White House Won't Share Data On Whether It Interfered In AT&T Merger Review

from the something-fishy dept

The late 2017 DOJ announcement that it would be suing to stop AT&T's $86 billion merger with Time Warner turned more than a few heads. While the DOJ insisted that the move was driven entirely by an interest in protecting consumers, the decision was utterly discordant with the Trump administration's often facts-optional assault on consumer protections that have bipartisan support, ranging from net neutrality to basic environmental protections. And the DOJ's sudden concern about the impact of media consolidation was in stark contrast to Trump's FCC, where demolishing decades-old media consolidation rules has been a top priority.

At the time of the lawsuit, many wondered if some other motivations were really at play. After all, Rupert Murdoch had been pushing Trump for more than a year to scuttle the deal for anti-competitive reasons. Time Warner rejected a News Corp. acquisition offer in 2014, and more recently AT&T rebuffed the company's attempt to buy CNN... twice. Time Warner employees quoted at the time believed Murdoch was the driving motivation for the political pressure to quash the deal:

"According to executives I spoke with, the theory is that Murdoch privately encouraged Trump to scuttle the deal as revenge for Time Warner rejecting Murdoch’s $80 billion takeover offer in 2014. “A direct competitor, who was spurned from buying us, perhaps is trying to influence the judicial process? That’s corruption on top of corruption,” one Time Warner executive told me."

One obvious theory is that Murdoch convinced Trump to scuttle the deal as a competitive favor, perhaps with an eye on using the deal to force AT&T to divest CNN to Murdoch as a merger condition. This could have theoretically played well within Trumpland given Trump's personal disdain for critical CNN coverage, something that wouldn't be a problem under Murdoch control. Proving that of course is something else entirely, since it's unlikely that, were it true, anybody involved would put such an arrangement in writing.

Fast forward to last month, when a New Yorker piece on the Trump White House's close ties to News Corporation included this notable but overlooked bit:

"...in the late summer of 2017, a few months before the Justice Department filed suit, Trump ordered Gary Cohn, then the director of the National Economic Council, to pressure the Justice Department to intervene. According to a well-informed source, Trump called Cohn into the Oval Office along with John Kelly, who had just become the chief of staff, and said in exasperation to Kelly, “I’ve been telling Cohn to get this lawsuit filed and nothing’s happened! I’ve mentioned it fifty times. And nothing’s happened. I want to make sure it’s filed. I want that deal blocked!”

That prompted House Judiciary Committee Chairman Jerrold Nadler and Representative David Cicilline to demand the White House turn over any correspondence that could help clear things up. But this week, the White House refused, insisting that all correspondence with advisors was protected:

"In a letter dated Monday and released on Tuesday by Cicilline, White House counsel Pat Cipollone declined to release any documents, saying he would not provide “protected communications between the president and his senior advisers that are the very core of the executive branch’s confidentiality interests."

Cipollone added that the Justice Department would be responding “in due course.”

Again, it remains entirely possible that Trump simply wanted the deal spiked out of spite for CNN. But Murdoch's involvement here would explain a lot. The Trump DOJ of course proceeded to do a face plant at trial thanks in part to a Luddite Judge, but also thanks to the DOJ lawyers' failure to mention net neutrality once at trial. It was a rather important contextual omission given AT&T's plans to use both its ownership of "must have" media (like HBO), and its domination of broadband networks anti-competitively. Was the DOJ just clueless or did it just not want to highlight the perils of the Trump FCC killing net neutrality?

It's certainly not out of the realm of possibility that the DOJ tried to stop the deal without any external motivation, but it would certainly be nice to see more data clearing that up one way or another.

Filed Under: antitrust, doj, donald trump, merger
Companies: at&t, cnn, time warner

Report Claims Trump Pushed For AT&T Time Warner DOJ Lawsuit To Hurt CNN, Help Rupert Murdoch

from the old-boys-club dept

The late 2017 DOJ announcement that it would be suing to stop AT&T's $86 billion merger with Time Warner turned more than a few heads. While the DOJ insisted that the move was driven entirely by an interest in protecting consumers, the decision was utterly discordant with the Trump administration's often facts-optional assault on consumer protections with bipartisan support, ranging from net neutrality to basic environmental protections. And the DOJ's sudden concern about the impact of media consolidation was in stark contrast to Trump's FCC, where demolishing decades-old media consolidation rules has been a top priority.

At the time of the lawsuit, many wondered if some other motivations were really at play. After all, Rupert Murdoch had been pushing Trump for more than a year to scuttle the deal for anti-competitive reasons. Time Warner rejected a News Corp. acquisition offer in 2014, and more recently AT&T rebuffed the company's attempt to buy CNN... twice. Time Warner employees quoted at the time believed Murdoch was the driving motivation for the political pressure to quash the deal:

"According to executives I spoke with, the theory is that Murdoch privately encouraged Trump to scuttle the deal as revenge for Time Warner rejecting Murdoch’s $80 billion takeover offer in 2014. “A direct competitor, who was spurned from buying us, perhaps is trying to influence the judicial process? That’s corruption on top of corruption,” one Time Warner executive told me."

