Editor’s Note: For most of us, the wide world of technology is a wormhole of dubious trends with a side of jargon soup. If it’s not a bombardment of startups and tech trends (minimum viable product, Big Data, billion dollar IPO!) then it’s unrelenting feature mongering (Smart Everything! Siri!). What’s a level-headed guy with a few bucks in his pocket supposed to do? We’ve got an answer, and it’s not a ⌘+Option+Esc. Welcome to Decrypted, a new weekly commentary about tech’s place in the real world. We’ll spend some weeks demystifying and others criticizing, but we promise it’ll all be in plain english. Continuing on from his work on the first two issues (let’s call those a beta) is writer Darren Murph, the former Managing Editor of Engadget and a Guinness World Record holder for number of blog posts published. So take off your headphones, settle in for something longer than 140 characters and prepare to wise up.
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AT&T already provides pay-TV services to around six million subscribers via its U-verse product and also offers entertainment on the go through its Mobile TV app. The proposed deal would see AT&T forking over nearly $50 billion ($95 per share) for DirecTV, which is, by any measure, one rival eating another. The public response, however, has been fairly muted, and the two giants almost certainly have another pair of colossuses to thank.
A few months back, Comcast agreed to terms that would enable it to purchase Time Warner Cable for nearly $45 billion. At the time, the scope of the deal was unprecedented, and the potential competitive impact was enormous. Fast forward to last week, and you’ll find the FCC effectively announcing that net neutrality as we know it can (and almost certainly will be) be watered down, kicked aside, and left as a footnote in history so long as lobbyists keep the checks coming.
If it all sounds convoluted, it is. If AT&T is indeed allowed to purchase DirecTV, the premise of a neutral net will almost certainly perish. It won’t be immediate — after all, AT&T has reiterated its commitment “for three years after closing, to the FCC’s Open Internet protections established in 2010” — but it’ll happen. In lay terms, this means that those who control access to the Internet (e.g. AT&T, Comcast, Suddenlink, Google, etc.) will have the ability to create “fast lanes” that they can charge more for.
If AT&T is indeed allowed to purchase DirecTV, the premise of a neutral net will almost certainly perish. In lay terms, this means those who control access to the Internet will have the ability to create “fast lanes” that they can charge more for.
Already, we’re seeing outfits like Netflix — which drives mind-boggling amounts of traffic — being forced to pay a premium for unbridled access to Comcast’s pipes. That may not mean much to you now, but what happens when Netflix is charging $70 per month for its offerings, and has a virtual monopoly on exclusive content pouring out of Hollywood? How is an upstart video provider going to compete with the future-Netflix if it has to somehow pony up to pay for equal carriage across a variety of Internet providers?
The shame of it all is that this combination of companies has the potential to be great for consumers. Rural portions of America that struggle to find a decent Internet connection could benefit tremendously from LTE-based home access. Presently, AT&T’s Wireless Home Phone and Internet offering provides precisely that, but only in a handful of locales. The entire nation’s economy would be positively impacted by connecting the disconnected with broadband-type speeds that are distributed over thin air. Many of these rural residents already rely on satellite to receive news and entertainment, but don’t offer financial incentive enough to lure Internet providers with wired service. In theory, this merger could encourage AT&T to rapidly expand that LTE footprint to reach as many of DirecTV’s rural customers as possible, enabling the multi-service bundle to be truly beneficial. Of course, that would require significant oversight to ensure that such a rollout actually happened, as there’s really no private enterprise that’d push the newly formed conglomerate via old fashioned competition.
The harsh reality is that consumers are now smart enough to dictate how they use the access that they’re given, which is the single largest threat to pay-TV, telephone, and Internet service providers today. A simple broadband Internet connection is all you need for entertainment (streaming services such as Netflix) and communication (free calling services such as Google Voice and Skype). It’s borderline silly to even pay for things like a hardwired telephone and pay-TV, and companies like AT&T and DirecTV know it.
If these behemoths don’t take preventative measures now, they’ll end up being mere access companies (nee “utilities”, as they’ve put it), whereby consumers pay the minimal amount for a simple Internet connection and then rely on apps and services of their own choosing to best take advantage. That’s a doomsday scenario for providers, who want to be seen as meaningful components of the value chain in order to keep record revenues flowing.
It would be great to say that mergers such as Comcast/Time Warner Cable and AT&T/DirecTV are beneficial for consumers, but sadly, they aren’t. Tom Wheeler, the chairman of the FCC, is the former head of the National Cable Television Association (NCTA) and Cellular Telecommunications & Internet Association (CTIA). In other words, this guy has grown up in lobbyist ranks. That’s not to say that he’ll never choose the public’s interest over stacks of lobby money, but it’s not exactly a comforting job history.