For all practical reasons, the claim that AT&T made to a federal judge that its merger with Time Warner could result in lower prices for DirecTV customers was preposterous.
How could it possibly be true?
Dallas-based AT&T was arguing its case for government approval of its $100 billion-plus purchase of Time Warner. When the merger was approved a year ago, AT&T wasted no time and raised its DirecTV price $5 a month. Competitors YouTube TV and Sling did the same.
Then again, in March, AT&T announced a $10 increase for DirecTV Now.
After the merger, AT&T was said to have the largest debt load of any non-financial public company: $180 billion. Of that, $40 billion came from the Time Warner deal.
Not to worry. AT&T has a plan to pay down debt. And it’s working.
Raise prices, sell off assets, reconfigure its workforce.
‘Pay down debt’
By the end of this year, AT&T says it plans to pay off about three-quarters of the $40 billion borrowed to buy Time Warner, owner of HBO, CNN and Warner Brothers, among other properties.
Chief Executive Officer Randall Stephenson has said, “We are moving aggressively to drive cash flow and pay down debt.”
Who is better at driving cash flow than AT&T? One reader suggested I start calling the company AT$T.
The company told stock analysts that more cash would flow when “discount” contracts expire and the company can raise prices on existing customers.
This is the economic model for most media technologies, including newspapers, cable and satellite TV, Internet and satellite radio. Sign up for a discount price, but woe to the customer who forgets the contract’s expiration date. That’s when prices jump.
It happened to me last week. I forgot to call SiriusXM when my “discount” expired, so for a few days, my satellite radio cost doubled.
This is the economic model that electricity companies use, too.
Spectrum price increases
One of AT$T’s chief competitors, Spectrum, raises its rates, too.
But unlike AT$T, which declined to provide The Watchdog with a list of fees that increased, Spectrum didn’t hesitate to turn over such a list.
Late last year, Spectrum (the old Charter Communications) raised its broadcast surcharge fee by between $1-$2 a month and its receiver fee by 50 cents.
Internet fees went up either $1 or $5, depending on the type of service.
The company told me that the increases only take effect when a promotional discount period ends.
Spectrum doesn’t charge a modem fee, and the company also doesn’t penalize customers with mandatory contracts and early termination fees.
Changing the terms
AT$T wouldn’t release its list of price increases to me, and the company wouldn’t tell me why.
So The Watchdog must depend on field reports from readers.
Here’s what you tell me:
“Got a bill from AT&T doubling our Internet from $52 a month to $115,” Dr. Linda Hughes of Dallas told me last week. “The phone rep said the prior data was unlimited, and to keep the old $52 rate, it will now have a data cap.”
I heard from others who complained of this service change they did not seek.
AT&T spokesman Dale Ingram told me, “These customers [who accepted the higher cost] are also now receiving more data. As always, if they are interested in changing to a different plan, they can contact us at any time.”
Another way AT$T raised customers’ costs:
The company announced on a back page of its November bill and also on its website that beginning in January of this year, if TV, Internet or phone customers cancel service any other day than the final day of the billing cycle, the company will no longer pro-rate the charge for days not used. No more refunds, as was past practice.
Another increase readers told me about: Last year, Internet prices jumped $3 a month.
In addition, The Watchdog previously reported that AT$T raised its “administrative fee” on wireless customers from 76 cents a month to $1.99. Competitor Sprint raised its fee to $2.50.
‘Bunch of telephone guys’
Watching the transformation of AT&T — one stock analyst called it “a bunch of telephone guys running a media business” — is fascinating.
Aside from price hikes, a most painful part to watch is the potential loss of jobs. Don’t forget that when Stephenson supported the federal corporate tax cut, he said new jobs would be created.
Last month, the union representing AT$T workers announced the company is shuffling more than 1,800 jobs in 23 states. The company says it is giving workers an option to relocate and keep their jobs.
Four hundred of those jobs are said to be in Texas. Many of them are installers and repair techs.
The union has criticized AT$T for giving “hefty pay increases to top executives.”
That got me curious.
In a 2019 proxy statement, AT$T reported that it gave “merger completion bonuses” between $2 million and $5 million each to several top executives.
Bottom line: When a bill goes up, contact the company to learn more. Ask if a better deal is available. Often, there is. Doesn’t hurt to ask.
Keep a notation on your calendar when discount contracts expire. Shop around before that date.
Customer costs will continue to rise. Expect it and develop personal strategies (such as calling the company and pretending to want to cancel service).
When CEO Stephenson spoke recently in Washington, D.C., he was asked whether the new 5G networks would mean cheaper cellphone bills for all.
“I hope not,” Stephenson replied.
Give him credit for an honest answer.