No hard evidence has proven any such connection, though if it were true, it's hard to think anybody involved in such an effort would put of of it in writing.

Another unproven theory generally gained more widespread public acceptance: that Trump had pressured the DOJ to intervene in the deal because of Time Warner-owned CNN's critical coverage of Trump. That obviously raised a lot of First Amendment questions about whether the President was pressing a government agency to help hamstring or otherwise silence a critic.

Trump and the DOJ repeatedly stated that Trump played no role in the the pressure for the suit. And Trump himself repeatedly stated he was "not going to get involved" in the case. Yet a New Yorker piece this week quotes sources who say that promise was never actually adhered to:

"...in the late summer of 2017, a few months before the Justice Department filed suit, Trump ordered Gary Cohn, then the director of the National Economic Council, to pressure the Justice Department to intervene. According to a well-informed source, Trump called Cohn into the Oval Office along with John Kelly, who had just become the chief of staff, and said in exasperation to Kelly, “I’ve been telling Cohn to get this lawsuit filed and nothing’s happened! I’ve mentioned it fifty times. And nothing’s happened. I want to make sure it’s filed. I want that deal blocked!"

Cohn, a former president of Goldman Sachs, evidently understood that it would be highly improper for a President to use the Justice Department to undermine two of the most powerful companies in the country as punishment for unfavorable news coverage, and as a reward for a competing news organization that boosted him. According to the source, as Cohn walked out of the meeting he told Kelly, “Don’t you fucking dare call the Justice Department. We are not going to do business that way."

Whether that was the end of it isn't clear. I'll note that many consumer advocates I've spoken to over the last few years believe that the DOJ under Makan Delrahim genuinely believed it was doing the right thing in challenging the suit. That of course doesn't mean Trump and Murdoch didn't try hard all the same. The piece also quotes former government insiders like Blair Levin, who ponders whether Murdoch was an architect of Trump's ire toward the deal:

"Blair Levin, the former F.C.C. official, told me, “There may be innocent explanations.” But, he adds, “Trump famously said you’re going to get sick and tired of winning, and that may not be true for the rest of America, but it sure is true of Murdoch.” He says of Murdoch, “He’s an incredibly cunning political player. He leaves no fingerprints. He’s been in the game of influencing government behavior to his benefit longer than most of us have been alive."

Of course hunches, theories, and anonymous sources aren't proof. And it remains possible that the DOJ under Makan Delrahim was just suddenly and genuinely concerned about vertical integration. Still, that flies in the face of everything the Trump administration (and particularly his friend Ajit Pai at the FCC) has stood for as they've worked tirelessly to make it easier for giant companies and broadcasters to merge. And it seems entirely possible that having been rebuffed by AT&T twice, Murdoch hoped the DOJ would win its case and force AT&T to sell off CNN to News Corporation. All under the guise of consumer protection.

If this all really was Murdoch gamesmanship, it ended in a remarkable face plant. The DOJ not only lost its initial case challenging the merger, it recently lost on appeal. In part because decades of lobbying have weakened antitrust, making it harder than ever for DOJ lawyers to make even the most obvious of points (in this case that AT&T would quickly raise its competitors prices for must have content, something that occurred before the ink deal was even dry).

The DOJ also failed because it refused to draw attention to net neutrality. The elimination of net neutrality by the Trump FCC opened the door wide to AT&T abusing its role as network operator to hamstring its competitors, most notably by only applying usage caps and overage fees on users that use competing streaming services. But the DOJ didn't mention net neutrality once during the trial, likely in part because it would have only highlighted the FCC's culpability in making this megamerger even more problematic than it already was.

Congress is still investigating whether politics and personal gain played a starring role in the Trump administration's sudden, uncharacteristic concern about monopoly power. One gets the sneaking suspicion there will be more details forthcoming.

Filed Under: antitrust, doj, donald trump, gary cohn, john kelly, mergers, rupert murdoch
Companies: at&t, cnn, fox, time warner

AT&T Begins Trying To Screw Up HBO In Earnest

from the ill-communication dept

If you haven't noticed by now, big telecom companies aren't particularly good at wandering outside of their core competencies. They've been government-pampered monopolies so long, innovation, creativity, and competition are concepts that are utterly foreign to their underlying genetics.

Nowhere has that been more apparent than big telecom's attempt to pivot to streaming and online advertising. Verizon's first foray into media, you'll recall, was a short-lived "tech news" website called Sugarstring, which was quickly shuttered after the telco banned its reporters from discussing subjects like net neutrality or government surveillance. That was followed by a botched joint venture with RedBox. And Verizon's failed Go90 and Oath efforts, which involved mashing together two failed nineties brands (AOL & Yahoo), then pretending that would be enough to do serious battle in the space.

