AT&T Defeats DOJ In Merger Fight, Opening The Door To Some Major Competitive Headaches

from the what-could-possibly-go-wrong dept

AT&T has defeated the DOJ in a court battle over whether or not the company will be allowed to acquire Time Warner for $86 billion.

In a ruling (pdf), U.S. District Court Judge Richard Leon stated that the government failed to make its case that the merger would harm AT&T's competitors, most of which are now trying to keep pace in the streaming video space. Consumer advocates have routinely warned that AT&T will use its greater leverage to make must-have content (like Time Warner owned CNN or HBO) significantly more costly for companies hoping to compete with AT&T's own TV services, including its newish streaming video effort, DirecTV Now.

That a company with a thirty-year history of anti-competitive behavior will likely use this greater leverage to behave badly shouldn't have been a particularly hard case to make, suggesting that DOJ lawyers may have flubbed key components of its case. The DOJ sued to thwart the deal last November, and while the agency claimed it was to protect consumers, the incongruity with other Trump administration consumer policies (like, well, everything) have fueled speculation that Trump's disdain for Time Warner owned CNN, or his close relationship with Rupert Murdoch may have colored the DOJ's decision to sue.

It's an indisputable and massive win for AT&T, and the DOJ's first antitrust court loss since 2004. Leon didn't just kill the lawsuit, he didn't offer any conditions to mitigate potential anti-competitive problems, and largely urged the DOJ not to appeal. AT&T, as you might expect, was thrilled with the court's failure to block its latest megamerger:

"We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government’s lawsuit to block our merger with Time Warner. We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative."

Anybody that has witnessed AT&T's versions of "affordable" and "innovative" likely isn't to buy that claim. This is, after all, a company that thought it would be a good idea to charge consumers more money just to protect their own privacy. It's also the same company that has been repeatedly dinged by government for either ripping off its own customers, or turning a blind eye while all manner of others did. Not surprisingly, more consumer-oriented folks like former FCC staffer and consumer advocate Gigi Sohn had a decidedly different take on AT&T's court win:

"Big media conglomerates are the winners and consumers are the losers with Judge Leon’s decision. Merging AT&T, one of the largest cable, satellite and mobile broadband companies with Time Warner will lead to higher prices, fewer choices and perhaps more importantly, fewer voices. Coupled with the demise of the 2015 net neutrality rules yesterday, AT&T will be free to favor Time Warner content over its cable and its fixed and mobile broadband networks."

Numerous companies were waiting on the AT&T decision before pursuing their own, previously-unthinkable merger ambitions. Comcast, for example, has stated the company was holding off on making its $60 billion offer for Fox's remaining assets until it saw the outcome of the case. Sprint and T-Mobile are also considering a merger that's likely to reduce competition in wireless and kill tends of thousands of sector jobs.

It's not just the AT&T merger that's problematic. The wave of major consolidation this loss will trigger, combined with the death of net neutrality protections opens the door to an absolute ocean of bad behavior by companies that have already clearly documented they'll stop at nothing to keep real competition at bay. And while the rise of streaming competitors crafting original content may mitigate some of this, you'd have to be pretty naive to think AT&T's stranglehold over broadband and media, combined with Trump era regulatory capture ends particularly well for the consumers and small businesses caught in its wake.

Filed Under: antitrust, competition, consolidation, doj, merger, richard leon
Companies: at&t, time warner

Thanks To No Competition, Broadband Satisfaction Scores Plummet

from the this-is-why-we-can't-have-nice-things dept

For years now we've documented the shitshow that is broadband industry customer satisfaction. That shitshow is generally thanks to a continued lack of real competition in the space, which lets these companies not only mindlessly raise rates like it's going out of style, but it gives companies like Comcast the leeway to experiment with terrible, anti-competitive practices like arbitrary and punitive usage caps and overage fees. And that's of course before you get to the clown car that passes for customer service at many of these companies, which routinely makes headlines for all the wrong reasons.

Year after year we witness a rotating crop of bizarre stories highlighting how terribly these entrenched monopolies treat their subscribers. And each year industry executives insist that they've learned the error of their ways and have dedicated themselves and their budgets to fixing the "consumer experience."

Except because these companies all but own state and federal lawmakers-- and see virtually no competition in their markets (especially at higher speeds)--things never actually get better. Case in point: the American Customer Satisfaction Index has released their latest analysis of customer satisfaction with the broadband industry. And what they found isn't pretty. In short, every single major ISP but one saw a decline in customer satisfaction over the last year:

Note that these scores are worse than every other industry the ACSI tracks, including the airline, insurance, and banking sectors. And these scores are even well below consumer satisfaction with many government agencies, including the IRS.

