TV Answer Man, I read that President Biden is proposing a massive bill to fund Internet expansion in rural areas. I remember you said DIRECTV and Dish couldn’t merge now because there wasn’t streaming in rural areas so people had to get satellite. Do you think this bill will allow the merger to happen? — Clark, Biloxi, Mississippi.
Clark, you may be on to something. AT&T, which owns DIRECTV, recently sold a 30 percent minority stake to private equity firm, TPG. The deal is expected to close in the second half of this year and some analysts, including yours truly, believe it will ultimately lead to a merger with Dish, DIRECTV’s longtime satellite rival.
One major reason why AT&T didn’t just sell DIRECTV to Dish now is a concern that federal regulators might reject the merger because it would create essentially a TV monopoly in rural areas where high-speed Internet (and streaming) is not readily available. Those rural residents must subscribe to a satellite TV service because it’s basically the only option they have other than the antenna. If DIRECTV and Dish merged, there would be only one satellite TV service which could lead to higher prices for those residents.
The FCC last year estimated that 21 million rural Americans still lack access to high-speed Internet, although some believe the number is higher.
President Biden’s $2 trillion infrastructure proposal includes $100 million for Broadband expansion projects with a target of providing affordable high-speed Internet to all areas by decade’s end. In concept, it would seem to remove the biggest obstacle in the way of a DIRECTV-Dish deal.
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However, there are two caveats.
First, the bill has to pass. Republicans, and some Democrats, are strongly objecting to the bill’s price tag, saying it will further expand the deficit. That doesn’t mean it won’t pass, but some of the bill’s loftier goals, such as Internet for all, could be watered down.
Two, if the bill does pass, we need to see the timetable for those Broadband expansion projects. Will work begin soon after passage, or as often happens with government projects, will it be delayed several years while task forces and congressional panels churn out impact studies? Federal regulators who would rule on a DIRECTV-Dish merger might want to wait before approving it until expanded Internet availability in rural areas is a reality, not just a project.
Still, I would guess that AT&T and Dish executives are watching this situation very closely to determine their next move. The TV Answer Man will monitor the situation as well and report back here if anything changes.
Until then, happy viewing, and stay safe!
Have a question about new TV technologies? Send it to The TV Answer Man at swann@tvpredictions.com. Please include your first name and hometown in your message.
— Phillip Swann
Wouldn’t Starlink accomplish internet expansion to rural areas?
I am one of the 20+ million who do not have high speed broadband. I have lived in a rural area for 30 years. During those years I have had an 18 foot satellite, Dish before settling with Direct TV for the past 17 years. In 2009, I installed a DSL line for computer that replaced an ISDN line.
Currently AT&T is running high speed fiber down a paved road about 1/2 mile from my home. However, they have told me my road is not listed to receive fiber for some unknown reason. My AT&T modem which has a whooping speed of 3.14 on a good day did not become an issue until streaming became the rage several years ago. In 2018, I purchased Hughes Satellite for my computer to allow my wife to stream on the DSL line.
I have no faith that fiber will reach my home in the next five years since Dish has terrible customer service and Direct TV service has dropped since AT&T brought them so the future of streaming looks dim in rural South Caroling.
What about Elon Musk’s Starlink broadband service? Doesn’t that count as serviceable broadband infrastructure? It’s already partially up and running NOW.
Or just because it isn’t terrestrially based it doesn’t count? That attitude sure is shortsighted, along with the rest of the Biden administration’s ideas. Just because the government didn’t think of it, it doesn’t count in the mix. Ridiculous!
I’ve made the bet on the starlink service with my $99 dollar down payment. But it will take several polar launches, which are rare compared to the monthly regular obital launches, untill Alaska gets overhead coverage. Still. I don’t see how they would be part of a rural broadband push by the government.
UNDERSTAND this NOW…”cancer” of AT&T and the morons who run that show…ERGAN has WAY BETTER plans for making $$ and they
Do
NOT
INCLUDE
the DIEING satellite TV business at ALL (no matter what you clowns “speculate” on)
AFTER 40 YEARS in this business I can GARUNTEE you that there will be NOOOOOOOOO
“merger” of DISH with DIRECTV or the clowns at AT&T and for that matter I will bet the rent that the “proposed” 30% merger that TPG is looking at WILL
NEVER’HAPPEN either because TPG will NOT transfer the $$ and the DEAL WILL DIE as they find out MORE about the inept MORONS at AT&T and what is left of “DIRECTV” (death of both AT&T and DIRECTV is NEARER then you think
) !!
AT&T is by NO MEANS IMMUNE for the F ups that they are and the consequences that WILL follow…AT&T is TERMINAL…(selling assets is the VERY first and obvious sign of a FAILER of ANY company and AT&T is by NO MEANS “immune”
0 !!
not sure i want anything to do with Ergan. he’s batshit crazy for one. what’s the point of having a pay tv service if your blacked out of channels?