AT&T is now following closely in Verizon's footsteps in the wake of its $86 billion merger with Time Warner (and HBO). The company this week made more than a few headlines when news broke that longtime HBO CEO Richard Plepler, responsible for the lion's share of HBO's success over the last 29 years, would be stepping down. The reason? While most news outlets beat around the bush, it's because he had a hard time getting along with hard-headed AT&T executives:

According to people familiar with the matter, this is an issue of autonomy. Plepler wanted to run HBO, and new WarnerMedia CEO John Stankey, an AT&T veteran, was effectively running HBO. Plepler had ideas about technology and international expansion that didn't jibe with Stankey's vision, according to a person familiar with the matter. The two are also "different people" and didn't have the closest relationship, another person said. So after six years of running HBO autonomously, Plepler told Stankey earlier this month he wanted to leave, two of the people said.

If you've been watching this saga unfold, that shouldn't be surprising. Hints of trouble in the new union emerged last summer during an all hands on deck meeting, where AT&T executives effectively told HBO executives they should stop focusing on this whole quality thing, and begin thinking about quantity and user data monetization:

(AT&T's John) Stankey described a future in which HBO would substantially increase its subscriber base and the number of hours that viewers spend watching its shows. To pull it off, the network will have to come up with more content, transforming itself from a boutique operation, with a focus on its signature Sunday night lineup, into something bigger and broader.

“I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”

Except creatives do their best work with a healthy degree of autonomy from left-brained bean counters. They don't want the god-damned phone company, for which creativity and innovation is an foreign construct, meddling too heavily in their production decisions. And not too surprisingly, a number of HBO and Time Warner employees have groused to Recode's Peter Kafka that AT&T doesn't really have any idea what they're doing (a point kind of downplayed in his piece):

More recently, when I called an HBO source to get their perspective on AT&T’s plans for WarnerMedia, that person described the plans as “inchoate,” an adjective that has rattled in my head ever since. If they’re willing to say that to a reporter, imagine how they really feel.

I've studied AT&T for twenty years of my adult life. This is a company whose leadership is really very good at a long list of things. They're good at running networks (usually), lobbying the government to hamstring competition, and finding creative ways to rip off its own customers, taxpayers, and even the disabled. What they're not so good at is creativity, innovation, and actual competition, since their near-total domination over state and federal regulators--and the lack of competition in their broadband businesses--means those particular attributes have rarely been exercised.

Like Verizon, AT&T has spent the better part of the last two decades getting millions in taxpayer subsidies for fiber networks that were never fully deployed. Also like Verizon, AT&T executives have a bone-grafted jealousy of Silicon Valley's domination of online advertising and video. But both companies have no earthly idea how to get there without cheating. As a result, their efforts quite often wind up looking like a doddering grandpa who is simply trying too hard to fit in:

AT&T first thought it would be a good idea to pay $67 billion for satellite TV provider DirecTV on the eve of the cord-cutting revolution, seemingly oblivious to the fact that satellite TV was just about to become irrelevant. That fact was quickly made obvious by the massive video subscriber losses AT&T and DirecTV have witnessed as users quickly cut the cord for streaming alternatives. While the deal's initial subscriber growth provided some benefit in terms of greater leverage in programming negotiations, they've been bleeding subscribers ever since. It was the first big hint that AT&T didn't actually know what it was doing.

AT&T then spent another $86 billion to acquire Time Warner, hoping that control over this must-have content would somehow magically cement its supremacy in video in concert with the DirecTV deal. But the mammoth debt from both mergers quickly drove AT&T toward nickel-and-diming both customers and competitors alike in a bid to get its financial head above water. This resulted in competitors like Dish dropping HBO from their lineups entirely due to cost, and even its newfound streaming customers have been fleeing for the exits in record numbers due to price hikes.

A lot of AT&T's thinking is typical of big telecom, where growth for growth's sake is encouraged and executives think you can merge your way to success. And while that might work in the competitively-addled broadband sector, the tight-margin, ultra-competitive streaming space is an entirely different animal. AT&T allegedly now wants to fuse HBO with Turner Media with an eye on churning out shorter-form, quickly-monetizable schlock at scale. It's the precise opposite of why HBO, one of several companies they just spent billions on, has long been so successful.

AT&T is a company for which ethics, quality, and creativity are alien phrenology, and if you've spent more than five minutes watching AT&T do business, it's apparent in everything it touches. Plepler smelled the odor on the wind and got out while the getting was good. Other talent is going to follow, and the brain and talent drain is going to create entirely new issues. While it's likely HBO will continue trucking along semi-functionally for a few years on the backs of projects already in the pipeline, it's hard to think AT&T's influence won't have a decidedly negative impact on the pioneering channel over the long term.

Even AT&T's knack for cheating and lobbying aren't likely to save AT&T from its own bad impulses, or secure supremacy in the face of something entirely foreign to the Dallas-based telecom giant: actual, meaningful competition.

Filed Under: content, john stankey, over the top, richard plepler, streaming, telcos
Companies: at&t, hbo, time warner

Judge Ruling In AT&T Merger Again Highlights Broken Antitrust Enforcement, Court Myopia

from the ill-communication dept

Last year AT&T defeated the DOJ's challenge to the company's $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his original 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality and neutered FCC oversight to dominate smaller competitors and tilt the entire internet ecosystem in its favor.