Comcast in fact is the only company to see no change whatsoever (though its TV services saw a 1 point decline), which is still notable given its 2014 promise that the hiring of a customer experience VP and other well-hyped improvements were going to "revolutionize" the way Comcast consumers were treated. Other companies like Charter (Spectrum) are in absolute free fall, dropping 8% year over year thanks to the poor service, rate hikes and empty promises in the wake of the company's bungled $89 billion acquisition of Time Warner Cable and Bright House Networks.

And while things like gigabit broadband get a lot of media hype, we've noted that the lack of competition driving this problem is only getting worse. Numerous telcos have all but given up on residential broadband to shift their focus toward video advertising and enterprise services. And as they refuse to upgrade millions of DSL subscribers they don't actually want, cable companies like Comcast and Charter are securing a greater monopoly over broadband than ever before.

Some like to claim new wireless technologies (like 5G) will emerge to magically provide competition to these providers. But while 5G wireless will provide faster, lower-latency and more resillient networks, it won't fix the business data service monopoly that drives high prices and many of the competition issues in the wireless sector. Nor will it address the industry's plan to keep putting ma bell back together via an endless array of competition-reducing megamergers. And however promising 5G is, it's not a substitute for uncapped, fixed broadband -- especially in more rural areas and less affluent cities.

While cable secures a growing monopoly over fixed-line broadband, monopoly ISPs (with the Trump administration's help) are gutting all FTC, FCC and state oversight over their regional monopolistic fiefdoms. All while regulators like Ajit Pai whisper sweet nothings about how eliminating popular consumer protections like net neutrality will magically improve sector investment and competition. Surely this all works out well for the consumer, right?

Filed Under: acsi, broadband, competition, customer satisfaction, fcc
Companies: charter, comcast, time warner, verizon

Shockingly, Streaming Providers Are Dominating Cable At Customer Satisfaction

from the innovation-nation dept

It's really no secret that traditional cable and broadband providers have some of the worst customer satisfaction of any companies in America. Comcast and Charter (Spectrum) in particular can usually be found stumbling around in last place in most satisfaction and support rankings. That's been particularly true of the American Customer Satisfaction Index, which routinely shows cable and broadband providers rank consistently worse than nearly any other company in any industry in America. In fact, these companies even tend to be ranked worse than Americans' experiences with government agencies like the IRS.

And despite seemingly bi-annual promises by these companies that customer service is their top priority (remember when Comcast promised a new "Customer Experience VP" would fix everything?), it's actually getting worse.

According to the latest ACSI report, high prices, bloated cable bundles, and terrible customer service continue to leave customers angry and frustrated:

"Customer satisfaction with subscription television service falls 3.1 percent to an ACSI score of 62, an 11-year low as the industry faces a seismic shift of subscribers defecting to lower-cost online video streaming services. In response, many cable and telecom companies are offering new Internet TV streaming in addition to legacy pay TV, but cord cutting continues."

While some cable companies have finally realized the error of their ways and begun offering less expensive, more flexible streaming alternatives (Dish's SlingTV and AT&T's DirecTV Now), by and large the mindset of the cable industry remains focused on doubling down on a lot of the dumb ideas (predominately aggressive price hikes) that brought them to this point in the first place.

For example Charter Communications, which has been pummeling consumers with price hikes in the wake of its $89 billion merger with Time Warner Cable and Bright House Networks, took a particularly steep tumble during these latest satisfaction ratings for traditional cable providers:

The same story is playing out with broadband ISP satisfaction ratings, where limited competition often results in high prices as well:

It's worth noting that this year was the first year the index ranked streaming video alternatives, and (shockingly) the companies that are now offering lower prices, more flexible and innovative services, and better customer service are doing significantly better than traditional cable. Netflix, Sony PlayStation Vue, and Twitch all saw scores of 78, and the lowest rated streaming provider (Crackle at 68) was still rated better than nearly all traditional TV providers:

And while cord cutting is expected to break records this year, that's not to say that cable providers can't turn things around. Industry executives simply have to stop pretending that the traditional TV cash cow will live forever, and begin to compete by offering cheaper, more flexible options with better customer support. The bottom line many cable executives can't acknowledge is: competition simply means TV isn't going to be as profitable as it used to be, and they're going to have to actually try now. You can either get out ahead of this phenomenon now through adaptation, or continue doubling down on the same bad ideas that resulted in record cable TV customer defections in the first place.

