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Home / Business / Kagan: Why AT & T and Time Warner should merge

Kagan: Why AT & T and Time Warner should merge

Last week I gave an interview to the NPR Marketplace and the conversation crystallized the question and answer as to whether AT & T and Time Warner should merge. There is really only one answer. Yes. There are many different reasons. Let me explain a few of them with you.

The reason for this proposed merger is first of all to help AT & T and Time Warner prepare for tomorrow's competition. Tomorrow looks a lot different than today. That is, when we think about this merger, we need to look forward, not back, as the industry changes. How technology is changing. How the competitors change. How the customer expectations change.

Businesses that are not preparing for tomorrow are always fighting

Businesses that are not preparing for tomorrow are always fighting. Consider Motorola. They held the handset for decades, until the 1990s, when they did not change fast enough. Then they stumbled and are now at the bottom of the pile.

Nokia, Blackberry and Palm take the lead for the next decade. They were strong companies, but they did not change fast enough, and when the Apple iPhone and Google Android hit the market, these three leaders fell to the lowest levels.

There is no resting. Companies grow or shrink. Companies are under pressure to stay current and run. If they do not, they die. Right. Leaders die. That's why so many telecommunications executives have joined forces in recent years. That's why AT & T and Time Warner want to merge. They want to continue to be strong. Continue to change and stay relevant.

If these companies were the first to move, regulators could look at them and decide if this new path should continue to unfold or block the transformation.

They are not the first, however. Or the second. In recent years, there have been several major mergers that have created a completely different industry. In addition, new technologies and new competitors are growing rapidly and threatening the model of yesterday. In addition, customers are already on board with this change. Therefore, traditional cable television and traditional telephone service are declining. That's why this kind of change is necessary.

Blocking a merger makes no sense in a changing industry

Therefore, change is necessary for today's competitors to compete further. Without change, the wave of changes in the market will sweep over them, pass them and leave them in the dust. That's one of many important reasons why AT & T and Time Warner want to merge.

It would not be fair to block existing competitors who want to transform themselves if others were allowed. It would not be fair to its investors, workers, partners and customers. So, if a company that has been with us wants to continue to change and reflect on new market trends in order to remain relevant and competitive, it makes absolutely no sense to block them.

Let's take a closer look at how other mergers and new competitors are changing the market.

How the telecommunications industry is changing

AT & T acquired DirecTV a few years ago. That was an important moment. AT & T expanded the company and started offering DirecTV NOW. This is an advanced TV service provided over the Internet. This was very innovative and put the competitors in pay-TV heavily under pressure.

Next, AT & T developed a new category of services known as wireless television or mobile television, which users value. This will pay-TV via the AT & T mobility network to any device anywhere in the US on the smartphone or tablet transferred.

This innovation is very popular and makes competitors move in the same direction. Verizon says they will move in the same direction. T-Mobile USA recently announced that they are also moving in this direction.

That's all good. That's the kind of innovation that brings creative competitors to the table. We want to continue to promote more.

Public companies need to grow to keep shareholders

It's important to remember that public companies need to keep growing to hold their investors. Investors will switch to another company if they can not make money. That's why the industry took the new growth path of iPhone and Android ten years ago. It has created the next wave of growth for so many companies, including mobile operators, app manufacturers, new companies like Uber and Lyft and so much more.

Suddenly telephone companies compete with cable television competitors. Today, customers can choose from all competitors for all their services. That means AT & T, Verizon, Comcast, Charter, Altice and more. All of these companies are rapidly moving in the same direction. While AT & T's first-mover advantage was good for them, this is rapidly turning into an industry-wide shift.

In addition, all of these competitors now face new competition from players they have never competed with before. Companies like Amazon.com Facebook, Google, Netflix, Hulu and more. These are companies that offer users new ways to receive TV services.

This is an expansive opportunity for new players and a real threat to existing leaders and competitors.

Yesterday's Competitors Face Threat and Opportunity

This threat must be addressed if yesterday's leaders are able to compete.

In recent years, several other major mergers have been approved that threaten the industry as a whole. Any threat is also an opportunity for growth, as long as the competitors are not tied.

Comcast merged with NBC Universal. That means they offer cable TV, IPTV, Pay TV, own and offer NBC channels, they offer VoIP phone and now they also offer Xfinity Mobile. This has put Comcast in an enviable position. You are one of the key leaders.

Verizon has partnered with AOL and Yahoo. That means they have radio, telephone, pay TV and content.

The entire industry is heading in this direction. Networks have purchased content players. The next step, which is already underway, are networks and content players that come together and compete with each other.

The reason why AT & T and Time Warner want to merge

That's all AT & T and Time Warner want. They will not be the first. In fact, they will be the third to come up with more. Other networks and content companies will continue to merge over the next few years. That's why Comcast wants to merge with FOX.

The time to stop this next wave would have been years ago. Now that this industry-wide transformation is taking place, it's only fair to bring existing players together and stay competitive with their new and old competitors.

You must be able to compete with existing competitors who have joined forces and changed. You need to be able to compete with new competitors who enter and change the space quickly.

If not, we beat those competitors in the gut and say they should not compete. That would not be good for employment or innovation. And nobody has the right.

Industry is changing and changing. It's good. Change and transformation have not only created new industries, but also created new companies, new competitors and more. This benefited the market, workers, investors, competitors and more.

Remember all the positive changes and growth we've seen over the past decade, thanks to Apple iPhone and Google Android, which have created this new smartphone segment. Before them, Blackberry led the smartphone sector. At the time, they were just a business service and there were only a few hundred apps.

Today, there are more than two million apps. That means countless companies have created unlimited growth opportunities. That is, it helps the economy in general, workers, investors, partners and more.

We do not want to block transformation and growth. If we did, we would still drive the Ford Model T. Or worse, we would still ride the horse and the carriage. We would not have internet or wireless telephone service. That's not us. We want growth and innovation.

What's at stake with AT & T, Time Warner Fusion

That's what's at stake. We need to include ground movements, global innovation. Not only do we have to welcome new competitors like Amazon.com Google, Netflix and more. At the same time, we need to make existing executives competitive in this new market.

Not only is it fair to them, but we will all benefit from what this type of competition brings to market. Remember how AT & T acquired DirecTV, created DirecTV NOW and launched the wireless TV wave.

We can expect more from that if we do not tie their legs and keep them from competing. The choice is ours. That's why we need to approve the merger of AT & T, Time Warner, and indeed every other similar merger.

Tomorrow is going fast. We have to bring each competitor further and innovate. If we do that, we will all benefit if we are users, workers, investors, partners, and more. If we stop the mergers, we will shorten our own future.

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