$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

AT&T Settles With DOJ Over LA Dodgers Channel Collusion Allegations

from the competitors-playing-too-nicely dept

In 2013, Time Warner Cable (since acquired by Charter Communications) struck an $8.35 billion deal with the LA Dodgers to create LA SportsNet, the exclusive home of LA Dodgers games. To recoup its investment, Time Warner Cable demanded exorbitant prices from competing cable providers if they wanted access to the channel. Unsurprisingly, all of Time Warner Cable's competitors in the region balked at the $5 per subscriber asking price.

Several years later, a massive portion of Los Angeles still can't watch their favorite baseball team, since Time Warner Cable's asking price not only kept competing cable operators from delivering the channel, but prohibited over-the-air broadcasts of the games.

Last November, a new wrinkle emerged in the standoff after the Department of Justice sued AT&T (now owner of DirecTV) for being a "ringleader" in a collusion effort involving the channel. The DOJ effectively claimed that DirecTV, Cox, and other regional cable providers violated antitrust law by sharing private company data during their coordinated effort against Time Warner Cable's exclusive arrangement and higher rates. The original complaint stated that this "unlawful information exchange" violated consumers' rights to fair channel price negotiations:

"As the complaint explains, Dodgers fans were denied a fair competitive process when DIRECTV orchestrated a series of information exchanges with direct competitors that ultimately made consumers less likely to be able to watch their hometown team,” said Deputy Assistant Attorney General Jonathan Sallet of the Justice Department’s Antitrust Division. “Competition, not collusion, best serves consumers and that is especially true when, as with pay-television providers, consumers have only a handful of choices in the marketplace."

Fast forward a few months and a new administration, however, and the Department of Justice has announced that it has settled its lawsuit against AT&T. According to the DOJ, AT&T has agreed to monitor its employees so they do not illegally share information about sensitive contract negotiations with competitors. This, the DOJ states, should wind up being a boon for consumers:

"When competitors email, text, or otherwise share confidential and strategically sensitive information with each other to avoid competing, consumers lose,” said Acting Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division. “Today’s settlement promotes competition among pay-television providers and prevents AT&T and DIRECTV from engaging in illegal conduct that thwarts the competitive process."

And yes, it makes sense to enforce existing antitrust law prohibiting covert collusion between companies. The problem, of course, is that nothing in the settlement fixes the original issue of Los Angeles residents being unable to actually watch these games due to Charter's exclusive deal with the Dodgers. Nor does it address the fact that cable providers increasingly pad consumer bills with "regional sports fees" that pay for these networks (which they often already own), but are designed to help providers falsely advertise a lower rate at the point of sale (something regulators truly couldn't care less about).

So while the settlement slaps the wrists of companies that technically broke the law to do battle with Charter's exclusive arrangement, nothing about it really makes things arguably better for the consumer. And with the DOJ's new incoming antitrust boss having formerly lobbied for both AT&T and Dish Network (he's previously supported AT&T's $85 billion plan to acquire Time Warner) the all-too-familiar anti-consumer dysfunction bone-grafted to the cable and broadcast sector isn't likely to evaporate anytime soon, even with the added benefit of streaming competition.

Filed Under: baseball, collusion, la sportsnet, merger, sports, tv
Companies: charter, dodgers, time warner cable

Yahoo's Security Incompetence Just Took $250 Million Off Verizon's Asking Price

from the dysfunction-junction dept

So last year we noted how Verizon proposed paying $4.8 billion to acquire Yahoo as part of its plan to magically transform from stodgy old telco to sexy new Millennial advertising juggernaut, which, for a variety of reasons, isn't going so well. One of those reasons is the fact that Yahoo failed to disclose the two, massive hacks (both by the same party) that exposed the credentials of millions of Yahoo customers during deal negotiations. The exposure included millions of names, email addresses, phone numbers, birthdates, hashed passwords (using MD5) and "encrypted or unencrypted" security questions and answers.

As noted previously, Verizon had been using the scandal to drive down the $4.8 billion asking price, reports stating that Verizon was demanding not only a $1 billion reduction in the price, but another $1 billion to cover the inevitable lawsuits by Yahoo customers.