Filed Under: acsi, cord cutting, customer satisfaction, internet, pay tv, streaming
Companies: charter, comcast, netflix, time warner

Cable Companies Warn In Court That AT&T Time Warner Merger Will Be Absolutely Terrible For Competition And Consumers

from the Synergies,-yo dept

AT&T and the Department of Justice are ramping up their legal arguments in court as the DOJ tries to block the company's $86 billion acquisition of Time Warner. While some question the DOJ's real motives in the case (Trump ally Rupert Murdoch has been lobbying against the deal for competitive reasons for a year), consumer advocates agree that the deal will be horrible for consumers and competitors alike. AT&T already has a long, epic history of anti-consumer behavior, and critics charge the greater leverage will only let AT&T jack up licensing costs for competitors trying to compete with AT&T's own streaming services.

To glean support for its unpopular merger, AT&T offered a special deal to 1,000 of its competitors. According to AT&T's proposal, if competitors agreed to support the merger, the company promised send any price disputes with other cable companies to an outside arbitration process. Most competitors were pretty clearly not impressed:

"But thus far, only 2 percent of AT&T's rivals have expressed support for that plan, according to lawyers for both sides. The revelation came as AT&T and the Department of Justice faced off in court Tuesday, the second day of a trial whose consequences will reverberate across the economy. Of the 1,000 letters sent by AT&T to competing TV providers in November notifying them of the proposal, just 20 received a positive response, according to company and government lawyers."

Many of those same competitors have been called to testify against the merger on behalf of the DOJ, and their comments this week were not what you'd call positive. Dish and its subsidiary Sling TV, for example, were quick to argue that AT&T simply has no incentive to offer reasonable licensing terms to streaming competitors like Sling once the deal's done:

If the merger goes through, Time Warner’s incentives change, according to Schlichting. It could demand higher rates or onerous terms, such as requiring Sling to buy more channels, and would be less likely to compromise, he said. Either Dish’s costs would go up, or if there’s no agreement and Turner channels “go dark,” the company would lose subscribers who would likely switch to DirecTV or its DirecTV Now online service, Schlichting argued. Gaining subscribers would be more lucrative for AT&T than programming fees, he said.

“I just don’t see them having any motivation to move” to get to a deal, he said of Time Warner.

Cable competitor Cox Communications had similar words of warning, noting that AT&T's promise for outside arbitration was a "little bit of gamesmanship," and that losing access to needed content soon to be owned by AT&T could "significantly impact the viability of our business model." DOJ lawyers have warned that if the AT&T Time Warner deal is allowed to proceed, consumer bills could skyrocket to the tune of $436 million annually. Tim Wu, the Columbia law professor who coined the term net neutrality, put things rather succinctly in a New York Times piece this week:

"The (DOJ $436 estimate underestimates) the full costs of this merger to the American public. What we really have here is a brazen effort to prolong the life of a dying business model — “full-service” pay TV — by making “cord-cutting” more expensive, and thereby strangling a revolution in internet television that remains in its toddlerhood. Even worse, greenlighting the deal could set off a domino effect."

While some of these potential pitfalls can be stymied by conditions, meaningful conditions haven't been a strong suit for either party of U.S. governance. More often than not, the companies merging volunteer their own conditions routinely made up of "goals" they would have accomplished anyway. While politicians pretend to be holding these companies' feet to the fire for political brownie points, enforcement is routinely non-existent. As a result, merged companies (especially in the traditionally regulatory capture protected cable and broadband industries) still somehow fail to adhere to them.

Years go by, everybody forgets, the harms of such vertical integration are either ignored or downplayed; rinse wash and repeat. Of course given that AT&T is on the cusp of successfully killing net neutrality, the end result of this merger could prove extra problematic. AT&T has been given the green light for an ocean of "creative" anti-competitive behaviors that could make life particularly difficult for streaming competitors, whether that comes in the form of zero rating AT&T's own content (while still counting competitor's traffic against AT&T caps), or by simply prioritizing the content of AT&T or its deepest-pocketed allies.

In short, the deal is likely to jack up the costs for competitors (which get passed on to you) at the same time we remove valuable safeguards protecting the health of the internet and the ability to compete on a semi-level playing field. All so a company with a long, long history of behaving badly can have more power over multiple markets. What could possibly go wrong?

