Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
December 18, 2014

DirecTV Delves into Problems With ‘Synthetic Bundles’

Among the arguments expected to be made on the Hill tomorrow about why the proposed AT&T and DirecTV merger would either harm or help consumers, the head of the satellite television company will lay out why he thinks DirecTV’s current arrangements with companies such as AT&T, Verizon and CenturyLink have been “largely unsuccessful in creating a competitively attractive video and broadband bundle.”

Prepared testimonies for witnesses at tomorrow’s House Judiciary subcommittee hearing on the proposed merger are already online.

Michael White, head of DirecTV, argues in his prepared testimony that the merger would benefit consumers, and goes on to outline problems he sees with “synethetic” bundles — under which separate companies pair up to offer services. (The merger, of course, eventually would eliminate the companies’ need to bundle synthetically, and the companies argue that the merger would allow them to offer new and competitive bundles.)

In his prepared testimony, White says that DirecTV has pursued a strategy of creating synethic bundles with other companies to address its lack of a broadband network, but that in addition to being more expensive than bundles offered by a single company, the synthetic ones are somewhat of a headache for consumers:

Today, a customer interested in a bundle must first complete her video purchase and then be transferred internally to our “Bundles Desk” to speak with a bundles sales specialist for a broadband price quote and installation scheduling.

And installation requires more than one service call, he says in his testimony:

DIRECTV is often ready to install a new subscriber’s video service before the broadband provider is ready to install the corresponding broadband service. As a result, customers must arrange separate installations, which need to be scheduled through separate service calls. Then, the customer must wait at home for separate technicians to arrive during separate installation windows, usually on different days. Moreover, when the video installer arrives before the broadband installer, the first installer cannot connect our Internet-enabled set-top boxes. Either the customer or the broadband technician must do so, and they may be unfamiliar with the process or unaware that this connection even needs to be made.

And customers still get multiple bills, he says:

Unlike integrated bundle customers, synthetic bundle subscribers do not receive a single bill for the combined services. Rather, they receive two bills which do not arrive on the same day, and any discounts take a long time to be applied.

Public Knowledge’s John Bergameyer in his prepared testimony calls for the deal to blocked because “evidence shows that this merger would hamper competition in many markets, further the digital divide, and exacerbate harmful industry trends.” He also says in his testimony that:

AT&T argues that these ‘synthetic bundles’ are not cost-competitive with the cable broadband/video bundle. It promises the claimed cost savings associated with these more efficient bundles to perform slight upgrades to its LTE network, adding a fixed LTE service to its mobile LTE coverage ares. But the evidence suggests that even without this merger, AT&T plans to go ahead with its fixed LTE plans. These fixed wireless commitments do not amount to a public interest benefit sufficient to offset this deal’s competitive harms.

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