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Will AT&T's buyout of DirecTV hurt consumers?

While the head of the Federal Communications Commission (FCC) is recommending the approval of AT&T's (T) $48.5 billion acquisition of DirecTV (DTV), one former member of the agency says consumers will get stuck with higher bills.

"If the history of consolidation is any guide -- and certainly I think it is -- the result seldom seems to be a reduction in what consumers pay for their telecommunications and media services," Michael Copps, a former FCC commissioner who now advises the activist group Common Cause, said.

FCC Chairman Tom Wheeler said in a statement Tuesday he would approve the deal, which would create the nation's biggest provider of cable or satellite TV, under certain conditions. The agency's four other commissioners still have to vote on the proposal.

The Department of Justice approved the transaction, saying Tuesday it does not "pose a significant risk to competition."

If the deal is approved, the number of major pay-TV operators will shrink from four to three. Already, many Americans can only get high-speed Internet service from one provider, a sore spot for consumer groups.

"If the conditions are approved by my colleagues, 12.5 million customer locations will have access to a competitive high-speed fiber connection," Wheeler said. "This additional build-out is about 10 times the size of AT&T's current fiber-to-the-premise deployment, increases the entire nation's residential fiber build by more than 40 percent, and more than triples the number of metropolitan areas AT&T has announced plans to serve."

Consumer group Public Knowledge, said in a statement that while it was pleased the FCC addressed concerns about the ability of AT&T to give its own services an unfair advantage, more work is needed to fix the lack of competition in the video and broadband markets.

The American Cable Association, which represents operators in small markets, argues consumers need protections against higher fees related to the regional sports networks (RSNs) the new company will carry.

"By charging higher prices for its RSNs to its pay-TV rivals, the new AT&T-DirecTV will not only drive up its rivals' customers' subscription fees, but it will reduce their funds available for deploying high performance broadband services in new areas," Matthew Polka, president and CEO of the trade group, said in a statement.

The ACA has long argued that rising costs for programming, particularly sports, is hurting the profitability of its members' businesses, an argument backed by veteran cable industry analyst Craig Moffett, a partner in the research firm MoffettNathanson.

"All else being equal, that will mean that even new builds of broadband will become increasingly economically challenged and therefore will become less and less likely," Moffett noted in written testimony delivered Wednesday in hearings. As a result, he said, "they will simply have to raise broadband prices."

The FCC declined to comment on this story and AT&T did not returned an emailed request for comment.

The FCC reviews mergers in the telecommunications and media sectors to see if they are in the public interest and rejected AT&T's 2011 proposal to buy T-Mobile US (TMUS) and Comcast's (CMCSA) recent bid to buy Time Warner Cable (TWC) as a result.

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