While the DOJ lost its original case, it was quick to appeal late last year, highlighting how within weeks of the deal AT&T had jacked up prices on consumers and competitors like Dish Networks, which says it was forced to pull HBO from its lineup because it could no longer afford the higher rates. Those rate hikes were directly courtesy of the huge debt AT&T incurred from both its 2015 merger with DirecTV (which eliminated a direct pay TV competitor from the market), and last year's Time Warner merger.

None of this apparently mattered to a three-judge panel from the US Court of Appeals for the DC Circuit, which ruled this morning (pdf) that AT&T's latest merger would be allowed to stand. According to the Judges, the DOJ's claims that Leon failed to understand basic economic realities in the broadband and video markets were "unpersuasive." Much like the initial Leon ruling, the cornerstone of the Judges ruling centers around the idea that because there's more and more streaming competition, any anti-competitive problems from the deal would be mystically mitigated:

"Evidence also indicated that the industry had become dynamic in recent years with the emergence, for example, of Netflix and Hulu. In this evidentiary context, the government’s objections that the district court misunderstood and misapplied economic principles and clearly erred in rejecting the quantitative model are unpersuasive. Accordingly, we affirm."

But, like the Leon ruling, the Judges failed to understand the bigger picture, almost to an embarrassing degree. In part with the DOJ's help, since throughout the entire case, the phrase net neutrality wasn't uttered even once in context.

While AT&T does face more competition via streaming competitors, its control over wireless and wired broadband networks those services run over gives AT&T a distinct advantage. So in addition to making "must have" content more expensive for competitors (something the court just ignores), AT&T can also use its broadband networks to hamstring these emerging competitors. We've already seen that demonstrated clearly as AT&T imposes arbitrary and unnecessary usage caps on overage fees on its broadband users if they use a competitor like Netflix, but not if they use AT&T's own streaming service.

It's not rocket science to see how AT&T's domination of broadband, control of essential content, and successful obliteration of FCC oversight all work synergistically to distort the market AT&T operates in. This is a company that effectively told the Ajit Pai FCC to go neuter itself, and the agency was more than happy to oblige. It's the same company that had so much political power, it was able to convince the government to retroactively change the law when it was found to be spying on Americans without a warrant. The problems with this type of power couldn't be more obvious.

Meanwhile, the case continues to show how the steady lobbying erosion of U.S. antitrust authority is having a decidedly negative impact US market health. For decades we were told that the telecom industry should be deregulated to unleash brave new synergies and amazing innovation. This wouldn't be a problem, telecom giants and their allies insisted, because antitrust authority would help keep these natural monopolies in line.

Yet here we are, with antitrust authority so comically eroded that lawyers are trapped within very narrow confines of economic theory, utterly incapable of proving even the most obvious of harms.

The broadband industry is a broken, natural monopoly plagued by federal and state regulatory capture. When you obliterate what few consumer protections exist, giants like AT&T and Comcast don't just mystically start behaving thanks to a free market, they just double down on existing, bad behavior. That's because telecom isn't a free market, it's a broken mess. And free of both competition and meaningful regulatory oversight, it only gets worse. History has made this point time and time again, and the public's utter disdain of Comcast and AT&T is example A.

In the wake of the telecom industry's successful attack on FCC authority, there are only a few things that can keep these natural monopolies in line absent meaningful competition. One, an FTC that lacks the authority, resources, or rule-making ability to actually police bad ISP behavior. Two, state regulators and AGs that ISPs and the FCC have working overtime. And antitrust enforcement that's been so neutered by lobbying that the government can't police even the most obvious instances of competitive issues caused by mindless merger mania.

Anybody, Judges included, that can't see the obvious problem here isn't paying close enough attention.

Filed Under: competition, doj, merger, streaming, telco, telecom, tv
Companies: at&t, time warner

House To Investigate Whether DOJ's AT&T Antitrust Lawsuit Was Political

from the do-not-pass-go,-do-not-collect-$200 dept

When the Trump DOJ sued to stop AT&T's $89 billion merger with Time Warner last year, more than a few eyebrows were raised. After all, the DOJ's antitrust suit, allegedly a bid to protect consumers, came as other arms of the Trump administration were busy utterly dismantling a wide variety of popular consumer protections (like net neutrality) at the direct request of industry. It raised the question: why suddenly care about consumer protection and antitrust power when you've shown absolutely no general concern for those concepts previously?

As a result, there's always been a lingering question as to whether Trump's obvious disdain for Time Warner owned CNN was driving a petty bid for vengeance. Others wondered if the DOJ's lawsuit was a personal favor to Trump ally Rupert Murdoch, who had tried unsuccessfully to buy CNN from AT&T at least twice, and had spent much of 2017 lobbying Trump to scuttle the deal as a competitive favor to his Fox empire.

