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Senators Have Issues With AT&T-Time Warner Merger

12/12/2016 8:00 AM Eastern

WASHINGTON — Members of the Senate Antitrust Subcommittee from both sides of the aisle raised lots of concerns last week about the AT&T-Time Warner Inc. merger, but they won’t ultimately be deciding whether or not to approve it.

 

Most of those concerns, which came in an oversight hearing with top management of both companies, had to do with whether the combined company would have the ability or incentive to disadvantage online competition, by means including withholding content, degrading content or giving their own Web-video services an advantage through zero-rating plans.

 

Telco AT&T, with 25 million pay TV customers via its DirecTV and U-verse TV platforms, and content giant Time Warner agreed in October to merge in a deal valued at $107.8 billion.

 

AT&T CEO Randall Stephenson and Time Warner CEO Jeff Bewkes testified they would have neither the ability nor the incentive to withhold or discriminate, and argued that zero rating was one of the ways the combined company could be a disruptive force for good in a marketplace dominated by cable incumbents.

 

Senators seemed to reserve judgment on whether the combined company did indeed pose no such risk, and Republican chairman Mike Lee (R-Utah) made it clear that while the deal was a vertical one — combining distribution and content, rather than consolidating either sector — there were still competitive issues.

 

Stephenson suggested the Justice Department could take care of any of those concerns through conditions.

 

Among the key takeaways from the hearing were the pledges by both executives that CNN’s news coverage would not change in the wake of President-elect Donald Trump’s criticism of the network and his threat, as a candidate, to block the merger. An industry source speaking on background discounted that threat.

 

Stephenson was in the unusual position of pitching his company as a disruptor among incumbent powerhouses — cable operators and Web video providers — pitching the deal a way to create a stronger competitor, essentially the second shoe to the telecom’s purchase of DirecTV.

 

Buttressing that argument was billionaire and Web-video pioneer Mark Cuban.

 

While ISPs have been the FCC’s Web gatekeepers of choice, Cuban said that in an apps-driven world — one in which traditional video is on the wane — companies such as Google and Apple have been the gatekeepers.

 

“This merger is not only one of survival and opportunity, but one that is needed by consumers,” Cuban told the senators. (See Viewpoint.)

 

AT&T may or may not have to submit the deal to the FCC, but Stephenson signaled that if the telco found a way to structure the deal that avoided formal FCC review, the company would keep the agency in the loop regardless. The FCC would likely provide expertise to the Justice Department in any event, Stephenson noted.

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