AT&T (T) - Get Report CEO Randall Stephenson, aiming to win the hearts and minds of consumers and politicians, dropped a surprise announcement on Tuesday, revealing that its new 100-channel streaming service, DirecTV Now, will cost $35 a month and allow customers to choose their channels "a la carte."
Shares of AT&T received no bump from the announcement, dropping 16 cents to $36.70, and have slid every day since Wednesday, three days before it formally agreed to purchase Time Warner for $85.4 billion in cash and stock. Stephenson, however, hopes a consumer-friendly offering can soothe the critics of the deal who fear less choice and higher prices.
"Our intent is to bring Time Warner and AT&T together" to create a "new and different competitor," Stephenson said at a Wall Street Journal conference Tuesday in Laguna Beach, Calif. "We think this is big."
The notion of a pay-TV company connected to more than 25 million households offering an "a la carte service" comes after more than 35 years of customer complaints about having to pay for dozens of channels they never watch. Stephenson also said the service would include more than 100 channels, a potential bargain at $35 per month compared with similar services from Dish Network's (DISH) - Get Report SlingTV and Sony's (SNE) - Get Report PlayStation Vue.
DirecTV Now will launch next month, Stephenson said, affording AT&T an opportunity to extend its reach far beyond its existing U-Verse and DirecTV satellite pay-TV subscribers. Rather than being limited to areas of the country where it offers cable TV, DirecTV Now will give AT&T the opportunity to win customers nationwide. At present, it has 15 million broadband customers and 130 million wireless subscribers.
Details about DirecTV Now, a multichannel online platform, comes as consumer groups and both presidential candidates expressed reservations if not outright opposition to allowing the Department of Justice and the Federal Trade Commission to approve the merger with Time Warner. Critics fear the combined entity could make it harder or impossible for other internet-based streaming services, known in the industry as over the top, to obtain Time Warner content such as HBO, TNT or TBS.
Stephenson said that AT&T recognizes that net neutrality is the law of the land and that AT&T wouldn't seek to hamper services such as Netflix (NFLX) - Get Report from using its broadband or seek to favor HBO. "Netflix is going to be OK -- no need to protect the OTT guy anymore," he said.
Netflix CEO Reed Hastings on Monday said he wouldn't oppose the deal provided that AT&T wouldn't give HBO "unfair advantage."
In April 2015, AT&T sued the Federal Communications Commission to overturn the government's net neutrality order.