Verizon appears to have gotten at least some of what it wanted, Bloomberg reporting that Verizon has managed to shave $250 million or so off of the original price tag:

"Verizon Communications Inc. is close to a renegotiated deal for Yahoo! Inc.’s internet properties that would reduce the price of the $4.8 billion agreement by about $250 million after the revelation of security breaches at the web company, according to people familiar with the matter...In addition to the discount, Verizon and the entity that remains of Yahoo after the deal, to be renamed Altaba Inc., are expected to share any ongoing legal responsibilities related to the breaches, said the people, who asked not to be identified discussing private information."

Yahoo wasn't always incompetent when it comes to security. In fact, at one point the company was considered among the best in the business, something that only began to change when CEO Marissa Mayer decided to begin cutting security corners. This came to light a few months back via a series of insider-fueled pieces highlighting how Mayer's business decisions actively worked to make Yahoo users less secure. Mayer was concerned, apparently, that actually being transparent with Yahoo customers about their (not so) private data would result in the company losing even more customers than it already had:

"According to the former Yahoo executive that Business Insider spoke to, Yahoo's culture of secrecy and its prioritization of other business goals led to troubling security practices that made it much more difficult for Yahoo to defend from hackers. Yahoo's security team was often denied funding and sometimes kept in the dark at Mayer's direction, as she feared more emphasis on security could potentially spur a decline in the company's user base."

But at the end of the day, transparency builds trust in the brand, resulting in more loyal customers -- something Mayer apparently didn't understand. The ironic part being that much of this shift away from security was also occurring because Mayer was busy trying to make Yahoo a sexier acquisition target. Fortunately for all of us, this deal finally puts this entire sordid affair in the real-view mirror, and Verizon executives can get back to gobbling up foundering 90s internet brands, and convincing itself it has the disruptive DNA required to take on Google, Facebook and others in the quest for Millennial ad eyeballs.

Filed Under: merger, security
Companies: verizon, yahoo

Verizon Eyes Charter Megamerger, Because Who Likes Broadband Competition Anyway?

from the ma-bell-and-the-ill-communication dept

Charter Communications just got done spending $79 billion to acquire Time Warner Cable and Bright House Networks. And like most telecom megamergers, the promises made before the deal (more jobs! better service! incredible new innovation!) have only a fleeting resemblance to what's actually happening in the real world. Instead, acquired markets have enjoyed frozen broadband deployments, rate hikes and scaled back social media support. With Charter already having among the worst customer service in any industry in America, support in the wake of the merger has been precisely what you'd expect.

With the ink barely dry on that deal, the telecom sector is looking to consolidate even further. Charter stock took a nice joy ride this week on the news that Verizon has reached out to Charter to merge, consolidating the sector even further. The deal would create a telecom giant the likes of which the sector has never really known:

"Verizon serves 114 million cellphone subscribers, 4.6 million TV customers and 7 million Internet subscribers; Charter has 17 million TV customers and 21 million Internet subscribers. Together, the two companies' high-speed Internet businesses would add up to more than Comcast's 25 million broadband customers; at 21.6 million, their combined base of TV customers would be roughly on par with Comcast's. Both Verizon and Charter declined to comment."

Rumors of a Verizon and cable industry megamerger have been floating around the industry for several weeks, with Comcast also being tossed about as an M&A partner. Most of the analysis suggests that Verizon's either interested in using Charter's large footprint to help shore up the company's fifth generation (5G) wireless ambitions, or feels threatened from the cable industry's plan to jump into the wireless sector -- Verizon hoping to head off any additional wireless competition at the pass via M&A.

Less talked about of course is the fact that Charter and Verizon directly compete in many markets (like New York City), and the deal would result in an already relatively uncompetitive sector getting less competitive than ever. Or the fact that time and time again, promises of job creation and improved service in the wake of these deals never actually materialize. In fact, quite often the opposite is the result as redundant positions are eliminated and competitive incentive to compete (or, say, improve utterly abysmal customer service) is eroded further.

