Incumbents Closing Ranks and the Urge to Merge

[Commentary] So what does AT&T get for its 50+ billion acquisition? It secures marketing access to 20+ million additional customers, who make sizeable recurring monthly payments.

AT&T also has the privilege of selling rather than reselling direct broadcast satellite video content which presumably already competes with the company’s U-Verse wired bundle. AT&T also gets the privilege of buying into a technology that has significant, and, arguably, increasing risks.

First on average one out of every three satellite launches fail to place the bird in proper orbit. A single DBS satellite costs more than $100 million, but in this age of scale and deep pockets that looks like chump change. Once activated satellites last for about 10 years and the risk for collisions with space junk increases.

The acquisition comes across as the opposite of “if it you can’t beat ’em join ’em.” AT&T is not acquiring a maverick, start up with leading edge technology and a new business plan -- just the opposite. If you can’t beat ‘em, join ranks and hope that your combination -- like others out there -- will continue to lock content access to incumbent technologies.