Today’s hearing addresses AT&T’s recent announcement of its intention to acquire DirecTV.  AT&T and DirecTV are well-known and successful companies.  AT&T is primarily a provider of mobile and fixed telephone, but it has in recent years made impressive inroads in the markets for video and high-speed internet.  DirecTV, on the other hand, is a satellite-video provider.  It has grown to become one of the largest multichannel video programming distributors or MVPDs in the country with around 20 million subscribers. 

The companies do not, for the most part, compete in the same markets.  Their primary products are not substitutes, but rather are complements.  Mergers of complements have the potential to create efficiencies that a merger of substitutes may not, and such transactions have traditionally been approved. 

This merger has nonetheless attracted attention.  The markets for video and internet are extremely important to consumers, and this transaction is occurring only months after Comcast and Time-Warner—two large players in the markets for video and internet—announced their intention to combine.  In addition, AT&T and DirecTV do offer substitute video products in some parts of the country, and the transaction has the potential to affect the competitive landscape in those areas.

As always, the guiding principle for our antitrust analysis is consumer welfare.  Indeed, as Robert Bork wrote in The Antitrust Paradox: “Competition must be understood as the maximization of consumer welfare.”  In antitrust, as in other areas of government policymaking, competitors often stand to benefit from government regulations or restrictions on their rivals.  As much as any other entity, competitors to merging parties have a constitutional right to petition and lobby the government.  They often have valuable information and insight into markets that will be affected by a transaction, and in many cases competitors simply want to ensure that antitrust enforcers protect competition and ensure a level playing field.  At the same time, history and experience have taught that competitors can and will seek to use the antitrust process to gain an advantage.  It is therefore essential that we remain on guard to ensure that government process not be used to pick winners and losers in the marketplace.  Where our policies and approach to antitrust ensure that free markets operate effectively and consumers choose the winners and losers, we obtain the best outcome for the country.

Applying these principles to this transaction will require a close look at those areas where the transaction may impact competition, such as where AT&T and DirecTV currently compete for video subscribers.  It requires scrutiny of the market for programming, where consolidation is reducing the number of buyers of video content and may potentially impact the range of choice of content that may be available for consumers going forward.  This transaction’s effect on the practice of bundling and the impact of that practice on consumers also merits discussion.

Proper antitrust principles, however, also require due weight be given to the pro-competitive aspects of this deal.  AT&T has committed to expand high-speed internet access to 15 million Americans who otherwise may not have such access.  The market for high-speed internet in some respects is both more important to consumers in the long term and suffers from less competition than the market for video.  This deal may thus offer real efficiencies and benefits to consumers—including innovation in a new internet distribution technology—that would not obtain if the deal is blocked.    

Markets change rapidly, and nowhere is this as true as it is for markets in technology-driven industries such as voice, video, and internet.  In response to such changing circumstances—and as we have seen with increasing frequency of late—incumbent companies may seek to consolidate.  In some cases, this behavior may be part of a nefarious attempt to forestall change—to prevent new products or technologies from making an incumbent obsolete.  In other cases, however, this behavior simply represents intelligent business planning to adapt to, and take advantage of, new trends.

Accordingly, in fast-moving markets, consumers may be harmed by government intervention as easily as they may be harmed by consolidation, and it is essential that, in considering important transactions such as the one before us, we apply rigorous economic analysis and ground our conclusions in the evidence.  By ensuring that we protect competition, and not any individual company or competitor, we can help create market conditions that benefit consumers and promote economic development.