A federal judge is about to render a major decision in the government’s lawsuit against a merger of AT&T and Time Warner, a case that could reshape how millions of Americans get access to the AT&T Internet and entertainment.
For weeks, the case has been in limbo as Judge Richard Leon has worked toward a ruling in U.S. District Court for the District of Columbia. Now he is expected to issue his opinion on Tuesday. Here is what you need to know about this pivotal case.
Why does AT&T want to buy Time Warner?
AT&T, in an $85 billion deal, wants to acquire all of Time Warner’s assets. This includes HBO, Warner Bros. and Turner Broadcasting, the latter of which includes cable networks such as CNN, TBS and TNT. Should the deal be approved, not only will AT&T have control over popular shows such as “Game of Thrones” but also everything under the DC Comics umbrella, the Lego movies, the “Lord of the Rings” films, live sports programming, such as coverage of March Madness, and much more.
The telecom giant envisions a future where it does not just provide home Internet access or mobile data to end users but could also sell content over those connections as part of a monetizing strategy. Just as Google knows what users are searching for or Facebook knows which brands its users have liked, AT&T aims to collect information on its wireless customers and its TV viewers. That data would prove valuable to advertisers who would pay top dollar for targeted ads, AT&T executives have said.
In the long run, the company has suggested, additional revenue from targeted advertising would allow AT&T to lower the price of subscription television — luring back customers who have canceled their TV services and adopted alternatives such as Netflix or Hulu.
Why is the government suing to block the deal?
The government says the deal would lead to higher prices for consumer. According to regulators, AT&T would use its control over Time Warner content — which it knows other cable companies need to keep their customers happy — to extract higher licensing payments. That would benefit AT&T in a number of ways, government lawyers allege.
First, charging other companies more to list CNN or TNT in their lineups would make Time Warner additional money. Second, any TV service that did not carry those channels might lose its customers to AT&T’s own TV provider, DirecTV. In that way, Justice Department has said, AT&T has the “incentive and ability” to raise prices on other TV providers to the tune of hundreds of millions of dollars per year — costs that would ultimately be passed to the consumer.
Who is going to win?
Most analysts who have been tracking the case say AT&T performed better at trial than the Justice Department by focusing on undercutting the government’s economic analysis of the deal and poking holes in its witnesses’ testimony.
Are there key factors to look for in the judge’s decision?
This case could be decided any number of ways. Leon could rule in the government’s favor, forcing AT&T to abandon the deal or to sell off key assets such as Turner or DirecTV to move forward. Leon could side with AT&T, saying there is no threat to competition and allowing the deal to proceed unimpeded. In that scenario, AT&T would not be required to divest anything or make any other concessions and could close the deal by June 18.
One wild card is an offer that AT&T has made to assuage its critics. Last year, the company sent 1,000 letters to rival TV providers saying it was willing to commit to an arbitration process after the merger with any TV service that feels it is being overcharged for Time Warner content.
Leon appeared to show strong interest in the arbitration offer, asking witnesses about it on multiple occasions despite efforts by the government to exclude it from consideration in the trial. As a result, some analysts believe Leon could seek a middle-ground approach that mixes in the arbitration offer somehow or, perhaps, a remedy Leon designs himself. He could even ask the two sides to work with him to develop a solution.
Whichever way it goes, could there be an appeal?
It is not clear whether an appellate court might agree to hear the case. But an appeal is an option for either side.
Wasn’t there a connection to President Trump at one point in this case?
For a moment, it seemed as if the trial would take on a political flavor as AT&T sought White House communications logs that could prove whether Trump inappropriately instructed the Justice Department to try to block the deal. (Merger investigations are supposed to occur independently of the White House as an impartial matter.)
Trump has criticized the AT&T deal in the past, saying on the campaign trail it would put too much concentration of power “in the hands of too few.” Analysts widely attribute Trump’s animus toward the merger to his dislike of CNN and the network’s coverage of his administration. White House and Justice Department officials maintain there was no inappropriate influence over the merger review.
In the end, Leon blocked AT&T’s request for more White House logs, restricting the case to a narrow analysis of antitrust law.
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