With a shakeup in the House, those questions could soon again be making headlines. Incoming House intelligence committee chairman Adam Schiff told Axios last weekend that one of the numerous things the new House leadership will investigate is whether the DOJ's antitrust lawsuit against AT&T was political:

"Schiff said Congress also needs to examine whether Trump attempted to block AT&T’s merger with Time Warner as payback to CNN.

"We don't know, for example, whether the effort to hold up the merger of the parent of CNN was a concern over antitrust or whether this was an effort merely to punish CNN," Schiff said.

To be clear, AT&T's monopoly power is clearly a problem and, regardless of the motivation, it's a good thing the DOJ tried to stop it.

AT&T's domination of both fixed broadband, wireless broadband, and its monopoly over the backhaul connections feeding everything from cellular towers to ATMs was already causing headaches. The company's expanded ownership of "must have" media properties only made things worse by causing new anti-competitive problems for competitors like Dish. Combine these with the death of net neutrality, AT&T's past behaviors, and the FCC's fresh inability to hold AT&T accountable for any of it -- and the over-arching market issues should be pretty clear.

Ultimately the DOJ lost its case for several reasons. Antitrust laws weakened after decades of lobbying left the DOJ arguing obvious outcomes (like AT&T raising rates on competitors and consumers) within narrow confines of economic theory. And because the DOJ didn't want to highlight the fact the Trump admin was harming these same consumers with its other hand (net neutrality), it simply avoided mentioning the idea at all. That's an obvious issue since AT&T's domination of both the media and its broadband monopoly will work synergistically to harm competitors and consumers alike.

Regardless, the Trump DOJ suddenly and exclusively caring about AT&T's monopoly power was always curious. And while many will be sure to suggest that any investigation of the motivation is itself political, it's a question that would be nice to have answered all the same -- since using "instruments of state power" like the DOJ to settle petty grievances with media outlets you don't like is kind of a fucking problem.

Filed Under: adam schiff, antitrust, congress, doj, mergers, politics
Companies: at&t, time warner

AT&T Blackout Of HBO On Dish Highlights Perils Of Megamerger Mania

from the do-not-pass-go,-do-not-collect-$200 dept

You might recall that AT&T recently defeated the DOJ's challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors and squeeze more money from consumers in an ocean of creative new ways.

Throughout the case the DOJ tried to demonstrate (poorly) that a bigger AT&T has every incentive to behave badly. Admittedly those efforts were pretty feeble since the multi-decade steady lobbyist erosion of antitrust law left them trying to make the case within very narrow confines of legally-acceptable economic theory. The DOJ also shot itself in the foot by refusing to even mention AT&T's attacks on net neutrality, likely because it didn't want to highlight the fact that another arm of the government (the FCC) was actively harming the same consumers the DOJ claimed it was trying to protect.

Regardless, with the merger still less than 5 months old, AT&T has been quick to show why people were concerned. The company has already quickly jacked up rates on most of its subscribers and imposed all manner of bizarre new fees as it tries to recoup the massive debt it incurred from both the DirecTV and Time Warner mergers. And this week, AT&T blacked out (previously Time Warner-owned) HBO content for Dish Network customers during contract negotiations, the first time that has happened in the history of HBO:

"AT&T Inc.’s HBO and Cinemax programs were pulled from Dish Network Corp.’s satellite service after the companies failed to reach a new distribution agreement, setting up a real-life “Game of Thrones” between two of the biggest players in pay TV. It is the first time in HBO’s more than four-decade history that programming has been blocked at a distribution partner over a contract dispute, according to AT&T, which acquired the premium cable network as part of its June $85 billion acquisition of Time Warner.

We've noted for years how retransmission and carriage fee disputes in the cable industry have grown increasingly common and are only getting worse. Basically, when it comes time to sign a new deal paying for content, broadcasters generally demand huge rate hikes for the same channels. Cable operators then play hardball, and during negotiations one side or the other (usually broadcasters) pulls their content from the cable lineup. Consumers never see refunds for these feuds, even though these feuds have occasionally left them without access to channels they've already paid for, for months.

For weeks, consumers are bombarded with PR missives, new websites and on-screen warnings all trying to amplify public outrage and drive greater pressure for one side or the other to buckle. After a while, the two sides strike a new confidential deal, and the higher rates are then quickly passed on to consumers. In a letter to lawmakers last year, Dish Network argued that consumers have faced 750 such broadcaster blackouts since 2010, with the retransmission consent fees that broadcasters demand growing a whopping 27,400% between 2005 and 2016.

Of course Time Warner and HBO management traditionally took the high road to avoid these kinds of problems, something that appears to have suddenly and abruptly changed. HBO execs are implying to media outlets that this could all just be a press stunt by Dish to apply pressure on AT&T as it fights the DOJ's recent appeal. Even if that's the case, consumer groups and out-leveraged smaller cable ops have been pushing for years for updated regulations that ban companies from blacking out content while companies bicker over rates.

