AT&T's $85 Billion Time Warner Buy Could Be An Anti-Consumer Shit Show Of Monumental Proportions

from the synergies-ahoy dept

As fixed and wireless broadband growth crawls to a halt and cord cutting begins to hammer TV numbers, incumbent telecom giants have been trying to pivot into the media and advertising game with mixed results. Verizon so far has shelled out billions to acquire aging 90s internet brands Yahoo and AOL, believing this can somehow transform the stodgy duopolist into a sexy, sleeker Facebook and Google competitor. So far these efforts to woo Millennials have been arguably underwhelming and occassionally comical, highlighting how innovation and disruption is somewhat foreign to these companies’ DNA.

AT&T has decided to follow a similar tack, over the weekend announcing a mammoth $85 billion deal to acquire Time Warner (not to be confused with Time Warner Cable) and its media properties (CNN, HBO). AT&T was quick to proclaim that the deal would be a “perfect match of two companies with complementary strengths,” who can bring a “fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers.” The deal comes not too long after AT&T decided to spend $79 billion to acquire DirecTV, adding notable debt for the already giant company.

AT&T’s decision to announce the deal now signals that it believes, or has been directly told, that regulators (both the tail end of Wheeler’s term and his replacement in the new year) would look kindly upon such a deal. But given AT&T’s long, rich history of aggressive anti-consumer behavior (and just blatant lying to prop up past mergers), there’s more than a few justified questions raised about AT&T growing larger.

This is, after all, a company that in the last four years alone has been fined for ripping off programs designed for low-income households, ripping off programs designed to aid the hearing impaired, actively aiding drug dealing directory assistance scammers, and making bills harder to understand to help crammers. It’s the same company that fought viciously against net neutrality, and is busy using “zero rating” to begin giving its own content an unfair advantage in the market. Yes, what could possibly go wrong with letting AT&T grow immeasurably larger?

Letting one company control an ocean-sized portion of all progamming and the conduit to the home has always been controversial. And while regulators did set some conditions to Comcast’s 2011 acquisition of NBC Universal, it was found that Comcast ignored many of those conditions, ultimately leading to regulators blocking its subsequent acquisition attempt of Time Warner Cable.

In this case, AT&T is making it clear that the acquisition is all about the company’s upcoming launch of its DirecTV Now streaming video service:

“Both Mr. Stephenson of AT&T and Jeffrey L. Bewkes of Time Warner stressed that during nearly three months of deal negotiations, the idea driving the talks was that Time Warner could help AT&T build out its own video streaming service. That service, called DirecTV Now, is Mr. Stephenson?s response to the migration of consumers toward mobile and online video watching and away from traditional cable packages.”

Owning that much content certainly makes licensing easier for AT&T. The problem, again, is that the current FCC has refused to seriously address zero rating (giving your own content a broadband cap exemption while still penalizing Netflix) as a potential anti-competitive weapon. AT&T, in response, has made it abundantly clear that zero rating will play a huge role in this upcoming service. Regulators could ban AT&T from using zero rating to favor Time Warner content, though history has shown enforcement of these promises is inconsistent.

And that’s before you get to the spectre of AT&T almost certainly (based on past behavior) using its role as a broadcaster to hamstring the streaming services that hope to compete with it. Or AT&T’s abysmal history on privacy issues, be that the use of stealth cookies to track user behavior without consent, or the company’s attempts to charge users more money just to opt out of private data collection and sales. AT&T’s also fighting tooth and nail against new FCC broadband privacy protections the agency is expected to vote on later this week.

In short, AT&T apparently believes that the best way to navigate a dramatically changing TV landscape that requires flexibility and innovation is to grow bigger and clumsier than ever.

