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