These demands are never really taken seriously in DC, as it's seen as too heavy handed of an intervention into negotiations between two companies. Ignored is that during these outages, consumers don't see refunds for content they paid for, and this consumer outrage itself is actively encouraged by both sides in a bid to apply pressure on the other end of the deal. While the FCC under Wheeler flirted with the idea of basic FCC rules putting this ridiculous tap dance to bed, there was simply no follow through.

That AT&T was going to use its newfound power to jack up prices for its TV competitors wasn't rocket science, especially if you've watched AT&T's particular flavor of "doing business" anytime over the last two decades.

The irony here is that AT&T even promised the DOJ that it would avoid these kinds of blackouts as a merger condition if the DOJ approved the deal. But the DOJ sued anyway claiming it was helping consumers (though Trump's disdain for CNN and Trump ally Rupert Murdoch's lobbying against the deal are seen as more likely justifications for a consumer-protection phobic Trump administration). But the DOJ's sloppy handling of the case and a terrible ruling by Leon left AT&T more powerful than ever, and consumers and competitors left more vulnerable than ever.

And that's before you even get to AT&T's plans for the post net neutrality world, currently on hold pending the outcome of next February's looming court battle.

Here in the States we have this bizarre tendency to either mindlessly approve megamergers with zero conditions, or conditions that companies are allowed to just tap dance around. The resulting mega-company then behaves badly, and everybody just stands around with a stupid look on their face. Rinse, wash, repeat.

Filed Under: competition, hbo, mergers, retransmission, retransmission disputes, tv, tv blackouts
Companies: at&t, dish, hbo, time warner

DOJ Continues To Point Out A Mega-Merged AT&T Will Jack Up Prices On Everybody

from the do-not-pass-go,-do-not-collect-$200 dept

AT&T recently defeated the DOJ's challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors.

In fact, net neutrality was never even mentioned by the DOJ at the multi-week trial. Likely in part because the DOJ didn't want to highlight how the Trump FCC was screwing everybody over with one hand, while the Trump DOJ was allegedly suing AT&T to "protect consumers" with the other (some argue that Trump's disdain for CNN and adoration of Rupert Murdoch were the more likely motivators). But if you ignore the fact that AT&T plans to use its monopoly over many broadband markets (from residential to cellular tower backhaul) combined with the death of net neutrality to make life difficult for consumers and competitors alike, you're not paying any attention to history or to AT&T's repeated nods in that general direction.

During the first trial, you'll recall the DOJ and its hired economists repeatedly pointed out how AT&T's vertical integration and ownership of "must have" content (like HBO) would provide the Dallas-based giant every incentive to raise TV rates. AT&T lawyers laughed those findings off, then immediately proceeded to...raise rates and hammer users with bogus new fees as it attempted to deal with the massive debt incurred from the merger. Those rate hikes were a major reason the DOJ decided it should try and appeal Leon's initial ruling.

As the DOJ works on its appeal of Leon's ruling, the government continues to point out in filings (pdf) that all of its economic models show that AT&T's ownership of Time Warner and DirecTV will provide the company with endless opportunities to raise rates on competitors and consumers:

"The bargaining model is an accepted and reliable predictor of competitive effects in the pay-television industry, and Professor Shapiro used reasonable inputs to quantify the magnitude of cost increases that AT&T would impose on rivals through negotiations—and the consequent higher prices for consumers—separate and apart from the non-quantifiable harms of the merger, such as reduced choice and stymied innovation...Given the district court’s illogical conclusion that the merger will lead to no change in bargaining leverage, and its erroneous finding of no consumer harm, a remand is necessary."

One of the major problems here is that lobbying has weakened antitrust enforcement so severely, government lawyers are now trapped within very narrow confines of economic theory to prove a point that should be common sense (especially if you've watched AT&T do business for more than five seconds): AT&T has a long history of behaving anti-competitively, and being even larger is going to make that even easier. There's roughly a million examples out there showing how AT&T exploits and abuses its captive customers with an ocean of bad behaviors.

That this will get worse as AT&T grows larger and more powerful shouldn't be a hard argument to make, even for lawyers trapped in the narrow hallways of accepted economic theory. And again, this is all before you even get to the fact that AT&T lobbyists just convinced the FCC to neuter itself on demand for no adult policy reason beyond it was what AT&T executives wanted.

Filed Under: antitrust, doj, mergers, prices
Companies: at&t, time warner

After AT&T Jacks Up Prices Post Merger, DOJ Decides To Appeal Court Loss

from the if-at-first-you-don't-succeed... dept

AT&T recently defeated the DOJ's challenge to their $86 billion merger with Time Warner thanks to a comically narrow reading of the markets by U.S. District Court Judge Richard Leon. At no point in his 172-page ruling (which approved the deal without a single condition) did Leon show the faintest understanding that AT&T intends to use vertical integration synergistically with the death of net neutrality to dominate smaller competitors. In fact, net neutrality was never even mentioned at the multi-week trial.

The trial did a wonderful job showing how modern antitrust law does a dismal job policing companies that dominate both the conduit to the home (wireless, wired connection) and the content running over it. And shortly after Leon signed off on the deal, AT&T got right work... being AT&T.