The company has been losing broadband, TV, and postpaid phone subscribers the last few quarters. Executives apparently believe the best solution is to strike a series of massive traditional media deals (with valuations based on peak TV earnings and cash flow) just as the traditional TV sector prepares for a free fall. AT&T bought a satellite TV giant on the eve of the cord cutting revolution, and now aims to buy a traditional media giant just as the TV market begins truly entering an identity crisis. But there’s absolutely no indication that any of these deals will make AT&T magically more relevant to Millennials, or that vertical integration between distributors and content producers is still a guaranteed route to success.

That doesn’t mean AT&T won’t engage in anti-competitive behavior to try and make it work. Once AT&T launches its new streaming service, the company could make it much harder than ever for competing streaming providers to license the programming necessary to compete with it. AT&T could also zero rate its own content, further penalizing streaming video providers trying to compete in the space. And again, that’s before you get to AT&T’s history on privacy or any other creative new efforts AT&T will cook up to use its significantly larger scale and broadband monopoly to unfair advantage.

This being election season, the Presidential hopefuls were quick to chime in (sort of). Hillary Clinton gave somewhat of a non-answer by saying that she “certainly thinks regulators should look at” the deal (as if regulators tasked to review a deal would do anything else). It was actually Donald Trump’s camp that issued the clearest opposition to the deal:

“This oligopolistic realignment of the American media along ideological and corporate lines is destroying an American democracy that depends on a free flow of information and freedom of thought,? Peter Navarro, a senior economic adviser to Mr. Trump, said in a statement on Sunday.

Broken clocks, twice a day, etc. All told there’s little to any indication that the deal would be good for consumers, AT&T competitors or small businesses. But there are also doubts that regulators under the (likely) Clinton administration would stop the deal, if her non-answer and the notable amount of telecom money headed in the Clinton camp’s direction is any indication. Regardless of the regulatory response, history suggests it should at least be fun watching AT&T’s lawyers, lobbyists, and armies of think tankers once again try to spit shine the company’s latest attempt to become larger and more powerful than ever.

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Companies: at&t, time warner

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Comments on “AT&T's $85 Billion Time Warner Buy Could Be An Anti-Consumer Shit Show Of Monumental Proportions”

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24 Comments
Anonymous Coward says:

Re: Re:

Ignorance is also a big contributing factor. Far too many of the folks put on important tech committees and positions of power in the regulatory agencies do not even remotely understand the technology behind what they are tasked with covering.

Thus they are more likely to listen to lobbyists who sweet talk them with lies.

Anonymous Coward says:

Re: Re: Re:

That is not ignorance but gaining power.

In system that bases success in elections on how much money you have it is inevitable that the people who want to be elected are the ones who are closest to the private sector.

Of course someone might dig up some dirt and try to trick that system but then one of your big donors gives §500.000* and your management another §200.000 to the wife of the person who should be prosecuting you and all is good.

*
http://www.wsj.com/articles/clinton-ally-aids-campaign-of-fbi-officials-wife-1477266114

LetEmMerge says:

Let Them Merge, Makes It Easier to Break Them Up

From a different perspective, perhaps letting them become this omnipresent mega media, connectivity powerhouse would be in our best interests.

This leaves just a few very large players who own content to connection and even device policy.

This would put them in the cross hairs of scrutiny like never before with the result a backlash from consumers and congress that could perhaps lead to better offerings down to the last mile and device policies.

If ATT to Comcast were to be hacked and user data exposed, that could lead to regulated security instead of industry self guidance.

If prices increase and content gets locked up even more that could lead to breaking up the media properties which have been folding into fewer and fewer mega corporations.

Perhaps FCC Commissioner Wheeler knows this, perhaps he’s playing the long game waiting for consumers, which are voters to express their will. It’s not going to change until voters change who represent them and this could be playing right into that thought process.

What would be easier, anti trusting multiple companies that compete at some level or anti trusting two companies that own it all? Think about it…

Norahc (profile) says:

Re: Let Them Merge, Makes It Easier to Break Them Up

AT&T has already been through one regulatory break up (remember Ma Bell?) and that hasn’t slowed them down.