Of course the X factor in this latest megamerger rumor is whether or not the Trump administration will approve of the deal. On the campaign trail, Trump promised to not only block AT&T's $100 billion acquisition of Time Warner, but even went so far as to claim he'd somehow break up the already completed Comcast NBC merger, completed back in 2011. Most Wall Street and telecom analysts however believe Trump was just grousing over the negative coverage by NBC and Time Warner-owned CNN, and the ideological bent of his regulatory appointments (like new FCC boss Ajit Pai) suggest standing in the way of such super-unions won't actually be a formal administration policy.

Since historically companies like AT&T and Verizon have had incredible success conning convincing the press and public that these kinds of deals are a great boon for job growth and improved infrastructure, it seems rather likely that Trump will somehow approve and co-opt the deals under a flurry of promises that will never actually materialize. Should these kinds of deals be approved, the cognitive dissonance among Trump supporters still convinced he's somehow a champion of the little guy (despite clear intent to gut consumer protections like net neutrality and his laundry list of ultra-industry friendly administration appointments) should prove equal parts entertaining and terrifying.

Filed Under: broadband, competition, merger, tv
Companies: charter, verizon

AT&T Intends To Dodge FCC Review Of Time Warner Mega-Merger, But Trump Remains A Wild Card

from the synergies-out-the-wazoo dept

AT&T continues to try and sell regulators on the company's $100 billion acquisition of Time Warner, making all kinds of promises (few actually being true). Consumer advocates are highly wary of the deal, arguing that a more powerful AT&T (with its rich history of anti-competitive behavior and outright fraud) would be in a perfect position to hinder streaming competitors from licensing the content they need to compete. That's of course when AT&T isn't busy giving its own DirecTV Now service an unfair market advantage via zero rating and usage caps.

But AT&T's path to merger completion just got a bit easier. Outlets had been noting for some time that an FCC review would only be triggered if AT&T attempted a transfer of the two dozen or so Time Warner satellite licenses or the station license for WPCH-TV in Atlanta. Avoid those, and you avoid even a possibility that the FCC could block the deal or saddle it with conditions. And that's precisely what AT&T appears intent on doing according to a new regulatory filing with the SEC:

“Time Warner has conducted a review of all licenses that it holds that are granted by the FCC,” says the company. “While subject to change, it is currently anticipated that Time Warner will not need to transfer any of its FCC licenses to AT&T in order to continue to conduct its business operations after the closing of the transaction.”

If, as AT&T contends, these licenses don’t need to be transferred — or if Time Warner divests itself of the licenses before merging — the companies seem to believe the FCC has no authority to intervene and review the merger.

The deal would still need approval from the Justice Department, but Donald Trump remains a bit of a wild card in AT&T's equation. Trump promised to block the deal in the lead up to the election, claiming "it's too much concentration of power in the hands of too few." But Trump's telecom transition team consists largely of folks interested in defunding and defanging regulators. These aren't exactly the kind of folks who'll be supporting government blockades of (or restrictive conditions attached to) telecom sector mega mergers. Neither is the most likely top FCC choice, Ajit Pai.

But there's a wrinkle. Trump may still block the deal, just for reasons other than what he claimed on the campaign trail. A recent New York Magazine column on Megyn Kelly contained an interesting tidbit, noting that Trump has turned to News Corporation boss Rupert Murdoch for tips on choosing the next FCC boss. Murdoch's also urging Trump to block the deal as a favor to Murdoch and his obvious competitive interests:

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.

In other words (assuming this report is correct), Trump could block the deal, but only to benefit Murdoch's own news empire, and not because it would protect consumers, smaller competitors, or the media and streaming markets. There's another possible factor as well. Bloomberg recently reported that Trump was opposed to the deal, but mainly because he's still bitter about CNN's coverage of his campaign -- and CNN is, of course, part of Time Warner. So there are still more "personal" reasons why Trump may want to block the merger. That's going to likely cause friction among Trump's own telecom sector and tech appointees, who have made it abundantly clear they don't want regulators doing much of anything outside of nodding dumbly and looking busy.

