FCC set to approve AT&T-DirecTV deal

AT&T's $48.5 billion deal to buy DirecTV is nearing approval by regulators.

FCC Chairman Tom Wheeler said Tuesday he has circulated to his fellow FCC commissioners the agency's proposed order approving the acquisition, which would create one of the largest U.S. pay-TV providers. AT&T and DirecTV will have to agree to some conditions for the final approval, he said.

In May 2014, AT&T announced its plans to buy DirecTV, a move to expand its television service presence nationally and enhance its buying power vs. TV networks that are demanding higher fees for their programs. Once the merger is complete, AT&T would serve about 26 million TV customers, including about 6 million TV customers who now subscribe to AT&T’s U-Verse service and DirecTV’s 20 million satellite TV service.

“An order recommending that the AT&T/DirecTV transaction be approved with conditions has circulated to the commissioners," Wheeler said in a statement.

The Department of Justice’s antitrust division also said Tuesday it will not block the deal and closed its investigation. “After an extensive investigation, we concluded ... (the deal) does not pose a significant risk to competition,” Assistant Attorney General Bill Baer of the antitrust division said in a statement.

As a condition of the FCC's approval, AT&T will have to expand its "competitive high-speed fiber connection" to 12.5 million customer locations. It would increase "the entire nation’s residential fiber build by more than 40%," he said.

To prevent AT&T from discriminating against other online video providers, AT&T will not be permitted to exclude its own or affiliated video services and content from monthly data caps it imposes on its broadband Internet customers. The premise of the condition is that customers, when given a choice, would theoretically opt for a video streaming option that is not subject to a monthly data cap.

The post-merger AT&T will also be required to submit to the FCC all agreements AT&T has with its "interconnection" partners, which are companies that help transmit data from content owners to AT&T's network. Consumer activists have called for more transparency regarding their practices to avoid deliberate slowing of data transmission and discrimination against content providers. AT&T also must report to the FCC regularly on its network performance.

“Importantly, we will require an independent officer to help ensure compliance with these and other proposed conditions," Wheeler said. "These strong measures will protect consumers, expand high-speed broadband availability and increase competition.”

For months, analysts have speculated that federal regulators would approve the deal since the companies largely avoid competing directly in the U.S., except for the areas served by U-Verse. DirecTV, based in El Segundo, Calif., also doesn’t directly offer Internet packages, making the merger more palatable to regulators.

AT&T’s desire to merge with DirecTV isn’t simply about finding more TV customers. Given DirecTV's capability to deliver TV services nationwide, AT&T can sell more TV-Internet-phone packaged bundles after the merger, including possibly offering Internet services to rural customers using its wireless technology. AT&T is the nation's second largest wireless carrier.

The relatively smooth approval process so far is in direct contrast with what Comcast encountered when its bid to buy Time Warner Cable for $45 billion was quashed by regulators in April. In that deal, regulators worried that the combination of Comcast and TWC would be too large and control more than half of the U.S. Internet market.

With the chairman on board, the deal “will pass,” said Roger Entner, analyst at Recon Analytics. And considering the conditions of the deal, “We could totally see this unanimously approved because there is something in it for everybody.”

Republican commissioners Ajit Pai and Michael O’Rielly would likely favor the merger as good for business. And the condition that AT&T increase its buildout “is significant. That’s huge,” Entner said.

Democratic commissioners Mignon Clyburn and Jessica Rosenworcel will likely favor the condition that AT&T must make regular reports about network performance and submit details of any interconnection agreements it makes with other networks. “It will build on the Open Internet order,” Entner said. “That is something I don’t think we’ve seen before.”

What’s unknown is whether AT&T will continue its participation in the suit challenging the FCC’s open Internet rules, he said.

"We look forward to gaining the approval of the Federal Communications Commission so we can quickly begin providing consumers with the benefits of this combination," AT&T said in a statement.

Contributing: Mike Snider

Follow USA TODAY media reporter Roger Yu on Twitter: @RogerYu_