Also don’t forget that AT&T recently got a court to agree with them that the FTC does not have the authority to regulate them in certain aspects like misleading consumers (https://www.techdirt.com/articles/20161018/14062235832/ftc-warns-att-court-victory-throttling-could-screw-consumers-decades.shtml). If that stands, it would mean pretty much that only the FCC and the DOJ could intervene.

Ryunosuke (profile) says:

Telecoms and content providers should NEVER, EVER, EVER mix. This raises not only zero rating issues, but also speech issues. An online or TV commentator is less likely to criticize the failures of the broadband industry if said industry owns said commentators (see: John Oliver). Also this may be the primary reason they are doing so, to control the narrative through more misinformation and outright lies over truth and facts.

bt says:

Shareholder Value Destruction

On a somewhat different note, I have done some consulting for AT&T, and here’s my take:

-When AT&T wants to buy a large successful company in a mature and unrelated area of business as a part of their “Growth Strategy”, your best move is to call your broker and take a large position shorting AT&T stock. Shareholder value destruction is dead ahead.

-This will do nothing to stop the Chord Cutting and when they try to sell their large, bloated bundles for silly prices, no one will want them but the people at the old folks home.

-This is another AOL-Time Warner in the making. The Government will be doing AT&T a favor when they shit can this stupid idea.

Thad (user link) says:

Re: Shareholder Value Destruction

This is another AOL-Time Warner in the making. The Government will be doing AT&T a favor when they shit can this stupid idea.

I don’t think your analogy works; AOL got the far better end of the deal when it bought Time Warner. At least, until it got busted for all its years of fraud. (So hard to cancel your subscription, no wonder it’s #1.)

bt says:

Re: Re: Shareholder Value Destruction

Price paid for AOL by Time Warner: 147 billion.

Price Time Warner subsequently sold AOL for: 2 billion.

Even AT&T probably can’t match that performance, but you can expect a similar outcome. If you read the finance pages, apparently there’s already concern that DirectTV isn’t adding to AT&T’s “growth” as AT&T had hoped.

When these guys can’t make something “Grow”. They do deals, good deals, bad deals, whatever – this is all about keeping Wall Street pacified. America’s MBAs in action.

Ninja (profile) says:

I’m baffled. I agreed with something that came from Trump or his campaign staff.

"This oligopolistic realignment of the American media along ideological and corporate lines is destroying an American democracy that depends on a free flow of information and freedom of thought,” Peter Navarro, a senior economic adviser to Mr. Trump, said in a statement on Sunday.

Of course this is also a prime example of cognitive dissonance.

Kent England says:

This merger has likely already stopped a new product

Turner Classic Movies (TCM), a Time-Warner company, and Criterion have announced a classic movie streaming service at http://www.filmstruck.com which has been mysteriously delayed according to a banner on their website. I doubt this collaboration will see the light of day if AT&T is allowed to buy Time Warner.

Wendy Cockcroft (profile) says:

Innovation and disruption

…innovation and disruption is somewhat foreign to these companies’ DNA.

Now, now, Karl, they innovate in shady practices and disrupt attempts to break up their duopoly.

realignment of the American media along ideological and corporate lines

That’s the idea. Divide and conquer. Free market enthusiasts hopping in to tell us all to vote with our feet in 3…2…1…

Pre-emptive response: if you ever actually find a free market, please let me know. For the record, I’d like to see it more open and more fair so there’s more competition.

Pre-emptive response #2: To actually encourage people to cancel subscriptions after they’ve run out (people locked into 18 month contracts might be unwilling to take the penalties for quitting early) requires the kind of orchestrated campaign that resembles the civil rights bus boycotts. What were those people called again? Weren’t they considered to be the bad guys? Wouldn’t such a campaign’s leaders be treated in the same way?

Pre-emptive response #3: Given the pre-emptive responses above, do you think it’s time to re-think your position or are you going to call me a commie/lefty/[epithet of your choice]?

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