Filed Under: antitrust, cable, competition, merger, tv
Companies: at&t, cox, dish, time warner

Ex-DOJ Officials Raise Trump, AT&T Merger Interference Concerns

from the do-the-ends-justify-the-means? dept

Last fall, the Department of Justice announced it would be suing to block AT&T's $86 billion acquisition of Time Warner. According to the DOJ, it sued to block the lawsuit to protect consumers, arguing that the deal would likely make it harder for streaming competitors to license the content they need to compete with AT&T (especially HBO programming). Consumer advocates have long argued that AT&T (with its decade of well-documented and often comedic anti-consumer behavior in tow) would simply use its greater leverage and power to hamstring competition and jack up rates for consumers (especially with net neutrality dying).

While some have argued that the DOJ is simply following antitrust protocol, others (including AT&T lawyers) think the lawsuit is driven by other motivations.

That's not a hard case to make given the Trump administration's anti-consumer, anti-innovation, and anti-competition tendencies on other fronts (like net neutrality). Trump's pick to head the DOJ's antitrust division, Makan Delrahim, was also on record, before joining the DOJ, stating he saw no real problems with the deal. Meanwhile Trump's disdain for Time Warner-owned CNN is also well established, and reports have indicated that Trump pal Rupert Murdoch spent much of last year trying to scuttle the deal for competitive reasons (Muroch has also approached AT&T twice about buying CNN).

Adding fuel to this fire was a bipartisan group of ex-DOJ officials (from US Attorney Preet Bharara and Nixon White House counsel John Dean) that, last week, filed an amicus brief with the court urging an inquiry into whether any potential laws were broken. The brief doesn't even mention Murdoch, and instead focuses on the obvious, inherent problems in scuttling a merger just because the President doesn't like one of the media outlets involved:

"While any improper use of government authority to punish critics or reward supporters would pose a grave threat to our constitutional system, that threat is particularly acute in a situation in which the government uses or appears to use its regulatory authority to punish media entities or others who are critical of the government. Such behavior could chill criticism, endangering the kind of free and open speech and debate that our Founders adopted the First Amendment to protect precisely because it is necessary for self-government."

While that's true, Bharara's specific objections here are somewhat rich for him personally, given that during his tenure he seized domain names and refused to return them -- only giving them back once it was abudantly clear he wasn't going to win in court. Bahara's office also issued a gag order over a subpoena to Reason just because a few folks said some mean things about a Judge.

Regardless, hoping to use these concerns to defeat the DOJ lawsuit, AT&T lawyers have been busy trying to get a hold of evidence proving that the Trump administration pressured the DOJ to try and derail the lawsuit. But late last month Judge Richard J. Leon rejected AT&T's request for detailed email and phone logs between the White House and the Justice Department related to the deal, forcing AT&T to scuttle that angle of their legal defense. Needless to say, whichever way this ruling goes could have a profound impact on the media, broadband, and advertising markets for years:

"If the judge sides with AT&T and Time Warner, he would usher in the creation of a new kind of corporate behemoth — one with nationwide reach via wireless and satellite television service that would also have control over a movie studio and channels like HBO, CNN and TNT, which has valuable basketball sports rights. The company would have a leading position to negotiate licensing deals with rival telecom and media firms. It would also be in a stronger position against fast-growing streaming video services like Netflix and Amazon Prime Video."

Questions over the DOJ's actual motivation here have created an interesting conversation over whether the ends justify the means, even if the motivation is cronyism and not consumer welfare. Whether the deal should be blocked has become increasingly relevant in the wake of the Trump FCC's attack on net neutrality, a move that could open the door to all manner of "creative" efforts by a bigger, more powerful AT&T to hamstring competition in the media space, should the deal be allowed to proceed.

All told, we've ironically got the Trump DOJ breathlessly claiming it's trying to protect consumers from a bigger, badder AT&T, while the Trump FCC empowers AT&T to engage in more anti-competitive shenanigans than ever before -- with no sign that anybody in government realizing they're operating at cross purposes if "consumers" really are the driving motivator. The Justice Department’s antitrust lawsuit against AT&T and Time Warner, filed back in November, is scheduled to go to trial on March 19.

Filed Under: doj, donald trump, interference, john dean, merger, preet bharara
Companies: at&t, time warner

The Right Choice For The Wrong Reasons? DOJ Sues To Kill The AT&T Time Warner Merger

from the highly-selective-empathy dept

If you've been paying attention, the Trump admninistration has been engaged in a frontal assault on everything from net neutrality to media consolidation rules, its legacy-industry-cozy policies driving a new wave of mergermania in telecom and media. As such, few thought the administration would block AT&T's $86 billion acquisition of Time Warner. After all, AT&T wasn't acquiring a direct competitor, and the harms caused by vertical integration -- however real -- haven't been a genuine concern in regulatory telecom oversight from either party for years (see Comcast NBC Universal or Sinclair Tribune).

