Seeking Ownership of Both the Information and the Superhighway

Seeking Ownership of Both the Information and the Superhighway
The New York Times, by Jim Rutenberg
30.10.16

 

On the face of it, there is something Strangelovian about the proposed merger between AT&T and Time Warner.

 

A company that controls the signal to the wireless devices of more than 130 million people, and to televisions in some 25 million households, buys a major movie studio and one of the biggest collections of cable channels in the country — potentially attaining a dominant position from which to control the information flow to a large percentage of Americans. A cultural-political Doomsday Machine is born. Mass media hegemony, or some such, follows. Or does it?

 

Like a lot of news consumers, I’ve been struggling to get my head around this deal, which would give AT&T control of the Warner Bros. movie studio and cable networks including CNN, HBO and TBS. It would be gargantuan, carrying an $85 billion price tag. And it would further concentrate media ownership into a few powerful hands, playing to fears of a big corporate media takeover of the wild and woolly web, which has been so central to this year’s great political upheaval. But it’s all very fuzzy.

 

What is it about this proposed merger that has both the left and the right, on the presidential trail and on Capitol Hill, so suspicious of it, if not downright opposed? Are the stakes really so high and the potential damage so great?

 

For answers, I turned to Senator Al Franken of Minnesota, the former “Saturday Night Live” comedian who led the congressional opposition to Comcast’s failed bid to buy Time Warner Cable nearly two years ago. He was one of the first to voice concerns about the AT&T-Time Warner deal.

 

“I think you’re being alarmist,” he told me.

 

He laid out the case in less cinematic terms, because, as the comedian John Oliver has pointed out in his warnings about corporate media power on his HBO show, the big stakes of the wired future are hidden in the small print.

 

“This is AT&T, which owns DirecTV, so that’s a large pay-TV provider,” Mr. Franken said. “Also, they’re the second biggest in mobile broadband. And they’re trying to buy this content company, Time Warner, which has Warner Bros. and all this very desirable TV content.

 

“When the company that controls the pipes, so to speak, owns this very, very large content provider, it can cause a whole bunch of different horribles for consumers,” he said.

 

First and foremost, Mr. Franken said, there’s the dual threat of less choice and higher prices.

 

On paper at least, AT&T could hoard some of its most popular movies or channels, making them more readily available to DirecTV, to promote DirecTV subscriptions, while pushing competitors off DirecTV or into the deep wilderness of the DirecTV channel guide. Or, Mr. Franken said, the new company could charge competitors like Comcast and Cox more for its most popular channels, price increases that would no doubt be passed on to the consumer.

 

Jeffrey L. Bewkes, the Time Warner chief executive, dismissed those fears when we spoke Friday, saying that they don’t jibe with the company’s business imperatives: to offer the most channels for the best price, and to have its own channels as widely distributed as possible.

 

“It would be like selling toothpaste and not putting it in Duane Reade,” he said, referring to the ubiquitous New York City drugstore chain. “It doesn’t make any sense.”

 

AT&T and Time Warner executives say they are prepared to abide by the conditions government regulators are certain to impose, including prohibitions against using the new company’s power to discriminate against rivals.

 

But Mr. Franken said he was doubtful about the effectiveness of such restrictions, calling them “very hard to enforce.”

 

He pointed to the Comcast-NBCUniversal merger of a few years ago, in which Comcast promised Washington regulators that it would not punish rival networks on its cable systems.

 

Yet, not long after the merger, Bloomberg filed a formal complaint charging that Comcast was keeping Bloomberg’s business news network far down the channel lineup from Comcast’s main cluster of news networks, including its CNBC and MSNBC, potentially hurting ratings. In 2013, the Federal Communications Commission ordered Comcast to accommodate Bloomberg.

 

Comcast portrays the dispute as a disagreement over the particulars of the conditions, and notes that the two companies went on to work amicably. The Bloomberg founder, Michael R. Bloomberg, even supported Comcast’s takeover bid for Time Warner Cable.

 

Then again, the old, familiar cable guide is yesterday’s battlefield, as video content moves to streaming services on your smartphone, tablet or television.

 

And, in that new media sphere, with about 131 million wireless subscribers, AT&T would presumably again have incentive to favor its own programming over that of its competitors, by making it download faster — on a national scale.

 

As of now, it cannot do that legally. The F.C.C. approved rules last year to protect so-called net neutrality, prohibiting broadband companies from favoring any content over any other, and from creating “fast” and “slow” internet lanes.

 

Yet the story is not necessarily over. AT&T has been part of a lawsuit challenging the way the F.C.C. imposed the rules, and vowed to take the case to the Supreme Court after a federal appeals court upheld the guidelines in June. The AT&T general counsel, David R. McAtee II, told me that the F.C.C. rules were “the law of the land” and the company would of course abide by them.

 

But I asked him whether AT&T’s involvement in the suit didn’t indicate that the company would create an internet class system if it won in court, especially should its takeover of Time Warner win approval.

 

The lawsuit, he said, was related to what AT&T viewed as government overreach, not the provisions prohibiting tiered internet service. “We have always stood behind the core principles of net neutrality,” he said. “We are not creating fast lanes and slow lanes.”

 

In a letter to the Justice Department calling for the rejection of the AT&T-Time Warner deal, Senator Bernie Sanders of Vermont said AT&T was already violating net neutrality principles by allowing customers to stream its DirecTV programming onto their mobile devices without having to pay the data-use charges that would normally apply. That would appear to give the company’s own television service a price advantage.

 

The company says DirecTV is formally paying AT&T for its customers’ use charges upfront, so the customers never see them. Other streaming services, it says, are welcome to make similar deals. (The Federal Communications Commission is looking into whether such arrangements should be considered a violation of net neutrality rules.)

 

It’s really dense stuff played out in complicated minutiae. But that’s where the future of the internet, and therefore, the free flow of information, is going to be decided.

 

Mr. Bewkes says if the public takes a look at the facts, it will see that the deal will not harm internet freedom. If anything, he argues, it will add a powerful new competitor to the Silicon Valley behemoths Facebook and Google, which appear to be swallowing the online advertising market whole.

 

But he acknowledged the deal is up against an overwhelming public sense that “the big tower of government or the corporation is bad and it’s not serving me.”

 

Donald J. Trump has said outright he would block the merger, and Hillary Clinton has said the merger raises “concerns.”

 

This deal, however, will be decided long after the campaign is over. As Mr. Franken pointed out, the fight against the Comcast-Time Warner Cable merger took some 14 months.

 

This time around, it doesn’t seem likely that Mr. Franken, who sits on the Senate Judiciary Committee, will be disabused of his notion that “the fewer hands that all this stuff is in, the worse it is in terms of competition and innovation and choice and price,” and, therefore, the worse it is for the future of the free internet.

 

To paraphrase Mr. Franken’s old character Stuart Smalley: This deal’s big enough, it’s potentially consequential enough, that, doggone it, it’s going to face a ton of scrutiny, as well it should.