This week, AT&T’s CEO, Randall Stephenson, is sitting before a Senate subcommittee and attempting to explain how the company’s merger with Time Warner wouldn’t be consequential to consumers.
When AT&T executives announced that they had reached a deal with Time Warner to acquire the content provider for $85.4 billion, the company received blowback from critics, lawmakers and politicians about what that deal could mean for consumers. The biggest concern that has been brought up repeatedly is whether or not AT&T decides to heavily limit or restrict the distribution of Time Warner content to other providers like Verizon or Sprint. For example, networks like HBO and CNN would be cheaper or, at the most dramatic, exclusive to AT&T subscribers.
Effectively, this means that other providers like Verizon would have to pay more to access HBO content for its own subscribers. That means Verizon would have to charge its customers extra to be able to stream the same HBO content that AT&T and DirecTV Now subscribers are getting at a fraction of the cost.
Sen. Amy Klobuchar (D-Minn.) said that having less competition would affect consumers directly and argued that it didn’t make sense to continuously remove competition from a growing and in-demand field. Doing so would result in giving consumers less options to choose internet, streaming and cable providers, leading to massive fluctuations in subscription costs across the board.
“The solution for less competition is not even less competition,” Klobuchar said.
Stephenson told the Senate on Wednesday that AT&T had no plans to restrict content at this time, and while that would inevitably end up being beneficial to the telecom giant, it would also cripple Time Warner’s business structure. Time Warner would lose out on bringing its programming to more people, thereby cutting the amount of subscribers its networks have. Show ratings go down, advertising funds would lessen and overall, Time Warner’s financials would take a hit. Stephenson added that it didn’t make sense for AT&T to financially ruin the company it was investing in, so restricting access didn’t make sense for either.
Despite Stephenson’s statements, there’s already precedent set by the company to confirm what critics feared would happen: the launch of DirecTV Now. Last week, AT&T unveiled its over-the-top streaming platform DirecTV Now, and along with it, announced that for $35 a month, subscribers would be able to get 100 channels. The kicker was that for an additional $5 a month, subscribers could get total access to HBO. Even as a promotional offer, it’s one of the cheapest ways to get access to HBO through an OTT package. In comparison, a subscription to HBO Now, the network’s stand-alone streaming service, costs $14.99 on its own.
Gene Kimmelman, CEO of consumer advocacy group Public Knowledge, said that because of the size of AT&T’s network — more than 130 million wireless subscribers and more than 25 million cable subscribers — the telecom company would absolutely have incentive to limit access to Time Warner video.
Sen. Al Franken (D-Minn.) echoed Kimmelman’s thoughts and used The Sopranos to further expand his point. Just like how The Sopranos attracted top talent, even though it was for an exclusive audience who was willing to spend more to access the show, AT&T could use exclusive access to Time Warner content to increase its DirecTV subscription base and online videos.
According to different analysts, this is the bottom line: Whereas the AT&T acquisition of DirecTV made sense because it could offer consumers better video and broadband deals, there’s no reason that Time Warner and AT&T have to merge to create more deals. According to Kimmelman, for example, they could operate as two separate companies and form similar deals without AT&T having any actual claim or ownership over Time Warner content.
Despite all of that, Stephenson kept reiterating that it didn’t make sense for the company to restrict access to Time Warner content.
“The business model's fundamental premise is wide and broad distribution of content into every home, particularly in the United States of America,” Stephenson said.
The merger’s fate will be decided by the Department of Justice and may have to get a pass from the Federal Communications Commission before it gets approved. There are major concerns from a variety of parties about the merger, and while it seems like something that’s so far removed from the average consumer, it has a major impact on anyone who streams video content.