But then rumors began to emerge that the Trump DOJ was contemplating suing to block AT&T's latest megamerger -- unless it was willing to sell either DirecTV (acquired by AT&T last year) or Turner Broadcasting, owner of CNN. Reports indicate that AT&T refused both options and was primed for a court showdown. This week the DOJ announced it would be giving AT&T what it wanted, and is taking AT&T to court to block the deal on antitrust grounds:

"Makan Delrahim, the department’s top antitrust regulator, said the Justice Department opposed the deal because it would create a communications and media behemoth unrivaled in its ability to reach most American homes with wireless and satellite television services and valuable programming such as CNN and HBO, the home to “Game of Thrones."

"This merger would greatly harm American consumers,” Mr. Delrahim, the assistant attorney general for antitrust, said in a statement. “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy."

Consumer advocates have long opposed the merger, arguing that AT&T will use its greater size and leverage to amplify what already is a fairly solid legacy of anti-competitive behavior, including making it harder for streaming companies to gain access to the content (especially HBO) they'll need to compete with AT&T's DirecTV Now service. As such, many consumer groups were quick to applaud the lawsuit. Albeit with the caveat that they weren't entirely sure the Trump DOJ was doing this for quite the reasons it claims:

“It’s refreshing to see the Justice Department doing something about this deal. However, we remain very troubled by President Trump’s threats to punish outlets like CNN that have aired critical coverage of the administration. The Justice Department must demonstrate that Trump’s saber-rattling has nothing to do with this suit. It could start by giving the same level of scrutiny to other mega-deals like Sinclair’s proposed merger with Tribune. But the bottom line is that the public would be best served if this merger is scrapped."

Concerns that the Trump administration is (ab)using the DOJ for petty grievances and cronyism aren't unfounded. A Trump administration official in July told the New York Times that it was pondering using the deal as leverage against the network. And Rupert Murdoch has been pushing Trump to block the deal since at least January, worried that it would pose a greater competitive challenge to his own News Corporation empire. AT&T had rejected at least two Murdoch overtures to buy CNN in the last six months, which is why the DOJ may have wanted AT&T to divest Turner Broadcasting.

All told, it's hard to believe that a Trump administration that has an active disdain for consumer protections -- and is going well out of its way to aid the Sinclair Tribune deal -- is suddenly hyperventilating about the vertical integration antitrust ramifications of AT&T Time Warner. AT&T clearly smells something a bit fishy in the water, and is conducting an investigation into whether Trump pressured the DOJ to change its tune. After all, DOJ antitrust boss Makan Delrahim had, until the last few months, said he saw no problems with the deal. AT&T's also investigating Rupert Murdoch's role in the DOJ's sudden, breathless concern for consumer welfare:

"AT&T intends to seek court permission for access to communications between the White House and the Justice Department about the takeover, said the people, who asked not to be named because the deliberations are private...AT&T will also try to get any evidence about whether Rupert Murdoch tried to influence the review, according to one of the people. Murdoch, a Trump confidant, controls 21st Century Fox Inc., the parent of Fox News. The president has praised Fox News’s coverage of his administration."

AT&T's already making it clear that if there is dirty pool at play here, it will help it come out in the wash:

All told, this is poised to be one of the uglier legal showdowns in recent antitrust memory. And it's forcing folks aligned against the deal to ask themselves if the ends justify the means, even if cronyism and a frontal assault on the media -- not consumer welfare -- are fueling the court battle.

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

Is Trump's AT&T Merger Roadblock A Return To Sensible Antitrust, Or Just More Cronyism?

from the raised-eyebrow dept

Given that the Trump administration has been tripping over itself to obliterate popular consumer protections (net neutrality, broadband privacy) and most media consolidation rules (largely to benefit Sinclair broadcasting), many analysts assumed that the administration would see absolutely no problem with AT&T's latest $86 billion acquisition of Time Warner. After all, such vertical integration mergers -- while they can cause very serious market harms -- are often more difficult to make a case for than mergers where direct competitors are eliminated.

Supporting that position was the fact that Makan Delrahim, Trump's new antitrust boss at the DOJ, had been on record previously stating that he saw no serious problems with the deal. That's why it was a bit of a surprise last week when reports emerged that Trump's DOJ was considering a lawsuit to block the megamerger, and may not approve the deal unless AT&T either sold off DirecTV (acquired last year) or Turner Broadcasting, owner of channels like Cartoon Network, TBS, and CNN.

