Days after agreeing to acquire media giant Time Warner, AT&T has revealed that its upcoming internet television service, DirecTV Now, will offer 100-plus channels for a mere $35 a month.
Previously, the company said that DirecTV Now, due next month, wouldn't undercut the steep price of cable television. But a $35 price tag is very much a shot across the bows of cable companies like Comcast, and in revealing the new strategy at a conference in Southern California, AT&T CEO Randall Stevenson said as much. "It's clear what customers want. They want premium content in a mobiles environment," Stephenson said. "Our goal is to drive prices down."
The move is also a way of bolstering support for the company's $85.4 billion deal to acquire Time Warner. Regulators will heavily scrutinize the proposed merger of two such large and influential companies, but the pair are insistent that the deal benefits consumers. Certainly, internet television benefits consumers. The ideal is a world where consumers can watch whatever they want over the internet from any device, rather than bow to the restrictions of old-fashioned cable TV.
According to Stephenson, AT&T envisions DirecTV Now as service that will eventually operate not just over landline internet connection but across 5G wireless connections, which it plans to deploy by 2018 and expand in 2019 and 2020. In this way, Stephenson wants to directly compete with cable TV. "I border on evangelical about it," he said.
The concern with an AT&T-Time Warner merger is that AT&T will somehow limit the distribution of Time Warner content on other networks. But Stephenson said that Time Warner’s offerings—which include HBO, CNN, DC Comics, TBS, TNT, the Cartoon Network, and Warner Brothers as well as various live sporting events—will be widely distributed. Meanwhile, Time Warner’s independence will be considered "sacrosanct," and Stephenson said the company will be a wholly owned subsidiary of AT&T. "We will be very cautious and thoughtful about how we organize this," he said.
On the flip side, the likes of Democratic vice-presidential candidate Tim Kaine and Senator Bernie Sanders have called on government regulators to fully vet the merger and make sure that AT&T won’t prioritize delivering HBO’s content on its pipes over, say, Netflix. The concern was echoed by Netflix CEO Reed Hastings just yesterday at the same conference. "As long as HBO's bits and Netflix's bits are treated the same," Hastings said, he wouldn’t oppose the merger.
Stephenson said that critics of the deal were "uninformed." According to the AT&T CEO, the two main concerns should be net neutrality and protecting internet streaming media companies like Netflix. The Federal Communications Commission will ensure net neutrality remains intact, he said, before adding that “Netflix is probably going to be OK." Time Warner CEO Jeff Bewkes, who appeared onstage with Stephenson, added the deal would bring much needed competition to advertising, which at the moment is being dominated by tech giants like Google and Facebook—who, as they ramp their video offerings online, are becoming media companies in their own right.
All that said, AT&T is already pushing the boundaries of net neutrality by "zero-rating" Internet content that comes from its existing DirecTV satellite television service. In other words, if you're a DirecTV subscriber, AT&T doesn't count DirecTV streaming against your data plan. It's unclear for now how it will handle the new DirecTV Now, which will be offered entirely over the net.