The company had made repeated promises before, during and after the trial that the merger would only result in price reductions and other wonderful things for consumers. But with the ink barely dry on the deal, AT&T quickly began raising rates on its streaming video services, eliminating promo offers providing free HBO to its wireless customers, jacking up the price of the company's unlimited data wireless plans, and imposing bogus new fees on those same subscribers. Most of these moves were expected as AT&T tries to recoup some of the monumental debt incurred by its endless quest to grow ever larger.

Initially, the DOJ stated it wouldn't appeal its court loss, even though Leon's myopic ruling opened the door to the idea. But the DOJ clearly sees something in AT&T's recent moves that gives it additional ammunition for another shot at the merger, so it's appealing the judge's ruling to the United States Court of Appeals for the District of Columbia Circuit according to a DOJ filing (pdf).

AT&T, for its part, doesn't seem particularly worried and believes the merger is a done deal:

"We think the likelihood of this thing being reversed or overturned is really remote,” Mr. Stephenson told CNBC Friday in an interview at Allen & Co.’s annual Sun Valley, Idaho, media conference. “The merger is closed. We own Time Warner."

That may or may not be true. Antitrust law has been so weakened over decades that the DOJ spent most of the first trial narrowly confined to strict corridors of economic theory as it tried to prove the obvious: AT&T's ownership of Time Warner will result in AT&T jacking up licensing costs for must-have content like CNN and HBO for its video (traditional cable and streaming) competitors. Patchy antitrust laws ill-suited for the mega-Comcast era aren't magically being fixed before the next legal battle, meaning it's pretty likely the next round won't go much better for the DOJ than the first.

That said, AT&T's price hikes do provide some additional ammunition. The DOJ might also want to actually mention net neutrality this go round. The agency likely avoided the concept the first time around because it didn't want to emphasize that while it was suing AT&T to "protect consumers" (though Trump's disdain for CNN and Rupert Murdoch's opposition to the deal for competitive reasons are just as likely motivators), another arm of the government (Ajit Pai's FCC) was busy eroding net neutrality rules making it easier than ever for AT&T to behave anti-competitively.

If you've watched AT&T do business for any more than five seconds, it's obvious the death of net neutrality is the lynch pin for AT&T's anti-competitive ambitions moving forward. While certainly a bit off the traditional antitrust track, at least mentioning that fact at some point during the trial might just be a good idea for the DOJ during the next round.

Filed Under: competition, doj, fcc, merger
Companies: at&t, time warner

AT&T Is Very Excited To Try And Ruin HBO

from the ill-communication dept

Ma bell isn't much fun at parties. While traditional telcos desperately want to pivot from broadband and cable to video and online advertising, that transition has been challenging. Especially for a sector that has spent the last 30 years as government-pampered regional mono/duopolies. Many of these companies are good at running a network or lobbying government to stifle competition, but they're simply not very good at things like creativity, innovation, or disruption. That was recently made abundantly clear by Verizon's face plant after it tried to launch a sexy new Millennial-focused video platform dubbed Go90.

AT&T suffers from the same disease, and it may soon manifest in abundance.

You'll recall that AT&T's $86 billion acquisition of Time Warner was allowed to proceed after a comically narrow reading of the market by U.S. District Court Judge Richard Leon. At absolutely no point in his 172-page ruling, did Leon show the faintest awareness that AT&T wants to use the gutting of the FCC, the elimination of net neutrality rules, and vertical integration synergistically to behave anti-competitively in the broadband and streaming video space, something that's obvious to anybody that has spent thirty seconds watching AT&T do business.

Leon took AT&T lawyers' arguments completely at face value, resulting in him failing to even apply a single meaningful condition to AT&T's latest megamerger.

And while the death of net neutrality, regulatory capture and rubber-stamped merger mania are all wonderful things for AT&T, there's still one little problem AT&T needs to overcome in order to capitalize on its wide, open anti-competitive runway: it's just not very good at this whole creativity or innovation thing. While it's clear that AT&T executives think they're really good at innovation, there are growing concerns that the company is going to meddle with HBO and erode many of the things that made the channel a standout over the last twenty years.

AT&T execs initially stated they'd be leaving HBO alone to do what the company does best. But that promise quickly evaporated this week at a town hall meeting at the network’s headquarters in Midtown Manhattan, where AT&T execs like John Stankey proclaimed that AT&T intends to dramatically reshape HBO to effectively focus on quantity and ad impressions over quality:

Mr. Stankey described a future in which HBO would substantially increase its subscriber base and the number of hours that viewers spend watching its shows. To pull it off, the network will have to come up with more content, transforming itself from a boutique operation, with a focus on its signature Sunday night lineup, into something bigger and broader.

“I want more hours of engagement. Why are more hours of engagement important? Because you get more data and information about a customer that then allows you to do things like monetize through alternate models of advertising as well as subscriptions, which I think is very important to play in tomorrow’s world.”

