When AT&T acquired Time Warner last year for $85 billion, the companies said the deal would be great for consumers, who would benefit from lower prices and improved service.
The Justice Department said the opposite, predicting the merger would give AT&T so much market power that price hikes and channel blackouts were all but inevitable.
And now we know. The government was right.
AT&T wasted no time in raising the price of its DirecTV satellite-TV service by $5 a month. It then raised the price of its DirectTV Now streaming service by $10 a month. (The company said last week DirecTV Now is being renamed AT&T TV Now.)
More than 6.5 million of AT&T’s DirecTV and U-verse pay-TV customers are currently cut off from CBS channels because AT&T says CBS wants too much money for its programming.
Meanwhile, more than 12 million Dish Network and Sling TV subscribers have lost access to AT&T’s HBO and Cinemax channels because, according to Dish, AT&T wants too much money for its own programming.
Put more succinctly, AT&T, after raising subscriber costs, wants to pay as little as possible for channels included on its pay-TV services. But it wants as much as possible from other pay-TV services for its own channels.
And it’s willing to hold consumers hostage to get what it wants.
“When you start seeing blackouts, it’s obvious you’re looking at a merger that’s not serving consumers very well,” said Herbert Hovenkamp, a law professor at the University of Pennsylvania and one of the nation’s top antitrust authorities.
U.S. District Judge Richard J. Leon ruled last year — and was subsequently upheld by an appellate court — that the government was mistaken when it warned of consumers being harmed by the merger.
Leon said it would be counter-productive for a merged AT&T/Time Warner to withhold its own channels from competing pay-TV providers or black out competitors’ channels, and thus the likelihood of this happening was low.
“The evidence of his being wrong is bordering on the absurd,” said Christopher Sagers, a professor at the Cleveland-Marshall College of Law.
“Plain and simple, the merger created for AT&T immense power over consumers,” Andy LeCuyer, Dish’s senior vice president of programming, said in a statement.
“AT&T no longer has incentive to come to an agreement on behalf of consumer choice,” he said. “Instead, it’s been given the power to grab more money or steal away customers.”
Einer Elhauge, a professor at Harvard Law School, said the current circumstances “seem to be precisely what the Department of Justice predicted would happen after the merger of AT&T and Time Warner, and precisely what AT&T successfully persuaded the trial court was implausible for it to ever do post-merger.”
His verdict? “It looks like the court just got it wrong.”
If so, what if anything can be done?
There was once a time when regulators decided AT&T had too much power over the phone industry and decided to break up the company.
I wonder if the same case now can be made for AT&T’s power over the TV industry.
The antitrust experts I spoke with said AT&T’s post-merger behavior makes a strong case for separating pay-TV and programming companies — but it may be too late to fix the problem.
I hope that it’s not too late, but once again, Robert Bork’s laissez faire theories of monopolies and competition are shown to be wrong.
In fact they are not just wrong, they are delusional, and I would argue deeply hypocritical.