those very same markets. Now working with DirecTV wouldn’t be something new for AT&T since they already resell satellite services in some areas. What’s interesting is AT&T’s market could expand into areas they had left previously to compete with the local fixed line providers that took over – competing over the very same fixed line assets AT&T (or SBC in many cases) built! A bit ironic, but such is the way in telecom. 

With satellite being a “good thing” to serve these markets, it would seem the FCC has given tacit approval to any company wanting to deliver broadband over satellite. Of course with the way politics works, who knows if AT&T used its influence to establish its future as a satellite provider. Companies like AT&T think on very long timescales. Of course, I could be way off base. But either way, it would seem AT&T’s acquiring a satellite provider would let them sell off their Tier 2, 3 and 4 fixed line assets even faster since they would then have a way to continue serving those markets more cost effectively. And they could use it in denser areas where UVerse isn’t deployed yet or in areas where Verizon owns the last mile with FiOS, thus completing any coverage gaps they may have.

And it’s all about delivering services over broadband. This is where the action is and will continue to be. We’ll continue to watch activities like these where it impacts broadband delivery in various markets. Most companies, including us, have a vested interest in being able to deliver content over those broadband pipes, wired or wireless (though VoIP obviously performs much better over wired). But the impact of satellite in rural areas, especially with a company the size of AT&T backing it, could either cause the local fixed line providers to scale back wired improvements or cause them to accelerate improvements in order to compete better.

Topics: Federal Communications Commission (FCC)