Executives of AT&T Corp. and Time Warner spent Wednesday defending their proposed $85 million deal before Congress, which sent AT&T’s stock above $40 for the first time since the deal was announced.
John D. McKinnon, Thomas Gryta and Shalini Ramachandran of The Wall Street Journal had the news:
Senators from both parties voiced wide-ranging concerns about the blockbuster deal at a hearing on Capitol Hill. The companies portrayed the union as a bulwark against the dominance of Silicon Valley giants such as Alphabet Inc.’s Google and Facebook Inc., while promising new digital media services that will benefit consumers.
Sen. Richard Blumenthal (D., Conn.) highlighted Mr. Trump’s promise to block the deal, saying, “I take him at his word,” while raising concerns that the president-elect’s animus may partly be his disapproval of cable news channel CNN and its coverage of him. “To threaten more vigorous or adverse enforcement against a particular company because he doesn’t like the news coverage is a threat to the First Amendment,” Mr. Blumenthal said.
Mr. Trump hasn’t commented on the merger since the election. AT&T Chief Executive Randall Stephenson and Time Warner CEO Jeff Bewkes said Wednesday they hadn’t had direct communications with the Trump administration and believed the Justice Department would evaluate the merger fairly.
“We are anxious to put it in front of the DOJ and have the DOJ look at the facts,” Mr. Stephenson said on the sidelines of the hearing.
Lawmakers focused their inquiries more on the complex policy questions involved in the media business than the fraught politics. Republican Senators shied away from Mr. Trump’s hard-hitting populist tone and his willingness to take aim at specific businesses. Since winning the election, Mr. Trump interceded in Carrier Corp.’s plan to move an Indiana factory to Mexico and criticized the presumed price tag of Boeing Co.’s contract for presidential planes.
T.C. Sottek of The Verge reported that executives essentially argued against the deal:
We heard a lot about “investment,” “competition,” and “innovation” in the two-hour session — but no reasons to believe that this merger is a necessary path to producing any of those things. And bizarrely, AT&T and Time Warner seem to have unwittingly argued against their need to merge.
The testimony was an unexpected vote for the value of an open internet and higher-quality services from ISPs across the board. Their arguments hinged on the idea that offering more innovative services over the internet is a way to better compete with cable companies. But that has nothing to do with a content company becoming part of the network company, and everything to do with the fundamental nature of the internet as an open platform.
In his opening testimony, AT&T CEO Randall Stephenson said that the intent of the merger “is to disrupt the existing pay TV model.” Cool — but Time Warner has already done that. Take HBO Now, for example, which delivers HBO to anybody with an internet connection without requiring they pay for a TV subscription. Time Warner did that all on its own without needing to be part of an internet service provider.
Alina Selyukh of National Public Radio reported that consumer costs became an issue in the hearing:
In response to concerns — including from the Republican chairman of the antitrust subcommittee, Sen. Mike Lee of Utah — AT&T CEO Randall Stephenson kept making the promise that the merger would actually result in more choices and lower prices.
“I can and intend to represent to you,” Stephenson told Sen. Amy Klobuchar, D-Minn., “that by virtue of innovation with Time Warner and going head-to-head against the cable providers with new products and new capabilities that we will bring the consumer better-priced options than we have today.”The proposed merger is facing a review from the Department of Justice, which will decide whether it violates antitrust law. In this case, AT&T and Time Warner argue their deal is in the clear because it’s vertical, meaning the two companies don’t directly compete and therefore their union wouldn’t eliminate any competitor.
Typically, the Federal Communications Commission would also review such a merger, sizing it up against a much broader standard of whether it’s in the public interest. But the FCC’s involvement in this merger is unclear — the agency wouldn’t have direct oversight power if the deal did not involve FCC licenses issued to Time Warner, and AT&T has yet to reveal whether it will dump such licenses from the transaction.
