Will AT&T-Time Warner merger hurt or help consumers?
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Karen Robinson-Jacobs, Hospitality/Leisure Industry Reporter
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The marriage of Dallas-based telecom giant AT&T and Game of Thronesparent Time Warner would produce offspring that give consumers a "new golden age of television" filled with expanding choice, rapid innovation and an expansion of broadband capabilities.
Or it would usher in an era of reduced choice for all consumers, increase advertiser targeting of individual consumers and make the combined company so powerful that it could eventually raise rates with impunity.
Reaction to the proposed $108 billion merger depends a lot on which side of the screen you're on.
Even as top-level executives with AT&T and Time Warner make the rounds to build support for the deal, announced Saturday, consumer groups and technology experts are dissecting the pluses and minuses.
Both groups see past as precedent both to the good (expanded offerings followed the Comcast NBC/Universal merger) and the bad ( past AT&T mergers included broken promises).
And consumers, already vexed by AT&T's much-publicized customer service woes, are wary of adding on yet another layer.
Some tech experts said the deal raises privacy concerns, because AT&T will have all of the usage data that now flows to Time Warner, plus the ability to target consumers at home or on their mobile phones.
AT&T has said it uses aggregate data, not traceable to individual consumers. It also said that new advertising models made possible by the merger will help defray the cost of new content.
How the deal shakes out will largely be shaped in Washington, D.C.
"From a business standpoint, it's a good idea," said Harry Bims, founder of Protocomm Systems, a Menlo Park, Ca., company that provides technical expertise for digital networks.
"From a consumer choice perspective, it may be a slightly bad idea, but that depends on what happens with regulatory approvals and what regulations are put in place. We'll have to wait and see."
AT&T has more than 100 million customers who subscribe to its TV, mobile and broadband services. Time Warner reaches millions of consumers through its three divisions: HBO, home to hit shows like
Veep and
True Detective; Turner, which operates channels such as CNN and Cartoon Network; and Harry Potter's home at Warner Bros. Studios.
AT&T and Time Warner are betting at least $500 million — the minimum breakup fee — that the courtship will lead to marriage. In the future, the companies see a mega-tech combo that:
— "Ignites innovation for all viewing platforms" (read: offers more options for smartphone video viewing). "AT&T and Time Warner will begin to create innovative programming optimized for viewing on any device and launch new generations of video services that are interactive, immersive, multi-user, and integrated with user-generated content," AT&T said in one of nearly two dozen deal-related filings with the Securities and Exchange Commission.
— Spurs greater "investment in the nation's broadband infrastructure." (AT&T already has invested $150 billion since 2011 to heft up its networks and associated operations.)
— Spurs investment in the development of "ultra-fast 5G wireless networks that will one day compete head-to-head with the broadband offerings of entrenched cable companies."
In the short run, AT&T consumers would be assured that they would avoid the repetitive game of chicken that now goes on between content providers and carriers when it's contract renewal time. Tense negotiations, most often over how much the content provider wants to be paid, would be nonexistent for the Time Warner products.
"Bargaining friction over these rights has limited the scope of video innovation and perpetuated conventional distribution models that benefit incumbent cable companies," AT&T said.
Also in the short run, prices for AT&T customers could come down since the parent would no longer pay the recurring fees associated with licensing the Time Warner content, technology experts said.
But critics charge that the combined company's balance sheet, suddenly weighted down with an additional $40 billion in debt, would hamper its ability to lower rates and could actually boost them.
Stephen Johnson is a Seattle-based technology consultant who helps design software used by cable companies. He noted that when one broadcaster negotiates with another, talks are far less contentious than the coming to terms between broadcasters and distributors.
He thinks AT&T customers will benefit when it comes time to talk turkey with other content providers outside the Time Warner world.
"They can come to the table with a lot more now because they own this big studio," he said. "I think that ultimately benefits your AT&T customer."
And AT&T insists it can "accomplish all of this without harm to competition."
Critics beg to differ.
"I don't see how this actually benefits any consumer, whether they're currently AT&T subscribers or not," said Todd O'Boyle, program director with Common Cause, a public advocacy group.
"AT&T as a distributor is suddenly empowered to discriminate against rivals. Rivals' ability to get to Time Warner content would be significantly altered by this proposed combination. The diminution of competition is going to hurt all consumers."
Some technology experts and consumer groups fear a future in which AT&T could reduce access to Time Warner content — through pricing or through the actual delivery system.
AT&T chairman and chief executive Randall Stephenson has insisted that the "Number One guiding principle" of the transaction is that "Time Warner will continue to distribute [its] content widely and broadly. They've built a franchise on wide and broad distribution that's going to continue."
Ultimately, it would be up to regulators to prohibit anti-competitive practices, but critics charge that such rules are hard to enforce.
"I don't think there is any set of conditions that could make this merger tolerable to the public interests," O'Boyle said. "If you look back at the history of the concessions and the merger conditions that they come up with, it is a history of broken promises. It's really easy to promise a lot upfront and then when it becomes time to abide by those conditions, it's easy for the new firm — the bigger firm, the stronger firm — to put all of its many legal resources into finding loopholes and shortcuts to skirt the intention of those conditions."
In 2012, Comcast agreed to an $800,000 settlement with the FCC, following an investigation into whether it was meeting conditions laid out in the merger with NBC/Universal.
O'Boyle said there were other lawsuits that stemmed from that deal.
Consumer groups also noted that with the Comcast merger, the restrictions are not permanent.
"Those restrictions only last for a certain amount of time. They will expire," said Carmen Balber, executive director of Santa Monica-based Consumer Watchdog. "And when they expire, we will have a more highly consolidated market with a combined content distribution company with more control over who can see its content and at what prices.
"And then, what are we left with but a more consolidated market with fewer companies who have more control? And that's where consumers suffer."
Twitter: @krobijake
Will AT&T-Time Warner merger hurt or help consumers? | Technology | Dallas News