In its Order approving the AT&T/DirecTV merger See TMI’s Regulatory Mix dated 7/28/15, the FCC imposed various conditions to address the potential harms posed by the transaction and confirm certain benefits offered by the transaction. The conditions address Fiber to the Premises deployment, non-discriminatory usage-based practices, Internet interconnection disclosure requirements, and discounted broadband services for low-income subscribers. The conditions will be in place for four years. So, why did the FCC adopt these conditions, and what does AT&T have to do?
Why was the Fiber to the Premises (FTTP) condition adopted?
Both AT&T and the FCC agreed that the transaction reduces the AT&T’s incentive to deploy FTTP service. This is because the resulting increase in U-verse video subscriptions will depress demand for DIRECTV’s services, thus “cannibalizing” its profits. The purpose of this condition is to address this competitive harm.
What FTTP deployment goals did AT&T agree to?
Within four years, AT&T must deploy FTTP-based Broadband Internet Access Service (BIAS) to at least 12.5 million mass-market customer locations (occupied by residences, home offices, and very small businesses). No more than 2.9 million of those locations may be upgrades to customer locations that receive speeds of 45 Mbps or more using fiber to the node technology. The implementation schedule calls for FTTP coverage to be expanded to 1.6 million locations by the end of 2015; 2.6 million locations by the end of 2016; 5.0 million locations by the end of 2017; 8.3 million locations by the end of 2018; and 12.5 million locations by the end of July 2019.
Does the FTTP commitment include E-Rate eligible locations?
In addition to the 12.5 million FTTP locations, AT&T is obliged to offer 1 Gbps FTTP Service to any E-rate eligible school or library located within or contiguous to a distribution area in which it deploys FTTP-based service. This includes locations covered by the 12.5 million FTTP buildout, which includes approximately 6,000 E-rate eligible schools and libraries. To satisfy this condition, AT&T must offer 1 Gbps FTTP Service in response to a Form 470 seeking bids for that service to any school or library in an area included in the FTTP build-out. AT&T also must engage in outreach to make all covered schools and libraries aware of the opportunity.
Will the FTTP deployment be funded by the Connect America Fund?
No. As a condition of the merger, AT&T may not use, receive, or request any Connect America funds for the investments required to satisfy the 12.5 million FTTP deployment transaction commitment or for operating expenses for such locations after such are deployed.
Why was the condition regarding usage-based practices adopted?
One benefit of the transaction is the improved ability to develop and launch AT&T’s video offerings provided to customers, including through fixed BIAS. At the same time, the transaction increases AT&T’s incentive to discriminate against unaffiliated online video distribution services by, for example, limiting consumers’ access to online video distribution services in order to favor the U-verse or DIRECTV video programming product or the combined entity’s online video programming products. AT&T will also have an increased incentive to limit subscriber demand for competitors’ online video content, including through discriminatory usage-based allowances, commonly known as data caps. The purpose of this condition is to address the incentive and ability to use such practices to discriminate against third party video content or distribution.
What did AT&T agree to regarding programming discrimination?
AT&T agreed not to discriminate in favor of: (1) its own video programming services; or (2) any content or application available through its own video programming services, in the application of usage-based allowances or other retail terms and conditions for its fixed BIAS. This includes not exempting one or more of its own programming services from usage-based allowances. AT&T is, however, allowed to offer discounts for integrated bundles of its U-verse or DIRECTV satellite video programming service or rebranded offerings of these services with the its fixed BIAS.
Why does the Order include conditions addressing Internet Interconnection?
The FCC found that the DirecTV transaction increases the risk that AT&T will use Internet interconnection agreements to limit competing online video content or online video distribution services. The purpose of the condition is to monitor the terms of AT&T’s future Internet interconnection agreements to determine whether it is using them to deny or impede access to AT&T’s networks in ways that limit competition from other online video content or online video distribution services.
Does AT&T really have to file all its Internet interconnection agreements?
Yes. For four years, AT&T agreed to submit to the FCC all agreements entered into for the exchange of traffic at Internet interconnection points located within the US within 30 days of their execution. For these purposes, Internet interconnection points means the facilities over which traffic is exchanged between AT&T’s network that carries BIAS traffic and (1) peering networks or (2) customers that purchase on-net only services to deliver traffic to and from AT&T’s end users over the company’s network. The agreements will be filed confidentially under a Protective Order. AT&T is not required to obtain FCC approval of any of the agreements. It also will not be required to file agreements where the volume of traffic is exchanged is less than a de minimus threshold (as established by an independent measurement expert).
Does AT&T have to report any performance metrics?
Yes, AT&T will be required to report on three performance characteristics of the traffic exchanged at Internet interconnection points; latency, packet loss, and utilization. No reporting will be required when the volume of traffic exchanged with the interconnecting party is less than a de minimis threshold. To effectuate this condition, AT&T must engage an independent measurement expert that meets certain requirements specified in the Order.
Why does AT&T have to offer discounted broadband services?
The FCC found that the availability of better and lower priced bundles of video and broadband service was a potential benefit of the transaction. However, it also is in the public interest to ensure that consumers have the ability to choose to purchase stand-alone broadband service. This is especially true for low-income subscribers who may not be able to afford bundled services. Thus, the purpose of this condition is to make available an affordable, low-price standalone broadband service to low income consumers in the AT&T’s wireline footprint.
What discounts does AT&T have to offer?
Where technically available, AT&T will offer wireline BIAS with download speeds of at least 10 Mbps to qualifying households in its wireline footprint for no more than $10 per month. If 10 Mbps wireline BIAS is not technically available, it will offer service with download speeds of at least 5 Mbps for the same price. Where AT&T has deployed broadband service at top speeds below 5 Mbps, it must offer wireline BIAS at speeds of at least 3 Mbps for no more than $5 per month. To qualify for these offerings, a household must have a least one individual participating in the Supplemental Nutrition Assistance Program (SNAP) and not have a recent outstanding debt for AT&T BIAS service. Qualifying households will also not be required to pay any installation or modem charges or fees in order to participate in the program, which will last for four years.
Will AT&T market the discounted service?
Yes, the condition includes various commitments by AT&T to market the program, including on its home page, through customer service representatives, and through outreach efforts in coordination with schools and community-based organizations serving low-income individuals and families. AT&T also agreed to promote the program through public service announcements with a minimum annual value of $15 million and provide a dedicated phone number to verify eligibility for the program.
Is AT&T required to file other reports with the FCC?
Yes, most conditions include semi-annual reporting for the next four years. AT&T is also required to develop a compliance program, retaining both an internal company compliance officer and an independent, external compliance officer that will report and monitor, respectively, the combined entity’s compliance with all conditions of the merger.
