Senate Judiciary Committee Examines the Competitive Impact of AT&T’s Acquisition of Time Warner

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The Senate Committee on the Judiciary’s Subcommittee on Antitrust, Competition Policy & Consumer Rights held a hearing on AT&T’s proposed acquisition of Time Warner, a deal that would combine one of the nation’s largest phone and internet providers with a media entertainment titan that among other things, owns HBO, CNN, TBS, TNT and Warner Brothers studios. A fun time was had by all.

Committee Chairman Chuck Grassley (R-IA) pointed to concerns about the a negative impact on competition and innovation. “There’s concern that a combined AT&T-Time Warner will block competitor access to popular Time Warner content. There’s concern that a combined company will give preferential treatment – for example, favorable channel placement and zero-rating pricing – to Time Warner’s premium entertainment programming to the disadvantage of other content producers, in particular small independent producers. There’s concern about AT&T-Time Warner’s ability to leverage their assets to negotiate better licensing arrangements or raise the price of their content to the detriment of other distributors. There’s concern about the merged company’s ability to employ “bullying” tactics to dictate rates and terms to other networks. There’s concern that this acquisition will concentrate too much power into one conglomerate, resulting in higher prices and fewer programming options for consumers. There’s also concern about the merger’s implications for a free and diverse press.”

In the New York Times, Cecilia Kang started her coverage saying, “When AT&T and Time Warner announced their $85.4 billion deal in October, lawmakers greeted the acquisition frostily. Now their tone is changing.” Although lawmakers said the deal merited tough scrutiny, they also questioned whether traditional ways of evaluating mergers are growing outdated as Silicon Valley companies like Facebook and Google become massive media platforms that threaten the television industry. Sen David Perdue (R-GA) said the deal would combine companies that did not directly compete against one another. “The consumer is benefited from the aggregation,” he said. “That is called capitalism.”

At the hearing, AT&T and Time Warner executives pitched a message that catered to the new administration: a populist promise of lower prices and the potential to build more wireless infrastructure through the merger. While AT&T and Time Warner are powerhouses, they presented themselves as weaker rivals to the cable industry and Silicon Valley tech companies. AT&T Chief Executive Randall Stephenson said that cable companies dominated the broadband and television market, serving high-speed internet to eight of every 10 American homes that have broadband service. To experiment with new mobile video technologies, he said, AT&T needed to have in-house content to quickly try new streaming services at a lower cost. He added that AT&T had just introduced a streaming service with 100 channels for less than most cable television packages. “It is only the beginning of what we want to bring to the marketplace to threaten cable’s entrenched and still-dominant market position,” Stephenson said. He said AT&T would give CNN editorial independence if the merger were approved. Jeff Bewkes, the chief executive of Time Warner, said, “It is not enough to deliver great content.” The companies’ competitors have multiplied, he said. Stephenson said the merger “eliminates no competitor” and that the company aims to “get the most content to the most people at the lowest prices.”

Consumer groups rejected the characterization of AT&T and Time Warner as disadvantaged rivals, saying a combined company would create a powerhouse that all cable providers and networks would have to negotiate with. Streaming providers like Sling TV and Hulu would face a major new competitor, with AT&T’s access to 110 million wireless and satellite subscribers and premium television networks under the same roof, the groups said. “If a single company is able to control so many key inputs to online video, this new market could be snuffed out,” said Gene Kimmelman, president and chief executive of Public Knowledge, a nonprofit consumer group, at the hearing. He stressed that internet companies rely on the wireless and broadband networks controlled by huge telecommunications companies like AT&T.

Mark Cuban, an internet entrepreneur and owner of the NBA’s Dallas Mavericks, who also spoke at the hearing, said the truly dominant companies in media distribution these days were Facebook, Google, Apple and Amazon. “Facebook is without question in a dominant position, if not the dominant position, for content delivery,” he said.

Antitrust enforcers in the Trump administration will ultimately decide whether to approve the deal or block it as anticompetitive. However, members of Congress can both reflect and contribute to the public mood regarding the merger of such large, high-impact businesses. The members of the Subcommittee extracted a pledge from the AT&T and Time Warner executives to treat their competitors fairly on content and distribution if their pending $85 billion merger is approved. AT&T’s Stephenson promised that the combined company would not unfairly favor Time Warner content on its distribution platforms, like DirecTV, by blocking or overcharging companies that compete with Time Warner from offering content. In turn, Time Warner Chief Executive Jeffrey Bewkes promised that his company would not inflate the price of Time Warner content for distributors that compete with AT&T.

“The reason we have these hearings is to get stuff on the record, right?” said Sen. Amy Klobuchar (D-MN), the subcommittee’s ranking member. “So they said on the record they wouldn’t discriminate. They said on the record that Time Warner wouldn’t discriminate, either, where the content went. So if that proves to be false, then you have it under oath that they said this, and then you can use that for further action.”

Senate Judiciary Committee Examines the Competitive Impact of AT&T’s Acquisition of Time Warner Lawmakers Change Their Tone on AT&T and Time Warner Deal (NY Times) Lawmakers Voice Concerns Over AT&T Deal for Time Warner (WSJ AT&T’s CEO just made an important promise to his rivals (Washington Post) AT&T, Time Warner try to sway reluctant senators (USA Today) Senators Extract Promise From AT&T, Time Warner to Be Fair to Competitors (Morning Consult) Mark Cuban tells Washington to let AT&T buy Time Warner, so it can compete with Google and Facebook (Recode) AT&T and Time Warner accidentally argue against their own merger (The Verge) AT&T-Time Warner Merger: What are the global implications? (ITU) Cinémoi's Ziman Slams White Male AT&T-Time Warner Witness Table (B&C – diversity) AT&T CEO Says $85B Time Warner Deal Will Be Tremendous for Consumers (Vice) AT&T, Time Warner Pledge Continued CNN Independence (B&C – CNN) Cuban: AT&T-TW Combo Required to Compete (Multichannel News – Cuban testimony) AT&T, TW CEOs Defend Their Merger Plans (Associated Press) AT&T touts Time Warner merger at U.S. Senate hearing (Reuters) Franken Expected to Be Loud Voice on AT&T-Time Warner Deal (Bloomberg) Consumer Groups Slam AT&T-Time Warner Deal (B&C – consumer groups) Lawmakers grill AT&T, Time Warner execs on $85B merger (The Hill) Consumer Cost Emerges As Key Issue In Grilling Of AT&T-Time Warner Merger (NPR)