FCC approves AT&T–DirecTV merger

The FCC has approved AT&T’s $48.5 billion acquisition of DirecTV, bringing one of the nation’s largest wireless carriers together with the largest satellite TV provider. The combined firm will have around 26 million TV subscribers, making it the largest pay TV company in the country. That created some concern for regulators, but apparently not enough to stop the deal. Instead, it’s been approved with conditions, including the expansion of the company’s high-speed internet program. Additionally, the conditions are meant to ensure that the combined company will still include affordable internet options and give subscribers the option to access rival video services online. The Justice Department said this week that it had closed its investigation of the deal.

In particular, the FCC appears to be interested in the combined company’s promise to begin serving new rural customers. When the merger was announced, AT&T said that it would commit to improving high-speed internet access for customers in rural areas. That’ll go a long way toward the FCC’s goal of making high-speed internet universally accessible across the US, which is likely a big part of why it favors this deal.

The FCC’s conditions for the merger include requiring AT&T to expand high-speed internet access to 12.5 million “customer locations.” (The company will also be required to offer options to eligible libraries and schools, and give discounts to low-income subscribers.) Under another condition for the merger, AT&T will be forced to “refrain from imposing discriminatory usage-based allowances or other discriminatory retail terms and conditions on its broadband internet service,” according to the FCC. The company will also submit its interconnection agreements to the commission, and retain compliance officers to ensure the conditions are met.

The merger could help transform AT&T into a formidable player in streaming video. As the largest pay TV provider in the US, it’ll have a newfound scale and bargaining power to help it license content. Bundling video with wireless service could make AT&T a much more appealing choice to those picking where to get their next smartphone — especially if AT&T starts to offer up DirecTV’s NFL Sunday Ticket, an offering so critical that AT&T was actually allowed to call off the merger penalty-free if DirecTV lost it.

There are benefits on the DirecTV side of the business, too. AT&T and DirecTV have long teamed up to offer internet and TV bundles, and now they can continue to do that in a more substantial way (as in, one company owns the entire package). Bundles are a favorite of service providers. It’s more profitable, and it protects them from competitors, who might edge them out by offering more services. It can also give providers a bigger incentive to expand into new markets, as there’s a possibility of higher profits.

The merger’s approval follows the death of Comcast’s attempt to purchase Time Warner Cable, combing the United States’ two largest cable and broadband companies into a single behemoth, bigger in pay TV than even the merger AT&T–DirecTV. For many good reasons, the FCC shot down that attempt, calling it “an unacceptable risk to competition and innovation.” This deal, on the other hand, it believes is in the public interest, likely due to its potential for spreading high-speed internet access. With the specter of a combined Comcast–TWC now out of the way, AT&T–DirecTV emerges in pretty good shape to start expanding.