FCC Approves AT&T's Merger With DirecTV, Imposes Net Neutrality Conditions

AT&T's $49 billion merger with DirecTV cleared its last regulatory hurdle today, when the Federal Communications Commission announced it had approved the deal.

But the approval comes with several conditions. Among others, the FCC is prohibiting AT&T from "zero-rating" its own video services -- meaning that the company can't exclude its own video services from consumers' monthly data allotments.

The FCC says that restriction is necessary because the merger "increases the incentive of AT&T-DIRECTV to use strategies that limit consumers’ access to online video distribution services in order to favor its own video services."

AT&T also must submit any "interconnection" agreements to regulators, so that they can decide "whether AT&T-DIRECTV is denying or impeding access to its networks in anticompetitive ways."

Interconnection agreements govern the flow of Web traffic from "transit providers" (like Cogent or Level 3) or "edge providers" (content companies like Netflix) to AT&T's servers.



Broadband providers' interconnection policies drew headlines last year, largely because Netflix customers experienced choppy streams as a result of problems at the interconnection points. Netflix resolved the issue by agreeing to pay four ISPs -- Time Warner, Comcast, Verizon and AT&T -- extra fees in order to interconnect directly with their servers.

Although Netflix signed the deals, the company wasn't happy about them. Last year, CEO Reed Hastings called on the FCC to prohibit broadband providers from charging interconnection tolls. “We'll never realize broadband's potential if large ISPs erect a pay-to-play system that charges both the sender and receiver for the same content,” Hastings wrote in Wired last year.

While the merger conditions clearly aim to advance net neutrality principles. At the same time, the terms appear weak compared to ones that Charter proposed as conditions of a merger with Time Warner and BrightHouse. For example, Charter vowed to avoid imposing data caps for at least three years following its prospective merger.

Other terms of AT&T's merger with DirecTV require the company to expand high-speed fiber to 12.5 million new households, and offer discounted broadband to low-income households.

Some consumer advocates said this week they're unimpressed with the merger conditions. Free Press argues that AT&T was already planning to expand its fiber broadband service, and that the terms "will do little to offset the deal’s many harms."

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