Regardless, AT&T remains publicly optimistic, insisting there's just no way regulators would dare block its latest megamerger; it's simply too fantastic:

"In the modern history of the media and the internet, the U.S. government has always approved vertical mergers like ours, because they benefit consumers, strengthen competition, and, in our case, encourage innovation and investment," AT&T executive VP and general counsel David McAtee said of the transaction.

Filed Under: doj, donald trump, fcc, ftc, merger, review, spectrum
Companies: at&t, time warner

AT&T Already Backing Off Its Biggest Time Warner Merger Promise: Cheaper TV

from the wink-wink-nudge-nudge dept

AT&T has spent the last few months fending off critics of its planned $100 million acquisition of Time Warner. Most critics say the company's ownership of Time Warner will make it harder for streaming competitors to license the content they need to compete. Others warn that AT&T's decision to zero rate (cap exempt) its own content gives the company's new DirecTV Now streaming TV service an unfair advantage in the market. That's before you get to the fundamental fact that letting a company with the endless ethical issues AT&T enjoys get significantly larger likely only benefits AT&T.

Responding to these criticisms, AT&T CEO Randall Stephenson spent the last few months repeatedly insisting that critics have it wrong, because the merger was allowing the company to introduce a new streaming video service that provides 100 channels of TV for just $35 per month:

"I'm not surprised [by the criticism]. They're uninformed comments," Stephenson said in response to a question from Wall Street Journal editor Rebecca Blumenstein at the newspaper's WSJDLive Conference. "Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we're trying to do here, again a $35 product we bring into the market."

That $35 price point was used again and again by AT&T lobbyists and executives in selling the deal before Congress, the company insisting that only this new mega-merger could possibly make this kind of offer possible. Stephenson at several points proclaimed that the lower-cost option was "a way to drive pricing down in the marketplace," -- a surefire example of AT&T's dedication to intense video competition.

It's ironic then that the company is already backtracking and raising rates on its new streaming TV service.

As it turns out, that $35 for 100 channel offer was only a limited-time promotion. AT&T has already jacked the price of the service up to $60 per month as of January 9, and the company is already indicating that pricing for all of its streaming TV service tiers (despite now owning Time Warner content) will be going up sometime in the near future:

"After Jan. 9, new subscribers who sign up for DirecTV Now’s Go Big tier with after Jan. 9 will pay $60 per month. Existing subs will continue to pay the $35-per-month rate for now, but the company also said the fees may increase at some future date. In addition, “channels, features, and terms (are) subject to change & may be discontinued without notice,” AT&T said in a notice on the DirecTV Now website."

And this comes as the outgoing FCC is clearly warning that AT&T is using usage caps to give this new content an unfair advantage over streaming alternatives. So while AT&T is busy claiming the Time Warner Merger will help it disrupt and compete with traditional cable, it's clear AT&T executives are more interested in building cable 2.0: the same old anti-competitive shenanigans and TV price hikes we all know and love, just with a shiny new layer of public relations paint. AT&T has a long history of bogus promises to get big deals approved, but it's rare to see the company already falling short on its promises before the ink is even dry.

Filed Under: merger, promises, tv
Companies: at&t, directv, time warner

Verizon Wants A Yahoo Price Cut After Company Reveals Another, Massive Hack Attack

from the this-is-not-going-well dept

Earlier this year Verizon was understandably irritated when it learned (just two days before the public) that Yahoo had failed to disclose a massive hack of the company's systems during the companies' $4.8 billion merger negotiations. Reports suggested that Verizon, who is attempting to pivot from broadband to ads and content, wanted a $1 billion reduction in the asking price and another $1 billion set aside for the inevitable lawsuits. Given its NSA ties, Verizon was likely much less concerned about reports revealing that Yahoo also went out of its way to help the government sniff through subscriber e-mail accounts en masse.

