A media giant in the balance: AT&T antitrust trial kicks off
A media giant in the balance: AT&T antitrust trial
kicks off
By MAE ANDERSON Associated Press • March 16, 2018
NEW YORK (AP) — On Monday, AT&T squares off against
the federal government in a trial that could shape how you get — and how much
you pay for — streaming TV and movies.
AT&T says it needs to gobble up Time Warner if it's
to have a chance against the likes of Amazon, Netflix and Google in the rapidly
evolving world of video entertainment.
The Justice Department's antitrust lawyers say that if
AT&T and Time Warner are allowed to combine, consumers will end up paying
more to watch their favorite shows, whether on a TV screen, smartphone or
tablet.
"On one hand, the government is saying this is the
Old World and AT&T Time Warner is saying this is the New World," said
Larry Downes, senior industry and innovation fellow at Georgetown University.
"They're arguing completely different views of how the content industries
look right now, let alone in the future."
In October 2016, AT&T offered to buy Time Warner for
$86 billion. Dallas-based AT&T Inc. provides wireless, broadband and
DirecTV satellite services via phone and TV. New York-headquartered Time Warner
owns the HBO, TNT, TBS and CNN networks and sports programing including Major
League Baseball's playoffs and the NCAA's March Madness basketball tournament.
The government sued to block the deal this past November.
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AT&T'S CASE
Almost 60 percent of Americans still get TV primarily
from traditional cable services, according to a Pew Research Center report. But
that is starkly divided by age. About 61 percent of people aged 18 to 29
primarily use streaming services — compared with 10 percent of people aged 50
to 64.
AT&T says the merger is necessary to compete as more
people use streaming services like Netflix, Amazon and others. It denies the
government's assertion that the merger will limit choice and lead to higher
prices for consumers.
"Blocking the transaction would deny consumers these
benefits and shield large, vertically integrated firms such as Comcast/NBCU,
Netflix, Google, Amazon, and Facebook from new competition on their own
turf," the company wrote in its pre-trial brief.
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THE GOVERNMENT'S CASE
The government brushes off the argument that the proposed
purchase is about offering consumers more choice. Instead, it says, the deal
will lead to less competition and innovation while bringing higher prices for
consumers, as AT&T could withhold Time Warner programming from other
distributors or offer it more cheaply only on its own network.
The Justice Department is similarly dismissive of the
notion that the mega-merger could promote competition to big internet players such
as Google and Netflix, noting that most people still watch TV via traditional
cable boxes.
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THE OUTCOME
"The real fundamental thing this trial will decide
is how much room does the media industry have to use scale to combat the
internet giants that are eating their lunch right now," said B. Riley FBR
analyst Barton Crockett.
If the judge blocks the deal, a chill over media
deal-making is likely. Big internet players like Amazon or Google could decide
to keep building up their own content offerings rather than growing them by
acquisitions.
But if the court lets the deal go through, it could
easily spur a wave of similar deals as other distributors — think major cable,
satellite and phone companies — bulk up with entertainment purchases in order to
compete against rivals born on the internet.
A middle-ground compromise is also possible if AT&T
loses this round. The company could agree to sell off some businesses or comply
with other restrictions in order to win approval for the merger.
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