AT&T's DirecTV Offerings at a Crossroads Between FCC, Trump

The FCC told AT&T (T) recently that the company's policy of exempting videos by its subsidiary DirectTV from AT&T's mobile data caps could be violating net neutrality rules, Ars Technica reported.

The Dallas-based telecom company charges other content providers if they wish to be a part of its "Sponsored Data" program and exempt from data caps, but doesn't charge its own affiliate, according to Business Insider. This practice of allowing customers to use certain applications or view specified videos without charging data, called zero-rating, could be hindering competition and "may harm the open Internet, such as preferring [its] own or affiliated content [and] demanding fees from edge providers," the FCC said in its letter, citing the Open Internet Order.

The FCC is challenging one of AT&T's main reasons for acquiring DirecTV in the first place: being able to provide bundles of products to its customers without additional costs.

AT&T CEO Randall Stephenson said in 2014 that the deal with DirecTV provided "a unique opportunity that will redefine the video entertainment industry and create a company able to offer new bundles and deliver content to consumers across multiple screens - mobile decides, TVs, laptops, cars and even airplanes."

The company might also be looking to offer customers similar data deals with content from media and entertainment company Time Warner (TWX) , which AT&T agreed to acquire for $85.4 billion in October, said Eric Jhonsa, TheStreet's technology reporter.

"One big question, of course, is whether the FCC's stance will stay the same after [President-elect Donald] Trump (a net neutrality opponent) takes office," Jhonsa noted.

Shortly after President Obama began pushing more strongly for net neutrality rules in late 2014, Trump criticized the move by saying it was "another top-down power grab," and calling it an "attack on the Internet."

Obama's attack on the internet is another top down power grab. Net neutrality is the Fairness Doctrine. Will target conservative media.

— Donald J. Trump (@realDonaldTrump) November 12, 2014

Trump's victory in the 2016 presidential election could lead to a massive roll-back in net neutrality regulations, according to the Verge.

Other companies in the industry agree that net neutrality's days could be numbered. Dish Network (DISH) CEO Charlie Ergen said in the company's third-quarter earnings call that he expects the regulations will get "another look" under a Trump presidency.

"You may see net neutrality be challenged or weakened going forward," he said. "It is certainly possible that, with the election and with the leadership in Congress, that all of net neutrality might blow up."

A challenge to net neutrality rules could greatly benefit AT&T as it looks to expand its free, zero-rated offerings for consumers with deals like its acquisition of Time Warner.

But Trump could also cripple that proposed merger. In October, Trump said that he would look to block AT&T's deal with Time Warner because the transaction would put "too much concentration of power in the hands of the few."

So while AT&T could be able to cut more data-deals and offer zero-rated content to users in the future, it might not have an expanded arsenal of media from Time Warner under its belt to offer costumers.

In the meantime, however, AT&T said that it is looking to retain the benefits such as zero-rating that made a deal with DirecTV so attractive in the first place. "We hope the FCC will consider the enormous value consumers find in obtaining free data or free streaming where someone else is footing the bill for their data," said Bob Quinn, AT&T's senior VP of external and legislative affairs.

"We welcome any video provider that wishes to sponsor its content in the same 'data free' way for AT&T mobility customers and we'll do so on equal terms at our lowest wholesale rates," Quinn added. "Saving consumers money is something we all should support."

The smartest move for AT&T, in terms of net neutrality, could simply be to sit back and wait for Trump, according to the Verge.

Verizon (VZ) will likely also keep a close eye on the FCC's inquiry into AT&T's zero-rating of DirecTV offerings. The telecom provider has its own streaming application, go90, through which it began providing free sponsored video to users earlier this year.

AT&T is a holding in David Peltier's Dividend Stock Advisor portfolio.

More from Stocks

North Korea, Apple, GPDR and Gap - 5 Things You Must Know

North Korea, Apple, GPDR and Gap - 5 Things You Must Know

One Thing to Consider Over Memorial Day Weekend: Are Stocks About to Collapse?

One Thing to Consider Over Memorial Day Weekend: Are Stocks About to Collapse?

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Inside Carnival's Mind Blowing New Horizon Cruise Ship (Video)

Complying With GDPR Could Be Costly for Facebook, Google and Other Tech Giants

Complying With GDPR Could Be Costly for Facebook, Google and Other Tech Giants

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)

Market Can't Handle the Wild Ride: Cramer's 'Mad Money' Recap (Thursday 5/24/18)