att_directvAT&T could be required to submit all of its interconnection agreements, along with regular network performance reports, to the FCC as a condition of FCC approval of the company’s plan to acquire DirecTV in a $48.5 billion deal announced in May 2014.

In a statement released late yesterday, FCC Chairman Tom Wheeler said he was circulating an order to his fellow commissioners that would approve the acquisition provided that AT&T agrees to that and other conditions. Proposed conditions include:

  • A commitment to bring fiber-to-the-home to more than three times as many metropolitan areas as previously announced
  • AT&T would not be allowed to exclude affiliated video services and content from data caps on its fixed broadband networks
  • A requirement for an independent officer to help ensure compliance with these and other proposed conditions

With Wheeler and two other Democrats having control of the five-commissioner FCC, there is a strong likelihood that the order will be adopted.

The Department of Justice already has approved AT&T’s acquisition plans.

The AT&T/ DirecTV Approval Plan
It’s not surprising that conditions of the AT&T/ DirecTV deal include a broadband build-out commitment. But what Wheeler is proposing is somewhat different from what reportedly was being considered just a couple of weeks ago. At that time the focus appeared to be on bringing broadband, although not necessarily fiber-to-the-home, to rural areas. But based on Wheeler’s statement, the FTTH buildout requirement appears to emphasize metro areas.

Earlier reports also referenced a requirement to offer stand-alone broadband – a requirement not referenced in the statement that Wheeler released yesterday. This is an important issue in rural areas where customers are commonly required to take landline voice service in order to get DSL – a requirement that carriers often impose to help cover the cost of operating the underlying infrastructure supporting both services, a cost that tends to be higher in rural areas.

While Wheeler might appear to be turning his back on the rural market, it’s possible the rural build-out and stand-alone broadband requirements are in the draft order but he chose not to highlight them — although not mentioning a rural build-out requirement would be an unusual move. It’s also possible that the Connect America Fund program figured into a decision to drop the expected requirements, if indeed that is what occurred.

Through the CAF program, AT&T has been offered $494 million to cover some of the costs of bringing broadband at speeds of 10 Mbps downstream to rural areas that cannot get landline broadband or can only get slow-speed DSL today. Perhaps Wheeler has decided that the CAF program already provides sufficient incentive for AT&T to undertake a rural broadband buildout.

I haven’t studied the CAF cost model in detail but because the CAF program is broadband-focused, FCC officials likely based cost calculations on broadband service only, and there may be an implicit assumption that customers would not be required to also purchase voice service.

AT&T has to decide soon whether to accept its CAF funding. But considering that the company accepted all the money it was offered last year in Phase 1 of the program, it would appear strongly likely that the company will make that decision again.