Fast forward to this week, and things just got notably more complicated for both companies. While the first Yahoo hack revealed the personal data of roughly 500,000 Yahoo subscribers, Yahoo just confirmed a second attack by the same party that the company says revealed the personal data of 1 billion Yahoo users. Yahoo says this second attack was only revealed once law enforcement reached out to Yahoo with snippets of the compromised data in hand. But in a website post by Yahoo’s chief information security officer Bob Lord, the company effectively admits it still doesn't actually know how the hackers got this information:

"As we previously disclosed in November, law enforcement provided us with data files that a third party claimed was Yahoo user data. We analyzed this data with the assistance of outside forensic experts and found that it appears to be Yahoo user data. Based on further analysis of this data by the forensic experts, we believe an unauthorized third party, in August 2013, stole data associated with more than one billion user accounts. We have not been able to identify the intrusion associated with this theft. We believe this incident is likely distinct from the incident we disclosed on September 22, 2016."

Not too surprisingly, Verizon continues to be frustrated by the revelations, while simultaneously using them to drive down the Yahoo asking price:

"A legal team led by Verizon General Counsel Craig Silliman is assessing the damage from the breaches and is working toward either killing the deal or renegotiating the Yahoo purchase at a lower price, the person said. One of the major objectives for Verizon is negotiating a separation from any future legal fallout from the breaches. Verizon is seeking to have Yahoo assume any lasting responsibility for the hack damage, the person said."

While some outlets continue to suggest the deal could be killed entirely, Yahoo is critical to Verizon executives' beliefs they can transform Verizon from stodgy old telco into a Millennial-focused media and advertising juggernaut. The problem is that Verizon's attempt to become the next Google or Facebook isn't going particularly well. Being a pampered telecom monopoly for a generation doesn't imbue you with the kind of DNA required to make such a disruptive transition, resulting in the company's Millennial-focused streaming service Go90 being a "dud" in the words of Verizon's own partners.

Verizon will likely continue undaunted in its plan to magically become Google by gobbling up failed 90s internet brands. And while it's far from certain that Verizon has the chops to successfully make this transition work, the least we can hope is that the telco brings something vaguely resembling security standards along for the ride as the deal stumbles its way toward its inevitable conclusion.

Filed Under: cybersecurity, hack, merger, privacy
Companies: verizon, yahoo

Charter's Mega Merger Results In Higher Prices, Slower Speeds, And Worse Customer Support Than Ever

from the meet-the-new-boss dept

When Charter pitched its $79 billion acquisition of Time Warner Cable and Bright House Networks, the company promised an absolute ocean of improvements for customers, including better broadband speeds, improved cable boxes and new jobs. After blocking Comcast's own merger attempt of these companies, regulators bought into this promise, approving the merger but banning the cable company from imposing usage caps, charging Netflix steep interconnection fees, or otherwise trampling net neutrality (even if the FCC's rules are gutted by the incoming administration).

But, even with these conditions, it's becoming apparent to many customers that the already shaky service they had under Time Warner Cable and Bright House Networks is actually getting worse. Charter apparently doesn't believe in offering customer support via alternative methods, so it has eliminated most of the alternative customer support offered via social media and third party forums. Despite promising broadband speed upgrades, the company has also frozen the upgrades that had been taking place at the acquired companies.

This week, Charter formally applied its branding to acquired Time Warner Cable and Bright House markets. To introduce itself to its new customers, Charter got right to work post merger jacking up the price of service as customers' long-term contracts expire, with an apparent unwillingness to offer any new promotions:

(One customer) told me he’d been paying Time Warner about $140 a month for TV, phone and Internet service. But now that Spectrum had reared its head, his bill had shot up to $162. “I guess they’re trying to get their $8 billion back as quickly as possible,” Cohen, 74, said, referring to the fat bag of cash Time Warner Cable paid to be the exclusive distributor of Dodgers games.

Charter CEO Tom Rutledge insists that these freshly-acquired customers were "mispriced" and that offering promotions is a dead end game. None of this should be surprising. In telecom, where last-mile competition is little more than a pipe dream, larger mergers and acquisitions almost always result in higher prices, worse service, and job losses. Yet for obvious reasons, state and federal regulators are consistently intent on letting these companies grow larger and more apathetic, and ignoring the negative repercussions of these decisions as if they never happened.

Here's the real problem: despite the hype surrounding efforts like Google Fiber, the broadband market is about to get even worse for tens of millions of consumers, thanks, in part, to this consolidation.