Given Trump's disdain for CNN's coverage of his Presidency, many began to immediately speculate that Trump was using the merger for leverage. After all, that's what one administration official told the New York Times was on the table in a story back in July:

"White House advisers have discussed a potential point of leverage over their adversary, a senior administration official said: a pending merger between CNN’s parent company, Time Warner, and AT&T. Mr. Trump’s Justice Department will decide whether to approve the merger, and while analysts say there is little to stop the deal from moving forward, the president’s animus toward CNN remains a wild card."

So the idea that Trump would use the merger as leverage to take aim at CNN was clearly something that was on the table. But when asked about the decision while on Air Force One last week, Trump insisted that the decision wasn't his, but was made by "a very respected person," presumably Delrahim:

"Speaking to reporters on Air Force One, Trump said he “didn’t make that decision — it was made by a man who’s a very respected person, a very, very respected person..."I did make a comment as to what I think,” Trump also acknowledged. Previously, the president has blasted AT&T and Time Warner’s merger plans — and during the 2016 election, he threatened to block the companies from combining under his watch.

"I do feel you should have as many news outlets as you can — especially since so many are fake," Trump continued, according to a pool report. Then, he concluded: “I didn't make a statement, but I did make a statement long before. So we’ll see — that probably ends up being litigation, maybe not, we’ll see how it all plays out."

Granted, forcing AT&T to divest either DirecTV or Turner Broadcasting makes sense from a regulatory perspective. Consumer advocates worry that AT&T's greater size, leverage, and control over broadcast content (particularly HBO) will make it harder for streaming providers to license the content they need to compete. They're also worried that AT&T will leverage this advantage -- in concert with its monopoly in broadband and stranglehold over tower backhaul -- to engage in more of the anti-competitive behavior it's well known for (zero rating, etc.).

But it's hard to square this return to sensible antitrust enforcement with an administration that has been taking a mindless hatchet to media consolidation and consumer protection rules. What kind of thought process involves seeing no problem with gutting media consolidation rules (which devastates smaller news outlets and media diversity), yet suddenly having a strong disdain for the often more-murky negative impact of vertical integration? One possible explanation for the policy asymmetry may reside with Rupert Murdoch, who has apparently been trying to get AT&T to offload CNN to News Corporation for much of the year:

"Rupert Murdoch telephoned AT&T Chief Executive Randall Stephenson twice in the last six months and talked about cable network CNN, sources briefed on the matter told Reuters on Friday. According to one of the sources, the 86-year-old executive chairman of Twenty-First Century Fox Inc offered to buy CNN in both conversations.

And again, if you head back to media reports from January, Murdoch had been pressuring the Trump administration to make life harder on AT&T Time Warner, a News Corp. competitor:

"If Fox News’ politics ultimately solidify as more pro-Trump than they were during the campaign, that might be to the benefit of Murdoch’s business interests. According to a well-placed source, Trump has asked Murdoch to submit names for FCC Chairman. Murdoch, another source said, also wants conditions put on the AT&T-Time Warner merger, and he could lobby Trump to make that happen."

Again, it's entirely within the realm of possibility that an administration that has been protecting monoplists and gutting consolidation protections is having an uncharacterstic flirtation with sensible antitrust enforcement under Delrahim. But it's also entirely possible, especially when looking at the administration's behavior in full context, that Trump's DOJ is giving AT&T a hard time simply to aid a political ally and to quash a critical media outlet.

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

After Previously Claiming the Economics Would Never Work, HBO Streaming Now A Major Windfall

from the evolution-doesn't-care-that-you're-afraid dept

For years, HBO and owner Time Warner fell into the trap of telling customers what they wanted instead of the other way around. You might recall that HBO and Time Warner spent years waging a rather scorched earth assault on piracy and other "unauthorized viewing," going so far as to poison show torrents and shut down "Game of Thrones" viewing parties. A major problem with this approach is that HBO wasn't fully providing pirates an alternative. While HBO was offering streaming to existing cable customers, it spent years ignoring consumer calls for a standalone streaming video platform that didn't require cable.

There were any number of reasons for this myopia, the biggest being that like any good legacy company, HBO and Time Warner execs were afraid of wounding the traditional cable cash cow (even if said cow was already showing signs of notable mortality at the time). More specifically, HBO was afraid of hurting the cozy, heavily-subsidized relationship HBO enjoys with many cable providers, who all but give the channel away on occasional promotion. So while offering a standalone streaming platform was essential in evolutionary context, HBO consistently insisted it just couldn't make the economics work for such an option.

