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Will AT&T, DirecTV Deal Cut Customers' Prices?

The AT&T-DirecTV deal could spur more offers to consolidate your home phone, Internet and TV services, but that may not mean long-term savings.
Image: File photo of a DirecTV dish is seen outside a home in the Queens borough of New York
The AT&T-DirecTV deal could spur more offers to consolidate your home phone, Internet and TV services, but that may not mean long-term savings.SHANNON STAPLETON / Reuters
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AT&T's plan to acquire DirecTV could spur more offers to consolidate your home phone, Internet and TV services, but fewer bills may not result in long-term savings.

The companies announced Sunday that telecom provider AT&T will purchase the satellite TV operator for $48.5 billion, contingent on regulatory and shareholder approval. Executives told CNBC on Sunday that the deal will help them deliver video at scale amid growing demand.

If the deal goes through, customers could see more offers encouraging them to consolidate their home services. "I certainly think bundling deals will be the first fruits of the deal," said Sam Rosen of ABI Research. In most cases, bundling shaves $5 to $10 off monthly bills compared to contracting for the same services individually, he said.

AT&T did not immediately respond to requests for comment.

Only about one-third of DirecTV customers are also AT&T customers; the rest may see more offers to get their broadband Internet and home phone service through their new telecom parent, said Kirk Parsons, senior director of telecom services at J.D. Power & Associates. "DirecTV's big doughnut hole has been not having broadband plans," he said. "This could be a good thing for their customers."

With more control over DirecTV pricing, AT&T would also have more leeway to offer better TV bundles to its existing phone and Internet customers. Currently, AT&T offers DirecTV packages starting at $29.99 per month for the first year, with a two-year contract and "qualifying AT&T service." New customers also get a reward card worth $50 to $100 for bundling high-speed Internet and DirecTV.

Customers of Verizon — which also offers service bundles including DirectTV — could see offers both to stay and to switch over to AT&T, said Todd Day, industry analyst for Frost & Sullivan. With many customers under two-year contract for the service, however, it's unclear how quickly Verizon's television offerings might change. Verizon declined to comment.

Whether consumers will bite on bundling offers is another matter. Most people still get their phone, Internet and TV service from different companies, Rosen said. "There are service differentiators that customers are aware of that lead them to choose multiple providers," he said. "It's always a choice of getting the best quality for each line of service."

City-dwellers facing the challenge of mounting a satellite dish, for example, aren't likely to find any AT&T bundle offers enticing. And although AT&T announced a commitment to expand and enhance broadband in some rural areas, some may find it still isn't an option, he said.

There's also a time limit on any good news: In the long run, consumers could see prices rise as a result of the deal, said Day. In a conference call Monday, AT&T committed to offering its broadband service at unspecified guaranteed prices for three years. Over the same period, DirecTV will offer its standalone video packages at a "consistent nationwide price."

During the call, AT&T CEO Randall Stephenson said the company would continue to offer its fiber-optic TV and broadband product U-verse. But with both DirecTV and U-verse under its umbrella, that's one less paid TV competitor in the market, Day said.