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Home / Business / AT & T, Time Warner Fusion Trial: What has been achieved so far

AT & T, Time Warner Fusion Trial: What has been achieved so far



AT & T and Time Warner are done with the US government avoiding their marriage. [1659002] AT & T chairman and CEO Randall Stephenson, Jeff Warkes, CEO of Time Warner, and John Stankey, chief executive officer at AT & T, commented this week to block the $ 85 billion deal.

Bewkes called the government's allegations "ridiculous" and said they "make no sense". Stephenson said the idea that AT & T and Time Warner would be able to raise prices after the merger was "absurd."

It "contradicts logic for me," Stephenson said, according to Reuters.

Over a month in the courtroom, the Justice Department and AT & T and Time Warner spent all their arguments to US District Judge Richard Leon. His decision could have implications for future dealings between Internet service providers and media companies, as well as how streaming services will look in the future. AT & T has massively invested in a streaming video service called DirecTV Now, and Time Warner plans to ramp up its original programming.

A win by the Department of Justice in this case could have a deterrent effect on several companies seeking to merge at a time when other streaming giants like Netflix and Google's YouTube capture more eyeballs. Both Bewkes and Stephenson pointed to new competitors like Google, Facebook and Netflix as the bigger threat.

Your statement marked the end of the defensive case. The DOJ, which first presented its arguments, will refute. Here is everything that has happened so far.


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The case of the government

At the heart of the Justice Department case is the question of whether AT & T's distribution network covers not only its wireless and broadband networks, but also DirecTV's satellite television service Time Warner Combined cable networks, including CNN, HBO and TNT, would lead to higher prices for consumers. The government also argues that the merger could threaten competitors, such as Dish Network's Sling TV streaming service, which offers smaller packages over the Internet.

A government star witness was an economist from UC Berkeley, Professor Carl Shapiro, who published a report that showed that the merger would lead to higher prices for consumers and that Time Warner would be able to get higher rates of Negotiate AT & T's rivals. The report shows that pay-TV subscriptions would increase by $ 436 million annually. AT & T has pointed out that the number is shrinking to about 45 cents a month.

Asked by Leon, Shapiro admitted that his analysis assumes that Time Warner has an incentive to act in a way that benefits AT & T's interests. He said he could not prove that this would be the case.

The Department of Justice also called other witnesses, such as executives of AT & T rivals. Tom Montemagno, executive vice president of program acquisition for Charter Communications, said he was concerned that the merger would lead to "inflated" price increases for Time Warner content. A study charter, commissioned prior to the negotiations with Time Warner in 2016, before the merger was announced, suggested that the company could lose 9 percent of current and potential subscribers if it loses Turner channels.

AT & T has proposed that it agree to third-party arbitration for seven years if disputes over the pricing of Time Warner networks with distributors occur. It also promised that it would not obscure programming during conciliation.

But competitors who reject the merger say that's not good enough. Warren Schlichting, a group chairman of Dish's Sling TV streaming service, said during his statement that the agreement was too vague. He also noted that HBO is not taken into consideration, which is important as every fifth subscriber to Dish HBO subscribes, Schlichting said, according to a report by Reuters.

"It's a high-risk offer in which you can invest the hands of a referee who understands your business or not," he said.

He went on to say there is nothing to stop Time Warner from forcing Dish to take more channels, which would increase the cost of the SlingTV package. SlingTV and streaming services like these are designed to offer consumers a sleeker and cheaper bundle of cable TV channels.

AT & T's Defense

AT & T has resisted all these allegations, a process that culminated in CEO statements this week.

  Time Warner CEO Jeff Bewkes arrives at the opening speeches on March 22nd.

Time Warner CEO Jeff Bewkes arrives at the opening speeches on March 22nd.


Jim Watson / Getty Images

Bewkes described the government's argument that the combined company could influence the financing of Turner networks via cable and satellite competitors, according to Variety.

"It does not work that way," he said.

He argued that Time Warner could not afford extended program loss, as the lost ad revenue and subscription fees are "catastrophic" to us. The blackout of some Turner channels on Dish Network in 2014 cost the company $ 150 million in revenue, he said.

He also argued against the government's claim that a combined AT & T and Time Warner could work with rival Comcast to harm streaming services like Dish's Sling or Google's YouTube TV. Instead, Time Warner is interested in being on these new platforms, he said. And it makes "no sense" for the company to restrict high quality channels like HBO from AT & T's rivals.

"We have to be in every shop," he said, according to Variety. "We have to have as many subscribers as we can get."

He said the television industry is undergoing a "tectonic" shift, noting that the trend toward targeted advertising is "really bad for TV companies". Companies like Time Warner have no access to consumer data to survive in this new world. He pointed to flat advertising growth and increased the pressure on Time Warner's Turner cable channels to increase the transportation fees to make up for the difference. But he said this comes at a time when consumers are "at subscription prices".

  Randall Stephenson, CEO of AT & T, during a Senate Justice Subcommittee hearing in 2016. Stephenson was in federal court this week, defending his company's merger with Time Warner.

Randall Stephenson, CEO of AT & T, during a Senate Justice Subcommittee hearing in 2016. Stephenson was in federal court this week, defending his company's merger with Time Warner.


Mark Wilson / Getty Pictures

Stephenson, who took the stand on Thursday, repeated these feelings.

The AT & T boss tried to show that the reason for the merger was never to gain a competitive advantage over competitors but to transform AT & T's business into the targeted advertising market with Apple, Google and Facebook.

He called the merger with Time Warner a "significant strategy shift" for AT & T and said the company knew that smaller purchases of content would not work. He said the company had to make a huge leap into the content business.

"We knew we needed to scale," Variety said.

Wrapping

The process, now in its fifth week, will soon be over. Stephenson was the last witness for the defense. The Ministry of Justice will now appeal to opposition witnesses.

It's hard to say how the case will break out.

DOJ head of cartel department Makan Delrahim seems to be convinced of victory. He decided last year to file the lawsuit. When asked at a conference last week if it might make it more difficult for him to lose the case to challenge similar deals, he said flatly, "We will not lose."

Nevertheless, there is reason to doubt that everyone else is so convinced. Leon has expressed skepticism about the fall of the government, according to Bloomberg. When the government's main witness testified that the study predicted higher consumer prices, Leon seemed puzzled over how the price increase was calculated.

"Well, I'm looking forward to reading your message again," Leon said, according to the Bloomberg report. "I'm not sure I got it, but it's too late and too hot to shed light on that point."

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