On what planet is that true? There is huge amount of area ATT will never be able to offer uverse tv to, but with the merger with Directv they would be able to offer tv to tens of millions (if not hundred million or more) of more people than they do now.
Yes, they have a potential base of most of the country, but they have high penetration in some areas (like LA) and low penetration in others. Why is that? I think it is because of national pricing. Cable companies don't do national pricing. If two people who live in different parts of the country both subscribe to Comcast they probably don't pay the same, depending on their markets. One may have a couple competing cable companies plus a telco alternative like FIOS. Another may have just the one cable company in town, lots of trees everywhere making satellite a bad choice and no telco TV offering. Comcast is going to stick it to the guy with no alternative, but is forced to keep their prices competitive where they have to if they want to get customers.
What if Directv priced that way? Maybe that's why there are so many subscribers in LA - if the cable companies charge more (due to cost of living, lack of competition, whatever) but other places where the cable prices are low maybe Directv has few subscribers since they're priced way out of line with cable TV.
Directv has a fixed overhead for operating satellites which doesn't change whether they have 1 million or 100 million subscribers. Each subscriber has a fixed acquisition cost (installation, free Genie, etc.) which is pretty high (they state it is over $800) so in order to pay all those fixed costs the gross margin on the service needs to be pretty damn good. They have to pay for programming per subscriber (I assume?) and of course with more subscribers you need more CSRs etc. but those are probably pretty small compared to the monthly charges so additional customers are pretty profitable if they stick around beyond their two year commitment. So what if they lowered their prices 25% in some city where there's a lot of cable competition and pricing is low. Maybe today they have only 5% of the households in that city because their prices are out of line, but were able to jump that up to 15% with the price drop. Would that be worth it? Hell yeah, that would be hugely profitable!
Directv could have done that themselves, and they haven't, but maybe if AT&T buys them and thinks more like a cable company than a satellite company, changes like that might happen. Whether that's good or not is another matter, but it would be interesting to see. It has always mystified me why Directv and Dish do national pricing, when many industries (think airlines) spend hundreds of millions on figuring out how to maximize revenue through extreme price discrimination. It is only recently they even bothered accounting for the different cost of sports in different areas.
I'm sure some will say this would be a terrible idea, that customers will be pissed if they find out they're paying more than a guy in another city, or maybe even more than the guy across the street. But anytime you fly you can be pretty certain some people on that flight - maybe a lot of them - paid less for their ticket than you did. Maybe if Directv did this there would be some initial shock and outrage, but they'd get over it pretty quickly and it would just be something you were used to.
Edited by slice1900, 16 May 2014 - 02:22 AM.