AT&T announced its $48.5 billion DirecTV acquisition plan a year ago today. And as they head toward an expected approval by the Justice Department and FCC, AT&T CEO Randall Stephenson told investors this morning that the combo will transform his company into a juggernaut in the fast-growing streaming video market.
“The traditional linear [TV] model is about to change in a significant way” as viewing on mobile devices grows, he said in a keynote at the J.P. Morgan Global Technology, Media and Telecom Conference. Once AT&T has a nationwide TV, wireless and retail infrastructure “we’re going to be in a unique position” to offer TV Everywhere streaming and other online services including Hulu.
AT&T also hopes to capitalize on unique offerings. It has NFL games including DirecTV’s NFL Sunday Ticket package. It’s also making content deals through its Otter Media joint venture with Peter Chernin, who Stephenson calls “one of the best creative minds in Hollywood.”
If all goes as planned, “we go from our video business being a money loser to being a money maker.”
He also talked up opportunities to invest in wired fiber optic lines in AT&T’s territories. Stephenson credits Google for improving the economics of these deals. Before it started to build its Google Fiber systems in Kansas City and Austin, most cities insisted that builders commit to upgrade the entire area — not just the well-to-do neighborhoods.
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“It’s not economic to build an entire city with fiber from day one,” the AT&T chief says. When Austin allowed Google to pick its spots, “we got the deal that Google got.” AT&T now passes about 100,000 homes in the city “and the penetration rates are terrific.”
AT&T vows to offer wireless broadband to about 13 million homes, mostly in rural America. It will be “truly competitive” with cable, and Stephenson is “getting more and more enthusiastic about it.”
How does that square with his threat to cut AT&T’s broadband investments if the FCC adopted tough net neutrality rules that reclassify the Internet as a regulated utility? Stephenson says he has “a certain degree of conviction that they will not be the rules of the land” for very long. He says that the courts may overturn the FCC. “If not, there is a strong move in Congress to do truly permanent net neutrality reform. … That’s not an improbable scenario.” What’s more, “administrations change and FCCs change. … Our investment thesis is that, for the long haul, these rules don’t remain as written.”
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