How does a combined pay TV behemoth – the largest on Planet Earth – migrate customers from a service it wants to shut down to another with higher profit margins? Are customers offered a steep discount to make the switch? Rolled over when their existing contract expires? Maybe convinced of the superiority of the new service?
Not if you are AT&T. The old Ma Bell has employed a different, more cynical strategy – by forcing U-verse customers into programming “blackouts” of their favorite local TV stations and then directing irate customers to switch to AT&T’s own DirecTV.
Since its acquisition of DirecTV in 2015, AT&T has begun the process of phasing out its U-verse offerings and pushing subscribers to sign up for the DirecTV satellite TV service. Rather than convince U-verse customers that DirecTV is a superior service – a dubious proposition, to say the least – AT&T is instead manufacturing retransmission consent disputes to deprive viewers of their favorite local broadcast TV stations.
By engaging in hardball retrans negotiations and refusing to pay market rates, AT&T can all but guarantee an impasse with a broadcaster that leaves U-verse subscribers without local programming. Customers who want their local broadcast TV must change pay-TV providers and AT&T can divert them to DirecTV, which pays lower content costs than U-verse and is therefore more profitable.
Of course, once subscribers are locked into a contract with DirecTV, they might be in for an unfortunate surprise.
DirecTV just settled a lawsuit filed by the Federal Trade Commission that accused the company of deceptive advertising practices. It seems DirecTV was luring subscribers with a discounted 12-month promotional rate while failing to disclose it required a two-year contract. Hidden in the fine print? That customers could owe up to $45 more a month in the second year of the contract. Even worse – the contract forced customers who canceled their subscription to fork over up to $480 in early termination fees.
If you do the math, AT&T’s “force customers to switch to DirecTV” strategy becomes apparent. Since the beginning of last year, AT&T has forced five retrans disruptions involving its U-verse service. Yet, prior to buying DirecTV, it had never reached an impasse with a broadcaster.
Raycom Media is the latest broadcast company to become versed in the U-verse tango. In the last two weeks, Raycom granted multiple carriage extensions to AT&T U-Verse in an effort to avoid a disruption in service for Raycom TV station viewers in 22 U.S. cities. Nonetheless, AT&T ignored Raycom’s offers, stonewalled on negotiations, and opted instead to force a programming “blackout” it hopes will result in thousands of subscribers shifting to DirecTV.
AT&T’s pattern of behavior is a far cry from the consumer benefits it promised federal regulators when it proposed its DirecTV merger. Rather, U-verse subscribers are being unfairly punished as a means to an end – the end of U-verse.