Moffett: DOJ Tried Wrong Case with AT&T/Time Warner

MoffettNathanson analyst Craig Moffett says that AT&T-Time Warner's court victory should not be seen as a green light for vertical mergers (ones combining distribution with content), particularly ones involving an ISP and a content company, say Comcast-Fox for instance. Moffett argues that the Department of Justice tried the wrong case by focusing its argument on the combination of the Turner linear networks and distributor DirecTV (owned by AT&T) and the alleged impact on Turner's independent distributors--increased consumer prices to consumers. Had DOJ instead drilled down on the potential foreclosure harm from the combination of Turner programming assets and an ISP, he suggests, the outcome could have been very different.

"The DOJ focused entirely on the risks that would arise from joint ownership of DirecTV and Turner’s cable networks (recall that they even proposed divestiture of one or the other as a preemptive remedy)," said Moffett. "And, therefore, so did Judge [Richard] Leon. Neither ever even raised the issue of whether there might be a more material competitive harm arising from the combination of Turner programming and an ISP." He said that was even more surprising given that the ruling came down the same week the FCC's network neutrality rules were rolled back--activist groups certainly suggested a combined AT&T-Time Warner was a net neutrality threat. "The theoretical harm here is obvious," he says. "A wireless or wired ISP, now unfettered by net neutrality regulations, could, in theory, advantage its own content over the content of others, either by zero rating (that is, not counting owned-and-operated content against monthly data caps), by prioritizing (the old fast lanes/slow lanes chestnut), or even by adopting a regime of content exclusivity."