Of course Netflix has been taking heat for focusing on quantity over quality, resulting in a string of high-profile duds. And AT&T's version of "monetization" has historically involved things like charging broadband users more money if they want to protect their own privacy. If you're an HBO exec and alarm bells aren't ringing in your ears, you likely haven't paid enough attention to AT&T's scattershot efforts to dominate media pre-merger. Stankey then tried to equate the experience HBO was about to go through under AT&T management to child birth:

“You will work very hard, and this next year will — my wife hates it when I say this — feel like childbirth,” he said. “You’ll look back on it and be very fond of it, but it’s not going to feel great while you’re in the middle of it. She says, ‘What do you know about this?’ I just observe, ‘Honey. We love our kids.’”

On the plus side, it's clear that AT&T wants to spend billions on original content to help the new AT&T-owned HBO to match Netflix blow for blow in the streaming wars. On the flip side, AT&T's corporate culture (indisputably anti-consumer, viciously anti-competitive and historically hostile) is inevitably going to clash with HBO management. HBO has creatively crafted some of the best television in the last decade. AT&T, in turn, has expertise in things like killing net neutrality and finding new, creative ways to rip off taxpayers and its own customers.

That there are going to be tensions between the two companies likely isn't debatable. And, while success is certainly possible, whether AT&T can shake off some of its own worst habits and "improve" HBO -- without eliminating all of its finest traits in the process -- is going to prove interesting to watch.

Filed Under: competition, content, content creation, hbo
Companies: at&t, hbo, time warner

Following AT&T's Lead, Comcast Makes A $65 Billion Bid For Fox

from the merge-ALL-The-things! dept

Encouraged by AT&T's massive merger victory this week, Comcast has made its own $65 billion acquisition offer for a large chunk of 21st Century Fox. According to the Comcast announcement, the company's all cash $65 billion dollar offer is a notable step up from Disney's own $52.4 billion all-stock package, setting up a showdown between two companies that have had a contentious relationship since Comcast's 2004 failed hostile takeover attempt of Disney.

The deal includes the FX Channel, numerous regional sports networks, and a minority stake in European cable TV giant Sky, which would all be tacked on to the NBC Universal assets Comcast acquired back in 2011. Fox will however retain Fox News, Fox Sports, and Fox broadcasting, which will all remain under the existing Fox brand. In its statement, Comcast rolled out the usual claptrap about how the combination would be lovely for all involved:

"We have long admired what the Murdoch family has built at Twenty-First Century Fox. After our meetings last year, we came away convinced that the 21CF businesses to be sold are highly complementary to ours, and that our company would be the right strategic home for them."

Comcast had previously hinted that it was waiting to see the outcome of AT&T's own merger battle with the DOJ before making its own bid for Fox. Comcast and many analysts believe that the comically broad nature of AT&T's court victory (based on a pinhole narrow reading of the markets by U.S. District Court Judge Richard Leon, who clearly has never heard of things like zero rating or net neutrality), means the precedent set will likely result in a DOJ that's more hesitant to intervene in potentially problematic merger moving forward.

That's especially true of vertical integration mergers, where modern U.S. antitrust law tends to be ill-equipped to handle some of the more complex new media anti-competitive concerns that pop up. Combined with the death of ISP privacy rules and the neutering of net neutrality, we're creating a brave new landscape where there's very little to stop giants like Comcast and AT&T from using their last mile monopolies--combined with massive ownership of content needed to compete with these giants--as anti-competitive bludgeons against consumers and competitors alike.

For example, there's now nothing of note preventing AT&T and Comcast from exempting its own content (like HBO or a regional sports game) from arbitrary and unnecessary usage caps, while penalizing those who use a competitor's service (Netflix, or the next Netflix). Similarly, there's nothing stopping Comcast or Verizon from arbitrarily throttling competitors at interconnection points, driving up the cost for competitors to access their broadband subscribers. There's an ocean of creative ways to hamstring competitors the government is now largely helpless to effectively police, and as the AT&T court win shows, the ISP claim that this isn't a problem because antitrust will save us all clearly isn't a valid argument.

With the FCC making it very clear it's a glorified rubber stamp, that leaves the DOJ as the only real wild card in terms of whether any meaningful conditions get applied to this deal. Granted if you followed the NBC Universal merger, you'll recall that Comcast has a pretty terrible history of ignoring merger conditions when it suits it, and regulators from both parties tend to do little more than grumble when the company tap dances around imposed restrictions (though that was a major reason why Obama-era regulators blocked Comcast's 2014 attempted acquisition of Time Warner Cable (not to be confused with Time Warner)).

Obviously there's still plenty of folks that see zero problems with massive broadband monopolies gobbling up countless media empires while paying millions of dollars to neuter state and federal oversight. And their theory that these kinds of deals are no problem because the market self-regulates (ignoring there is no free market competition in broadband to organically hold them accountable) will soon have a perfect opportunity to put their theories to the test.

Filed Under: antitrust, broadband, competition, content, doj, mergers, streaming
Companies: at&t, comcast, disney, fox, time warner