AT&T is buying Time Warner. We all know what happened the last time the media giant was acquired. The dot-com bubble burst, wiping out $5 trillion of investor wealth and most of the value of AOL Time Warner. By any measure, that had to be the most ill-conceived business deal ever.
I’m sure news of the AT&T deal brought back some horrifying memories for former AOL chairman Steve Case, who tweeted “#DejaVu” after Saturday’s announcement.
But that’s ancient history. The public markets have long since rebounded. While there is some frothiness in the internet space, investors are more concerned about private equity and monetary policy than an overvalued stock market. I think it’s safe to say that this tie-up will pan out far better than the last one … if it ever gets done.
With the presidential election just fifteen days away, the candidates couldn’t be more divided on policy, with one notable exception: They both seem to be against big business. It looks like corporate America is in for a rough ride no matter who wins the White House. And, as one of the biggest megamergers in history, AT&T-Time Warner is sure to attract intense regulatory scrutiny.
The deal hadn’t even been formally announced when Donald Trump vowed to block it if he were president, calling it “too much concentration of power in the hands of too few.” He went on to say that mergers like this one, as well as Comcast’s previous acquisition of NBCUniversal, “destroy Democracy” – an unusual position for a Republican candidate.
Hillary Clinton has yet to comment on the news, but wrote in a Quartz op-ed last year that she would “stop corporate concentration in any industry where it’s unfairly limiting competition,” in part by “beefing up” antitrust enforcement. I don’t think anyone will be surprised to see her come out against this deal with rhetorical guns blazing.
At first I wondered why AT&T boss Randall Stephenson would even consider putting his company through another year of regulatory hell after the feds put the kibosh on his proposed acquisition of T-Mobile back in 2011.
But the more I look at this, I just can’t see how buying Time Warner gives AT&T an unfair competitive advantage that allows the telecom giant to raise prices or restrict trade – key requirements to triggering the Sherman Antitrust Act.
Don’t get me wrong. I’m sure the Federal Trade Commission and Justice Department will look for every possible way to stop the deal, but if they plan to put taxpayer money where their mouths are and actually sue to block it, they’re going to have to do a whole lot better than chest thumping rhetoric about corporate concentration of power.
Although the merger will add Time Warner’s media empire that includes HBO, CNN, TNT and Warner Brothers to one of the nation’s two biggest wireless carriers and satellite TV service providers (AT&T acquired DirecTV in 2015), the question is, so what? How does that give AT&T monopoly power or limit competition in any industry? The answer is it doesn’t, at least not in my book.
Wireless and broadband technology are reshaping how consumers watch TV. Once practical monopolies, cable companies face intense competition from over-the-top streaming services from Netflix, Amazon and a host of others … and they all have original media content. That’s why the Comcast NBCUniversal deal wasn’t blocked. And there’s nothing different about AT&T-Time Warner.
Of course AT&T will be required to make Time Warner content available to other distributors at competitive prices, but that would happen on its own. That’s how media companies make money: by selling licenses to distributors and advertising to marketers. It’s simply not in AT&T’s interest to in any way limit distribution of its premium content.
Besides, if you want to talk about anticompetitive clout, what about Amazon? The retail giant dominates the digital marketplace and offers special pricing to Amazon Prime subscribers. If regulators didn’t stop Amazon from getting into the media content business, they certainly have no business trying to stop a Comcast or an AT&T.
With the wireless market becoming saturated, mobile carriers have to find ways to grow, diversify and ensure their services reflect the way consumers want to use them. Ironically, the Time Warner deal will only make AT&T’s up-coming DirecTV Now streaming service more attractive to cord-cutters. As a consumer, I welcome that choice.
You want to know what’s bad for consumers? Grandstanding politicians who overreach by spinning every megamerger as anti-competitive.