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.  

Thursday 26 June 2014

Mobile Office Visit to North Ogden

When: Thursday June 26 2014 @ 10:00 AM – 12:00 PM
Where: North Ogden, Utah @ North Ogden City Council Chambers at City Hall -  505 E. 2600 N. North Ogden, UT 84414

WASHINGTON – Today, Senator Mike Lee announced his plans to offer an amendment that would block funding for a regulation that allows the Department of Housing and Urban Development (HUD) to dictate local zoning requirements in any community across the country. 

“Even for our highly centralized federal government, this rule represents an extreme step in consolidating government decisions over distinctly local matters within the hands of distant, unaccountable bureaucrats,” said Lee. “Local authorities are far more attuned to the unique conditions and needs of their communities, and they have a personal stake in their success. In every state across the country, there is no doubt that a mayor and city council officials will be more personally invested and more effective in improving the lives of the people in their community than a federal official located in Washington, D.C.”

Senator Lee plans to offer his amendment to the Senate Transportation, Housing and Urban Development Appropriations Act should it be brought to the floor this week.

If funded, the “Affirmatively Furthering Fair Housing” rule would empower federal officials to assert the authority to force any community that receives a Community Development Block Grant to comply with zoning plans written in Washington.  This rule effectively allows HUD to carve up the country, block by block, according to its own priorities and preferences.

Community Development Block Grants are allocations of federal tax dollars, issued to local governments by HUD, to address a variety of community development needs. One of the primary uses of these resources is to provide affordable public housing for individuals and families in need. Sadly, the inevitable consequence of federal management over how local officials spend this money will only make it harder for communities to provide adequate low-cost housing for their neighbors in need.

To protect the ability of local officials to serve low-income communities, Senator Lee’s amendment would prevent this egregious power grab by the federal government and would keep housing decisions closest to the people who are affected by them.

Rep. Paul Gosar is the original sponsor of a similar amendment in the House, which was successfully added to H.R. 4745, the Transportation, Housing and Urban Development Appropriations Act for Fiscal Year 2015.