Regulatory Microscope Lies Ahead for AT&T and Time Warner


AT&T reached a deal to acquire Time Warner for more than $85 billion on Saturday.

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A cable and internet provider decides to buy an entertainment conglomerate.

The merger is met with skepticism by industry analysts and outrage by consumer groups, who complain that it would thwart competition, create unfair pricing and incite more media consolidation.

That was 2009, when the cable giant Comcast announced it would acquire NBC Universal.

When the next administration in Washington takes up the $85.4 billion deal between AT&T and Time Warner that was announced on Saturday evening, the Comcast acquisition will be used as the lens to examine the changing media landscape.

In the end, the Justice Department and the Federal Communications Commission approved the acquisition of NBCUniversal, requiring some small management concessions but few divestitures.

But AT&T and Time Warner will probably face a much sterner test. With a huge wireless business, too, the combination would be a new kind of media juggernaut.

Donald J. Trump has already condemned the deal. Campaigning in Gettysburg, Pa., on Saturday, Mr. Trump said he would block it if he were president, “because it’s too much concentration of power in the hands of too few.”

Hillary Clinton, meanwhile, has promised to be tough on corporate megapowers and consolidation.

Regardless of who wins next month, the AT&T acquisition of Time Warner will be among the biggest and most important regulatory cases to await the next administration.

“By standard antitrust metrics, this deal should be O.K. in Washington,” said Paul Gallant, a technology, media and telecommunications policy analyst with Cowen & Company. “But the Democratic Party is moving left, and if Clinton wins, this could become an early test for her ‘tougher on business’ rhetoric.”

AT&T will be viewed with particular scrutiny because of the company’s acquisition of DirecTV in July 2015. The deal made AT&T the largest paid-television provider in the nation, with more subscribers than Comcast. After a string of telecommunications mergers during the Obama administration, including Charter Communications’ acquisition of Time Warner Cable, which was approved this year, consumer interest groups have complained that there are fewer options for customers to choose from.

Those deals were known as “horizontal integration” because similar businesses merged. AT&T’s proposed acquisition of Time Warner, however, is considered “vertical” because the two companies largely do not compete against each other but operate on the same supply chain.

Still, regulators may look at other ways AT&T could affect the media ecosystem if the deal is completed. AT&T could make it more expensive for its competitors to gain access to Time Warner’s content or give preferential treatment to its own programming, said John Bergmayer, senior counsel at Public Knowledge, a digital rights advocacy group.

The merger would make AT&T unmatched in its size and reach to consumers through smartphones, home broadband, satellite television and a broad portfolio of cable channels and movies. For that reason, it may raise more cautionary flags than Comcast’s merger with NBCUniversal, which did not involve a wireless carrier.

Many experts in Washington still look unfavorably at the outcome from Comcast and NBCUniversal because the terms of their settlement were too difficult to enforce.

“It was an unsuccessful merger from a regulatory point of view,” said Andrew Schwartzman of the Georgetown University Law Center’s Institute for Public Representation.

In the case of Comcast, some smaller competitors, particularly programmers that compete with NBC, complained that the company did not fulfill promises it made with the approval by the Justice Department and the F.C.C.

The financial information company Bloomberg L.P. complained that Comcast had put its business news channel, which competes with CNBC, in the equivalent of the channel menu hinterlands. Comcast had promised not to discriminate against competing programmers by putting only its own channels in prime locations on the dial next to similar and popular programming. Bloomberg sued Comcast, saying that its channel was put on odd channels, far away from other business news, and that consumers had a hard time reaching it.

Consumer advocates said Comcast’s merger with NBCUniversal had not decreased prices or created greater options for consumers.

“It’s a massive deal concentrating a huge amount of media power under one corporate umbrella,” said Craig Aaron, president of the consumer advocacy group Free Press. “Consumers benefit when companies have to negotiate and fight with each other.”

In their favor, AT&T and Time Warner may avoid a review by the Federal Communications Commission because the deal may not involve the acquisition of television stations. Time Warner owns a station in Atlanta, but could sell the station to avoid a F.C.C. review, which is much broader than the mandatory antitrust review of large mergers by the Justice Department or the Federal Trade Commission.

In a blog post on Saturday, Richard Greenfield, an analyst with BTIG, noted that Time Warner recently acquired a 10 percent stake in the streaming television service Hulu, which “is one of the lightning rods that regulators have focused on as an example of Comcast’s bad behavior with NBC.”

“In our view, regulators will fear that AT&T will use its distribution footprint to favor Time Warner content vs. third parties,” Mr. Greenfield wrote.

Still, any concerns that AT&T would treat Time Warner programs like HBO’s “Game of Thrones” or cable networks like CNN favorably, or that it would withhold them from competitors, could be addressed in conditions attached to an approval. Regulators may seek commitments from AT&T and Time Warner to make content from HBO available through streaming or through apps, according to Amy Ray, an antitrust partner at Cadwalader, Wickersham & Taft.

“I don’t think they would have inked a deal this big if there wasn’t a good possibility of it going through,” Ms. Ray said. “The real question is, will it go through without any sort of remedy or commitment? I’d put that chance very low.”

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23 October 2016 | 12:06 am – Source:


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