Another day, another $50+
billion dollar merger announcement.
Interested
in watching NFL football on your smartphone, or tablet using cutting edge
IPTV/OTT technology? You’re going to
have to ask AT&T for permission.
AT&T
must have billions of dollars burning a hole in its figurative pockets. Perhaps stung by its inability to buy
wireless carrier market share, the company has shifted strategy from horizontal
to vertical integration. AT&T should
have an easier time securing approval from the FCC and the Department of
Justice with an acquisition that combines two types of content distributors as
opposed to two types of ventures operating in identical markets.
So what
does AT&T get for its 50+ billion acquisition? It secures marketing access to
20+ million additional customers, who make sizeable recurring monthly payments.
AT&T also has the privilege of
selling rather than reselling direct broadcast satellite video content which presumably
already competes with the company’s U-Verse wired bundle.
AT&T
also get the privilege of buying into a technology that has significant, and
arguably increasing risks. First on average
one out of every three satellite launches fail to place the bird in proper
orbit. A single DBS satellite costs more than $100 million, but in this age of
scale and deep pockets that looks like chump change. Once activated satellites last for about 10
years and the risk for collisions with space junk increases.
I marvel at
satellite technology, but have to report that geostationary orbiting satellites
22,300 miles above the earth, suffer comparative disadvantages (e.g., signal
delay) when providing data services as compared to terrestrial options. Also DBS video market share has started to
decline, because increasingly nomadic and impatient consumers expect video
access anytime, anywhere, via any device and in any presentation format. The cable/satellite model of “appointment
television” has begun to lose its control over access. See my discussion of “cord nevers”: http://telefrieden.blogspot.com/2014/05/revenge-of-cord-nevers.html.
AT&T
gets to pitch a bundle of video, data and voice services via networks it owns
and operates. AT&T appears to consider
this strategy an insurance policy of sorts against market forces that may penalize
ventures that cannot bundle all desired services. The company also may think that joining
forces with another incumbent, offering an existing, but increasingly risky
technology, somehow achieves greater market resiliency for both ventures.
The
acquisition comes across as the opposite of “if it you can’t beat ’em join ’em.” AT&T is not acquiring a maverick, start
up with leading edge technology and a new business plan—just the opposite. If you can’t beat ‘em, join ranks and hope
that your combination—like others out there—will continue to lock content
access to incumbent technologies.
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