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The AT&T Acquisition of Time Warner

Keith Higgons

Posted on March 21, 2018 16:22

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The 85 billion dollar battle heads to court.

I realize media discussions can be a little arcane. Because this merger is rather significant, I’ll attempt to make this palatable and hopefully keep your eyes from glazing over.

What Is Happening?
The United States Department of Justice is attempting to block the AT&T acquisition of Time Warner (CNN, HBO, etc.). The DOJ claims this would limit competitiveness and lead to higher prices.

Why Is It Happening?
AT&T is arguing that this merger needs to take place in order for the combined, or vertically integrated (below), company to be competitive with the streaming explosion of Netflix, Amazon and Google. However, those companies aren’t vertically integrated.

Vertical Integration
Vertical integration is when a company expands its operations into the different steps in production. For example, in television, if you own and create your shows and then own the “pipes” or the “last mile” that distributes them to viewers, that’s “vertical integration”.

The concept behind vertical integration also doesn't appear to foster competition. Is it competitive if a company is the creator, supplier and distributor and all revenue flows into one coffer (see Comcast/NBCUniversal)?

Is Vertical Integration bad?
Maybe. The potential exists for a combined AT&T and Time Warner to favor access to their own content, via Direct TV.

However, the vertically integrated Comcast has not run afoul as of yet … but it’s still relatively new.  

With the rapid growth of streaming content and the potential collapse of net neutrality (it’s not dead yet), I would remain guarded about vertically integrated media companies continuing to behave equitably to their competitors.

So what? I watch most things on my phone.
By 2019, smartphone users will reach 2.7 billion users worldwide. Unlike cable companies, or pay TV services, telecommunications is a growth market and AT&T already has well over 100 million wireless subscribers.

Conversely, as of October 2017, Comcast has 25.5 million Internet subscribers (22.4 million cable television subscribers … and that’s shrinking).

That’s a big disparity of subscribers.

What about faster speeds?
Nope. The infrastructure is not being addressed.

The United States ranks 46th in mobile Internet speeds (remember, that’s the growth area) and 9th in fixed broadband speed.

Would my bill go down?
Nope. That your cable bill increases annually is now as reliable as death and taxes.

In 2018, AT&T’s Direct TV set an increase between $2 and $8, depending on your package, over 2017. Also, check your bill, most companies have introduced new hidden fees and charges.

While this merger could still get shot down, it seems unlikely because a legal precedent was already set with the Comcast and NBCUniversal merger. It’s also the same judge, Judge Richard J. Leon. It seems odd that he would rule differently with AT&T and Time Warner.

If he rules in favor of the merger, expect to see more vertical integration, and mergers, in media and other industries.

If he doesn’t rule in favor, it simply means it will be harder … but still not impossible.

Keith Higgons

Posted on March 21, 2018 16:22

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Source: FOX News
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