AT&T and Verizon have given up on millions of DSL customers they don't want to upgrade, and have shifted their focus to media and advertising. Smaller telcos like Windstream, Frontier and CenturyLink don't want to pay to upgrade their DSL lines either, in many areas, and are shifting to enterprise services. So as cable giants consolidate, DSL competitors dwindle, and we move toward a new era of hamstringing regulators that oversee the telecom market, cable's monopoly will grow stronger, and the incentive to provide quality service at low prices will be less than ever before.

Filed Under: broadband, customer supporter, merger
Companies: bright house networks, charter, time warner cable

Senator Wyden Warns That AT&T's New Merger Poses A Massive Threat To Net Neutrality

from the nickel-and-dime dept

As AT&T fires up its lobbyists and various policy tendrils to sell the company's $100 billion (including debt) acquisition of Time Warner, the focus of the conversation has very quickly shifted to net neutrality and zero rating. AT&T already exempts its own content from the company's usage caps, and its DirecTV Now streaming service, launching later this month, is expected to follow suit. Once AT&T acquires Time Warner and its various properties (HBO, CNN), the worry is that this content will also get a leg up by being cap-exempt, creating an unlevel playing field for competing content and streaming services.

Senator Ron Wyden this week made it abundantly clear that he sees the new AT&T merger as a significant threat to net neutrality. In a letter to FCC boss Tom Wheeler (pdf), Wyden specifically points to AT&T's ever-expanding usage caps and the practice of zero rating as "anti-competitive practies that harm consumers" and small businesses alike:

"I am deeply concerned that if AT&T acquires Time Warner's content, the new mega-company will have incentives to prioritize its own content over content created by small business, independent artists or by its rivals."

As we've noted more than a few times, Wyden also highlights how usage caps are arbitrary and unnecessary constructs in the first place:

"Nearly all data caps, and particularly those attached to wireline broadband plans, have nothing to do with network management and everything to do with profiting from an ever-more-consolidated broadband market. Data cap plans that zero rate data at the discretion of the ISP violate the principle of net neutrality by creating an internet where one bit is favored over another bit absent user control...I am deeply concerned that if AT&T acquires Time Warner's content, the new mega-company will have incentives to prioritize its own content over content created by small business, independent artists, or by its rivals."

The problem, as we've long noted, is that while the FCC passed net neutrality rules last year, it failed to prohibit zero rating, and has yet to take any meaningful stand on usage caps. Usage caps aren't just price hikes on uncompetitive broadband markets, they're incredibly effective at giving incumbent ISP content a leg up in the market using zero rating. And while the FCC claimed it would be launching an "informal information exercise" to examine the negative repercussions of caps and ratings, that inquiry has resulted in jack shit in terms of actual enforcement.

As a result, we've now got AT&T, Comcast and Verizon all using caps to give their own content an unfair advantage, while Sprint and T-Mobile happily sell "unlimited" data plans that throttle games, music, and video unless consumers pay a premium. The FCC's failure to ban these peripheral behaviors, as we warned, opened the door to all of this, and AT&T's new mega-merger has the potential to take the problem to an entirely new level.

Wyden was quick to note on Twitter that he'll introduce legislation if the FCC fails to act: The problem is that in a nation where the majority of consumers don't even know what a gigabyte is, zero rating is simply too confusing. Most consumers (and many reporters) still labor under the illusion that zero rating gives them something for free, ignoring that usage caps are an entirely arbitrary construct layered on top of what's already some of the most expensive wireless data rates in the developed world. Without consumers understanding how anti-competitive usage caps and zero rating truly are, there's less political pressure to do something about it -- which is why the FCC continues to twiddle its thumbs on the sidelines.

The debate over the AT&T merger is thankfully bringing this entire conversation to the foreground, but it's also going to be a wonderful opportunity for AT&T, its lobbyists, and loyal politicians to confuse consumers even further.

