Innovation or monopoly? Panel looks at ATT-Time Warner deal

Delia Watkins
December 8, 2016

Currently, AT&T has such a promotion with DIRECTV.

Warner Bros.is the world's largest film and television studio and the biggest producer of prime-time broadcast series, bringing in about $13 billion a year ago, according to the company's filings.

U.S. politicians have grilled chief executives of the communications giants AT&T and Time Warner about whether their plans for one of the year's biggest mergers would end up harming customers.

The AT&T-Time Warner deal is unusual, however, because President-elect Donald Trump criticized it on the campaign trail, and promised to block it.

The Justice Department will determine whether the deal is legal under antitrust law.

Billionaire entrepreneur Mark Cuban, chairman of the cable network AXS, told the hearing he favored the merger because it would create an entity sizeable enough to compete with tech industry giants who are now the "gatekeepers" for content on the internet, where users increasingly prefer to watch movies and shows over traditional cable television. Whatever happens, Wednesday's senate hearing will make clear how prepared the company executives are and what the future may hold for the AT&T-Time Warner merger.

"We need more companies with the ability to compete with Apple, Google, Microsoft, Amazon and Facebook", Cuban said.

IBEW President Lonnie Stephenson said that at a time when wages for many workers are stagnant, AT&T's "commitment to respecting its employees' right to come together on the job to promote fair wages and family-friendly benefit is the right direction for our economy and nation". Bewkes answered yes, adding that the contract provisions between distributors and content creators are usually uniform, and distributors would never accept a raw deal on Time Warner content.

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The ultimate decision over whether to green-light the mega merger lies with the Department of Justice and potentially the Federal Communications Commission, which could choose to review the deal.

Despite such commentary, which was featured in the hearing, Stephenson has marched forward, calling the $85 billion deal a form of vertical integration that may necessitate merger conditions, but shouldn't be blocked.

Blumenthal said he might agree with Trump's opposition to the deal as too much concentration.

But Grassley also notes that the rapidly changing business structure of home media may upend conventional concerns about large-scale mergers.

AT&T expects the regulatory review process to be "fairly straightforward", Stephenson said. For the time being, though, Stephenson indicated AT&T is "perfectly content" with the low margins due to the minimal capital required to launch the product. Time Warner stock was up 0.1% to 94. "I don't see the economic rationale nor do I see the customer rationale", he said. Thom Tillis said after Blumenthal's remarks, drawing laughter from his fellow Republicans.

The bipartisan grilling could be a sign that populist attitudes against big mergers may put political pressure on the deal.

Gene Kimmelman of consumer advocacy group Public Knowledge that his group estimated that cable consumers were being overcharged by "at least $45 a month" already "because there are too few players".

Last week, AT&T rolled out an internet TV package called DirecTV Now, which it thinks will make it a real competitor to cable TV eventually.

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