Netflix challenges AT&T's $48bn DirecTV deal

Netflix has warned US regulators that AT&T's planned $48bn takeover of one of the country's largest satellite television groups would create a company with the power to stop customers from ditching their pay-TV subscriptions in favour of online video services.

In a letter to regulators at the Federal Communications Commission, the streaming video service said AT&T's bid for DirecTV would make it the biggest distributor of multichannel TV in the US as well as one of the country's leading internet service providers.

"These two dynamics create a powerful incentive for AT&T to protect its investment in DirectTV . . . by using its ability to harm online video distributors," Netflix said in the letter dated May 4.

This power would enable AT&T "to prevent or delay cord-cutting and cord-shaving," Netflix added, referring to the trend of customers cancelling their cable and satellite TV subscriptions and getting their TV from cheaper online alternatives instead.

The letter accused AT&T of having already degraded its customers' access to Netflix's online video service, which is home to shows including House of Cards and Orange is the New Black. "Netflix urges the commission to reject the merger as currently proposed," it concluded.

A person close to AT&T described Netflix's move as a "last second attempt" to impact the deal, and said there was "nothing new in their filing". AT&T and the FCC declined to comment.

Netflix was one of the leading voices in a broad coalition that opposed Comcast's ill-fated $45bn bid for Time Warner Cable, which was terminated last month amid signs that regulators were planning to block the deal.

However, a spokesperson said Netflix was not opposing the AT&T-DirectTV deal outright, but rather seeking remedies to ensure the combined company would not be able to abuse a dominant position.

"While we are participating in the government's review, we are not opposing the merger. We've been highlighting concerns about AT&T's broadband practices and the need for appropriate remedies since last September," the spokesperson said. <

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Now that Comcast has pulled its offer for Time Warner Cable, many internet campaigners and companies have turned their attention to the AT&T deal, according to John Bergmayer, an attorney at Public Knowledge, the consumer advocacy group that also played a prominent role in the "Stop Comcast" coalition.

"There is no doubt that AT&T-DirecTV was announced in the shadow of the Comcast deal. I don't know if it was deliberate, but it saved them from a lot of scrutiny they otherwise would have got," he said.

Public Knowledge has petitioned the FCC to reject the deal, based on fears it will hurt online video platforms and make the internet less open. Mr Bergmayer said AT&T should be forced to sign up to the FCC's latest open internet rules, which it is challenging in the courts, along with other telecoms groups.

In its letter, Netflix argued that AT&T would be able to use data caps and usage-based pricing to make services like Netflix more expensive compared to its own online video offerings.

The FCC seeks to make merger decisions within 180 days of a deal being agreed, but it stopped the clock on the AT&T-DirecTV deal in mid-March at the 170-day mark. On the same day it also paused its countdown on the doomed Comcast-TWC merger. The decisions were made to allow time for a District of Columbia appeals court to rule in a related case.

At the time the FCC said: "The Commission reserves the right to restart the clock as it believes will best serve the public interest and it intends to provide further guidance as it becomes appropriate."

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