Having dropped $48 billion and change last year to acquire DirecTV, AT&T is now earmarking tens of billions more over the next 3 to 5 years to acquire media companies, according to a report this week by Bloomberg. Citing “people familiar with the plans,” the report said AT&T is targeting acquisitions ranging from $2 billion to $50 billion, with an eye toward “owning some of the content it distributes.”
It likely won’t be distributing it through DirecTV, however, at least not via satellite. According to an earlier Bloomberg report, AT&T will begin phasing out DirecTV’s 
satellite platform within the same 3 to 5-year window, with any eye toward making internet streaming its primary TV platform by 2020. The company has lately been lining up carriage deals ahead of its planned launch of its DirecTV Now over-the-top service later this year. And it has been aggressively steering its wireless customers toward DirecTV by bundling unlimited wireless data plans with a DirecTV subscription, which so far has been taken up by some 5 million of its wireless subscribers.
DirecTV Now will also be “zero-rated” for AT&T wireless customers, meaning it won’t count against their monthly data cap.
Assuming the reports are accurate, the plans put AT&T on the same path as rival Verizon, which launched its wireless streaming video service Go90 late last year. While Go90 hasn’t yet gained the traction Verizon probably hoped for, the telco has been building out its content creation capabilities. Last year it acquired AOL and was recently the winning bidder for Yahoo, although that deal could yet fall through in the wake of new revelations about Yahoo’s massive security breach.
Like AT&T, Verizon has also be slowing phasing out its fixed-line FiOS TV service as its video strategy becomes increasingly wireless-focused.
Underlying all those moves is the continued development of 5G wireless technology, which both Verizon and AT&T have recently begun field-testing. 5G promises to deliver wireless broadband speeds 10 to 100-times faster than today’s 4G technology. Not only will that greatly improve the mobile video experience, it will make wireless broadband a viable competitor to fixed-line pipes for delivering multichannel video service to the home.
Clearly, both AT&T and Verizon see the potential to establish nationwide, in-home footprints in broadband and video delivery by leveraging 5G technology. They have also gotten a major boost for those ambitions from the Federal Communications Commission, which exempted wireless services from key parts of its net neutrality order and has so far permitted wireless providers to offer zero-rated services, including their own, proprietary digital content services.
Those decisions were clearly aimed at fostering competition to fixed-line broadband and to incumbent multichannel video programming distributors.
FCC chairman Tom Wheeler, in fact, is seeking literally to evict cable broadband providers from their privileged position on the TV set-top by trying to force though new rules to separate pay-TV service from service-provider installed set-top boxes.
All of that bodes well for Verizon and AT&T, along with Sprint and T-Mobile, in the home. But the wireless giants are clearly wary of simply stepping into the shoes of fixed-line cable providers with respect to the content they deliver, which is where Verizon and AT&T’s content ambitions come in.
Traditional MVPDs have seen their margins eroded by ever-increasing carriage and retransmission fees demanded by content owners. Given the significant capital investments they face in upgrading their networks to 5G, the wireless companies are obviously keen to maintain control over their own margins. Becoming content owners in their own right could buy them both leverage with the media companies and strategic options in developing their video strategies that could help them preserve those margins.
Wireless video to the home may not stay restricted to the current, big four wireless service providers, however. The larger cable broadband providers like Comcast and Charter/Time Warner Cable will have to respond should AT&T and Verizon make significant inroads into the living room. Both Comcast and Liberty Spectrum, a subsidiary of cable network owner Liberty Global, are on the list of bidders in the FCC’s upcoming spectrum auction intended to increase the amount of bandwidth available for wireless broadband services. It’s unlikely either is looking to build out its own 5G wireless network, but controlling valuable spectrum could position them to partner on favorable terms with existing wireless providers to build out their own wireless video capability. Even an outright bid by Comcast for Sprint or T-Mobile isn’t inconceivable.
The air war for video supremacy is likely to be a multi-sided affair.