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How The Proposed AT&T/DirecTV Merger Might Affect Consumers

Less competition may, once again, mean fewer choices.

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This week, AT&T announced plans to buy DirecTV for $48.5 billion. If federal regulators approve the deal, it could take up to a year before the merger is complete. 

Conventional wisdom says consumers usually don’t come out ahead in deals like this.

“When you have fewer players in the marketplace, you have fewer choices,” said Partha Krishnamurthy, a marketing professor at the University of Houston’s Bauer College of Business. 

Krishnamurthy says if the AT&T/DirecTV merger goes through, the new company will likely standardize its service bundles. 

“As a result, consumers have to tailor their preferences to the market, rather than the other way around,” Krishnamurthy said.

However, there’s also the theoretical possibility that consumers might benefit if the two companies become more a more efficient single entity.

“Therefore, the costs of offering content becomes lower. And economies of scale also drive down costs.  And, therefore, the cost advantages are passed onto the consumers, and consumers may see lower prices,” Krishnamurthy said.

But Krishnamurthy says what’s more likely to happen is that lower cost going toward the company’s bottom line, and to shareholders. If regulators approve the merger, the companies say they will keep offering DirecTV and AT&T internet as stand-alone services at nationwide prices for at least three years.