Will AT&T and Verizon Acquire DirecTV and Dish Network?

By Gary Kim April 16, 2014

One might argue that will happen. The traditional argument--for at least a decade--is that neither AT&T nor Verizon can grow the video portion of their triple-play services much more than incrementally without acquiring more video share now held by the satellite providers.

No matter how effective the telcos are at marketing video services, they are hampered for a couple of reasons.

The cost of upgrading their fixed networks to handle video is a task now made tougher because the financial return from investing in mobile assets now competes for investment funds, is one limitation.

The other problem is that both firms are barred from significant growth by acquisition, simply because of their large share of the telco fixed network business. AT&T’s fixed network might pass about 30 million of 115 million or so U.S. homes, and not all those locations are video-capable.

Verizon passes about 27 million homes. And despite new AT&T plans to vastly accelerate upgrading its networks, perhaps half of all lines operated by AT&T and Verizon fixed networks are not yet upgraded to enable video services.

The point is that AT&T and Verizon will be limited in the number of video subscribers they can attract, simply because their footprints are relatively limited, both geographically and in terms of the cost of upgrading rapidly.

Verizon’s video entertainment customer base, for example, is about five million households. DirecTV has about 20 million customers while Comcast, with Time Warner Cable, would have more than 30 million customers. Dish Network has about 14 million customers.

No matter how effective Verizon is at winning video market share where it has fixed network FiOS assets, the fact is that Verizon’s network footprint is too small, relative to the satellite networks to grow its business too much further.

AT&T has about 5.5 million video customers as well. One might argue that the only way either AT&T or Verizon gets significantly more video share is by buying one of the satellite providers.

To the extent that national footprint is helpful, as it has become in the mobile business, national scale arguably would be beneficial in the video business, as both DirecTV and Dish Network are able to take advantage of, in terms of marketing and to some extent in terms of appeal to advertisers.

To be sure, there are countervailing arguments. Dish Network CEO Charlie Ergen sees a dwindling future for satellite-based video service, and also for fixed network delivered linear video entertainment.

Not only does Ergen expect demand for linear video to decline, geostationary satellite networks are ill-suited for interactive services.

But, to the extent that linear video remains a key revenue driver, acquisition of Dish Network and DirecTV subscriber bases are one of the most-logical ways for AT&T and Verizon to gain scale and revenue volume in the linear video business.




Edited by Maurice Nagle

Contributing Editor

SHARE THIS ARTICLE
Related Articles

Four Reasons to Reach for the Cloud after World Earth Day

By: Special Guest    4/23/2018

The World Earth Day agenda offers a chance to flip the rationale for cloud adoption and highlight environmental benefits that the technology brings pr…

Read More

Bloomberg BETA: Models Are Key to Machine Intelligence

By: Paula Bernier    4/19/2018

James Cham, partner at seed fund Bloomberg BETA, was at Cisco Collaboration Summit today talking about the importance of models to the future of machi…

Read More

Get Smart About Influencer Attribution in a Blockchain World

By: Maurice Nagle    4/16/2018

The retail value chain is in for a blockchain-enabled overhaul, with smarter relationships, delivering enhanced transparency across an environment of …

Read More

Facebook Flip-Flopping on GDPR

By: Maurice Nagle    4/12/2018

With GDPR on the horizon, Zuckerberg in Congress testifying and Facebook users questioning loyalty, change is coming. What that change will look like,…

Read More

The Next Phase of Flash Storage and the Mid-Sized Business

By: Joanna Fanuko    4/11/2018

Organizations amass profuse amounts of data these days, ranging from website traffic metrics to online customer surveys. Collectively, AI, IoT and eve…

Read More