So while Time Warner and HBO execs were busy trying to downplay cord cutting as a fad, the piracy of HBO programs continued to smash BitTorrent swarm and other piracy records. That was until March of 2015 when HBO was forced to finally acknowledge the changing tides and launched HBO Now, its standalone streaming app. Fast-forward a little more than two years, and that decision is looking pretty good now in hindsight:

The “Game of Thrones” effect is in full force for HBO NOW, the premium network’s streaming service for cord cutters. According to new data from app market data provider App Annie, the iOS and Android versions of the HBO NOW mobile app have together generated $19 million in U.S. revenue for the two months containing the airing of “Game of Thrones” Season 7, as of Monday, August 21.

App Annie says it expects HBO NOW’s mobile apps to pull in well over $20 million by the end of the month.

The show’s outsized popularity has again sent the HBO NOW app flying up the Top Revenue charts on the iOS App Store, too. Roughly one month after the Season 7 premiere, HBO NOW became the number one app in terms of Overall iPhone revenue. It grabbed that spot on August 16th, 2017, and remained the top app by revenue for two more days.

That's pretty good for a service executives had to be dragged kicking and screaming toward, though you'd wonder how much more successful the platform could have been with an earlier start. And while "Game of Thrones" piracy is still booming, and HBO is still sending nastygrams to user ISPs in the hopes of thwarting it, at least HBO is now offering these users a legitimate alternative. An alternative that could provide more value over time if HBO experiments with price, or works on partnerships with smaller ISPs that have been contemplating getting out of traditional cable TV because they lack the leverage to compete with industry giants.

It's a similar predicament that's now facing ESPN, which, like HBO, spent years believing it could stand in the wings nursing its cash cow with a dumb look on its face while the entire pay TV ecosystem shifted under its feet. With cord cutting, phase one usually involves denying that the trend is happening, followed by acknowledging the trend but insisting it's some kind of fad. That's usually followed by the pretense that you saw and prepared for the trend all along despite all the data showing the opposite. It's usually good to throw in some make believe about how you're the one that gets to decide when to adapt for good measure

There's no doubt that adaptation will make these companies less money over the short term, but executives often struggle to realize a core truth: they don't have a choice. Cord cutting and the shift to IP video is happening whether these executives like it or not, and they can choose to stand mid-river in futile opposition to the flow, or adapt and take an early hit as the legacy cash cow dies, but be much better positioned for the future, whatever consumers determine they want it to look like.

Filed Under: game of throwns, hbo, hbo now, streaming
Companies: hbo, time warner

$89 Billion AT&T, Time Warner Merger Approval Looking Likely Despite Trump Pledge To Block Deal

from the merge-ALL-the-things dept

Needless to say, consumer advocates and smaller competitors aren't too keen on AT&T's $89 billion plan to acquire Time Warner. They argue that AT&T's long history of unethical behavior, empty promises, and anti-competitive shenanigans make it extremely likely the company will use its greater size and leverage to ill effect. They worry that AT&T will make it harder for competitors to license content necessary to compete with AT&T's DirecTV Now streaming service, and arbitrary usage caps and other tricks like zero rating to similarly put competitors at a disadvantage.

Traditionally, these kinds of vertical integration deals aren't blocked because it's harder to clearly prove potential antitrust harm, even if AT&T has a thirty-year documented history of all manner of fraudulent behavior. On the campaign trail, Trump repeatedly promised that this was a deal his administration simply would not allow, given the "concentration of power" the deal would deliver:

"In an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN -- a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.

Trump, of course, said a lot of things on the campaign trail, including promising to break up Comcast's already-completed 2011 acquisition of NBC, something Trump couldn't have done even if he wanted to. And while some thought that Trump's disdain for Time Warner-owned CNN would throw a wrench in the deal works, there's no indication that's going to happen. AT&T has already streamlined its chances for the deal by selling any assets that would have triggered an FCC review, and Trump subsequently appointed a DOJ antitrust boss on record stating he has no problem with the deal.

The fact that Trump's FCC has become a rubber stamp for every shitty idea coming out of AT&T's, Verizon's and Comcsast's collective heads should also likely clue people into which direction deal approval was leaning.

So not too surprisingly, media reports on the progress of the merger talks indicate AT&T's conversations with antitrust officials have shifted from whether the deal will be approved to finalizing what, if any conditions will be affixed to the deal:

"The early-stage discussions suggest that government lawyers have nearly finished their months-long look at how AT&T, the biggest pay-TV distributor, would reshape the media landscape with its bid for the owner of CNN and HBO -- and shows that the sides have moved on to talking about how they can make the merger work without harming rivals."

