The past week has been a significant one for US mobile telecommunications. First it was reported that the Federal Communications Commission (FCC) would not oppose AT&T’s $44.5bn takeover of DirecTV. Later in the same week, Verizon announced a $4.4bn takeover of AOL. Why is this happening? One word: video.
Every operator is aware of the massive growth in video and especially mobile video. After all, they are the ones that essentially built the infrastructure for the consumption of mobile video traffic. Yet they are rarely the beneficiaries of mobile video growth. When discussing operators and mobile video, you usually hear the words “burden”, “demands” or “challenges” in the same sentence.
Verizon’s acquisition caught a lot of people off-guard. Many people may think of AOL as the owner of content properties like Huffington Post and TechCrunch. And many more people still think of them as the dial-up people. But the AOL of today is not like the AOL of five years ago. They have become so much more.
Through a variety of acquisitions, AOL (and its ONE platform) is now a firm leader in advertising tech for mobile and mobile video among others. Consumption of media is moving rapidly to mobile devices. Video is becoming the dominant form of data consumed on mobile devices. And through their acquisition, Verizon instantly becomes a leader in… mobile video advertising. It makes sense.
The AT&T acquisition has a lot of straightforward scaling benefits. By combining AT&T’s smaller U-verse with DirecTV’s 20+ million subscribers, the resulting entity will become much more powerful. It will become the United States’ second-largest pay-TV provider. That means a lot more weight in licensing deals. It also means that DirecTV’s subscribers can, theoretically, in the near future, become triple-play subscribers of TV, Internet and mobile.
But beyond that, as AT&T Chairman and CEO Randall Stephenson said on his recent investor conference “Our customers are demanding video to be delivered across any device.” And he hinted that we should “stay tuned” for further developments. Now that the long-discussed DirecTV acquisition will not be blocked by the FCC, we may well see AT&T become an OTT video player streaming to mobile devices as early as this year.
These are two very different acquisitions by the United States’ two largest wireless carriers. There are different reasons that the acquisitions make sense for both carriers. But in both instances, they represent an unwillingness to sit back and just be a “carrier”. You could argue that these two acquisitions represent the beginning of an operator fightback for revenue in mobile video. As Stephenson said, “stay tuned”.