Filed Under: competition, merger, net neutrality, ron wyden, zero rating
Companies: at&t, time warner

AT&T's Already Making Things Up To Get Its Massive New Merger Approved

from the witness-the-firepower-of-this-fully-armed-and-operational-battle-station dept

Over the years, we've noted how AT&T has a nasty habit of lying to sell the public, press and regulators on the company's neverending attempts to grow larger. Whether it's promising broadband expansions that never arrive, or using astroturf to try and argue anti-consumer mergers are good for toddlers, AT&T's lobbyists, lawyers, and policy tendrils work tirelessly to argue that up is down, black is white, and any skepticism of its claims are unfounded hysteria. As we saw with the blocked T-Mobile merger, this sort of behavior doesn't work quite as well as it used to.

Enter AT&T's latest $85 billion planned acquisition of Time Warner. Consumer advocates worry AT&T could use its size and leverage to make content more expensive, while the usage caps and zero rating give AT&T's own upcoming streaming video service an unfair market advantage. Wall Street hasn't exactly been bullish on the idea either, noting how AT&T's $69 billion acquisition of DirecTV, followed by its $85 billion acquisition of Time Warner is not only a giant risk on the eve of the cord cutting revolution, but it saddles AT&T with an absolute mountain of debt that will potentially damage the company's credit rating.

But AT&T being AT&T, the telco is already busy trying to claim the merger will create all manner of amazing consumer benefits. One of the top early claims is that buying a massive media empire will somehow speed up AT&T's fifth-generation (5G) wireless deployments:

"Stephenson this week tried to claim that the $85 billion acquisition of a broadcaster will somehow speed up the company's deployment of fifth generation (5G) wireless broadband. "We would probably have a desire to move faster on 5G, certainly not slower," Stephenson claimed on the company's earnings call this week. AT&T CFO John Stevens agreed, claiming that the massive deal "brings us a lot more financial flexibility... or revenue enhancements and growth that will allow us to fund 5G."

Except that 5G is an evolutionary step up for wireless, one AT&T was unquestioningly-dedicated to before this merger was even announced. AT&T doesn't really have a choice in working toward 5G, which doesn't even have an official standard yet -- and likely won't see any meaningful commercial deployment until 2020. As for "financial flexibility," buying a massive media empire, saddling yourself with debt, having your credit downgraded and potentially hamstringing your ability to participate in current spectrum auctions -- doesn't magically make your wireless network appear more quickly.

AT&T also appears to be trying to convince the press, public and regulators that the deal is somehow making it possible for AT&T to launch its new "DirecTV Now" streaming service, which is expected to launch this Friday. AT&T executives have been claiming repeatedly that the service's $35 per month price point is somehow thanks to a merger that technically doesn't even exist yet:

"AT&T CEO Randall Stephenson today defended his company's proposed acquisition of Time Warner, saying that critics who claim the merger will raise prices are "uninformed." As proof, he said the AT&T-owned DirecTV will soon launch a $35-per-month streaming service called DirecTV Now.

"I'm not surprised [by the criticism]. They're uninformed comments," Stephenson said in response to a question from Wall Street Journal editor Rebecca Blumenstein at the newspaper's WSJDLive Conference. "Anybody who characterizes this as a means to raise prices is ignoring the basic premise of what we're trying to do here, again a $35 product we bring into the market."

Right, except this new streaming service was actually first announced eight months ago. And the licensing contracts supporting this $35 price point (which you know won't be anywhere near $35 once AT&T saddles it with fees and caveats) were already in place long before the merger was even announced. While AT&T is surely going to get better rates for content now that it owns the cow, there's absolutely no historical evidence to suggest that savings will be passed on directly to the consumer. If anything, consumers could pay more as AT&T uses its broadband mono/duopoly power to try and hamstring streaming alternatives.

This is just AT&T getting warmed up. Over the next few months, media outlets will be hammered with op-eds from lawyers, lobbyists, politicians, policy wonks, "consultants" and think tankers (all with undisclosed financial ties to AT&T) happily claiming that this new merger will cure cancer, protect toddlers, and keep the nation's puppies warm and happy. And while it's understandable that ISPs want to get into content and ads as broadband growth slows, the $150 billion spent on DirecTV and Time Warner could have brought fiber optic connections to American homes several times over.

Filed Under: 5g, broadband, content, lies, merger, wireless
Companies: at&t, directv, time warner