Biden Infrastructure Bill Could Be Final Nail in DirecTV-Dish Merger Coffin
By Mike Farrell a day ago
Craig Moffett says rural broadband expansion could remove some merger roadblocks, gut business There are a lot of reasons why a merger between DirecTV and Dish Network wouldn’t make long-term sense — it would cost too much, it would be the combination of two business that are in rapid decline, it’s anti-competitive, it’s just plain dumb — but that doesn’t stop people from bringing up the possibility from time to time. And while talk about a possible deal probably will never truly die, Moffett Nathanson principal and senior analyst Craig Moffett said in a research note Tuesday he may have found the final nail in the Dish/DirecTV merger coffin: President Joe Biden’s $2 trillion infrastructure bill.
In a 19-page research note, Moffett pointed out that the infrastructure bill, which includes about $100 billion for broadband expansion into rural areas, could remove one of the barriers to a DirecTV-Dish combination — the fear that it would reduce TV distribution competition in rural markets from two players to one — but creates another. By giving cable, telco and other operators financial incentives to extend broadband into areas that didn’t make economic sense in the past, it also gives consumers the final reason to dump their satellite TV subscription.
“The Biden infrastructure bill explicitly targets taking the rural core of customers historically served exclusively by satellite providers to zero,” Moffett wrote.
While opening up the rural broadband market would appear to remove one roadblock to a satellite merger — that such a deal would take down the number of competitors in less populated areas from two to one — it poses another challenge in that it could eviscerate satellite TV’s last stronghold.
“Given the option, for the first time, of choosing not just cable but also OTT alternatives, it’s a safe bet that many customers will simply leave,” Moffett wrote of the satellite TV subscriber base.
The old arguments for a DirecTV/Dish merger appear compelling on the surface — putting the two together would create a satellite TV juggernaut with 23 million subscribers (more than Comcast!) and would produce cost efficiencies and synergies in the billions of dollars per year. But despite the plusses, those that would push for a merger between the two companies are ignoring the one very big minus — consumers are abandoning traditional pay TV structures for more flexible streaming relationships that ensure that a combination would only prolong the inevitable breakdown of the business.
Also Read: Dish Gets Back to Its Rural Roots
And it already is breaking down pretty rapidly without any external help. Moffett estimated that pay TV (cable and satellite) has been losing customers at a 7+% clip over the past four quarters. Gross additions for both DirecTV and Dish have also been plummeting — from a combined 6.45 million subscribers in 2016 to 2.36 million subscribers in 2020.
In his report, Moffett wrote that the Biden bill would be a “body blow” to the satellite TV business, but especially for Dish, which has made a focus on rural markets its main focus over the years. The same strategy, according to Moffett, has kept DirecTV’s subscriber losses from going totally in the tank.
While Moffett added that the actual size of the rural subscriber pool is unknown, it is obviously large enough to keep these companies going as it becomes an increasingly important part of their respective businesses.
“As the subscriber bases of the two companies spiral lower, the rural core has been steadily growing as a share of what’s left,” Moffett wrote. “Merging the two companies would not change this dynamic at all.”
And now, he continued, “The federal government wants to spend $100B to make this market segment disappear.”
Dish Network chairman Charlie Ergen has said on several occasions that he believes a DirecTV/Dish merger is “inevitable,” but given that Dish’s future is tied to whether it will be able to successfully build a wireless network, merging with DirecTV shouldn’t be top of mind, according to Moffett.
Dish has about $16.5 billion in debt ($10.5 billion of which is pledged toward the satellite business) with about $2 billion in maturities due in June. Dish could make that payment with cash on hand, but according to Moffett, that would starve the wireless effort of needed cash to fund its buildout.
Dish has said that it will spend about $10 billion on its wireless network, a figure that Moffett has said in the past he believes is strikingly low. Adding pressure to that aspect of the business can’t help the situation.
DirecTV relies on the rural markets as well — Moffett estimates that most of the churn in rural markets is actually between the two satellite companies, so any reduction in that base will adversely affect both companies. In addition, AT&T’s deal to spin off its DirecTV, AT&T TV and U-verse businesses with TPG Capital earlier this year carries a high interest loan (10%) from TPG that also includes a “warrant for 30% of the excess value in the event DirecTV ever realizes an exit at a valuation of greater than $16.2 billion, as it might in the event of a Dish merger,” Moffett wrote.
Dish and DirecTV tried to merge in 2002, when both were much stronger companies and the threat of broadband was minuscule, and the government blocked it. Even as satellite’s fortunes began to wane during a presidential administration that was supposedly open to more deals, the feds reportedly made it pretty clear that they would block a merger, and the current administration appears to be even less inclined to allow a big combination. But ultimately, whether a deal is done will come down to what these things usually come down to — economics. And with the government ready to fund satellite TV’s competitors in its most stable market, those economics don’t look so good.
Disagree.
If a customer could take the best part of Dish (price) and the best part of DirecTV (channels) then a merger would be a wonderful idea! However, the odds are the worst of each will be the norm. DirecTV’s prices and Dish’s Charlie Ergen’s contract disputes will probably result in higher prices for less service. As a former DirecTV, Dish, and now back to DirecTV customer the only winner will be the streaming services…and they have a long way to go in channel offerings and technology improvements.