More accurately, they've moved on to talking about how they can make it appear that the merger could work without harming rivals, since, as we've long documented, the conditions affixed to these kinds of deals are traditionally only theatrical in nature. More often than not, the conditions are proposed by these telecom companies themselves, often requiring that companies do something they'd already planned to do anyway. In AT&T's case, it usually involves fudging their existing broadband deployment numbers, then promising a new broadband expansion that may or may not actually materialize.

We've documented how AT&T in particular is a long-standing professional at making all manner of bullshit promises if their mergers get approved, with regulators never really learning much of anything with hindsight. With Trump being no stranger to flimsy telecom promises of his own (his promise to block this deal being example A), the merger's going to create a wonderful opportunity for bullshit synergies the likes of which we may never see again.

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

Trump Hopes To Use AT&T Time Warner Merger As 'Leverage' Over CNN

from the the-peanut-butter-and-jelly-of-bullshit dept

On the campaign trail, you might recall that Donald Trump threatened to block AT&T's $89 billion acquisition of Time Warner, insisting that the deal was "an example of the power structure" he was fighting, because it would deliver "too much concentration of power in the hands of too few." Granted he subsequently appointed an FCC chairman in Ajit Pai who's little more than a rubber stamp for companies like AT&T, and nominated an antitrust boss already on record stating he has no real problems with the merger, leading most analysts to believe the deal will be approved anyway.

There are of course a number of legitimate reasons to block the deal, including concerns that AT&T will make licensing access to necessary programming more difficult than ever for streaming video competitors. Or the fact that AT&T's using its dominance in wireless to give Time Warner content an unfair advantage over competitors via usage caps and overage fees (aka "zero rating"). It would be foolish to think a company with such a rich history of anti-competitive and anti-consumer behavior wouldn't use this greater size and leverage anti-competitively.

But these are complicated nuances it's not-terribly-likely the current President actually understands. Instead, his focus in recent months has been the fact that he doesn't like Time Warner-owned CNN's critical coverage of his administration, and, according to the New York Times, hopes to use the deal as "leverage" to force CNN to soften its critcism of the President as part of his broader assault on the media:

"White House advisers have discussed a potential point of leverage over their adversary, a senior administration official said: a pending merger between CNN’s parent company, Time Warner, and AT&T. Mr. Trump’s Justice Department will decide whether to approve the merger, and while analysts say there is little to stop the deal from moving forward, the president’s animus toward CNN remains a wild card."

Other news outlets noted that the Trump administration is also contemplating demanding the ouster of current CNN boss Jeff Zucker in exchange for approving the deal. The news was quick to result in letters to the DOJ from several Senators who claimed Trump was "interfering" in an approval process that should be left up to regulators and the DOJ to decide:

"Any political interference in antitrust enforcement is unacceptable," Minnesota Sen. Amy Klobuchar wrote in a letter to Attorney General Jeff Sessions. "Even more concerning, in this instance, is that it appears that some advisers to the President may believe that it is appropriate for the government to use its law enforcement authority to alter or censor the press. Such an action would violate the First Amendment."

If you're at all familiar with the ethical behavior over at AT&T (like the times it ripped off a program for the hearing impaired or made bills harder to understand to help criminals scam its own customers), it would certainly be in character for AT&T to agree to trample the editorial firewall between itself and CNN to get the deal done -- it just wouldn't be stupid enough to put any such agreement in writing. As the net neutrality fight makes clear, telecom giants aren't particularly concerned about the whole free speech thing (check out Verizon's first foray into tech content, for example).

AT&T's also a world-class expert at making utterly bogus claims when it comes to its latest megamergers, consistently claiming such deals will lower prices, expand broadband coverage and create oceans of new jobs (telecom megamerger history makes it abundantly clear the exact opposite almost always occurs). Given some similar expertise over at the Trump camp, there's an incredible opportunity for some amazing bullshit here; an opportunity Trump likely won't want to waste by continuing what's become an arguably unhealthy fixation on CNN.

The likely outcome is that we'll get to have our rotten cake and eat it too: a torrent of bogus job and broadband expansion promises the likes of which we've never seen before -- and a CNN left bridled by a meddling new corporate parent focused exclusively on currying favor in the Trump administration to anti-competitive benefit. Just think of the incredible potential for synergies...and bullshit.

Filed Under: acquisitions, bullying, donald trump, first amendment, free press, freedom of expression, leverage, mergers
Companies: at&t, cnn, time warner