We’ve been hearing about “convergence” since the earliest days of the internet. A computer in your living room! Movies streaming in your home!
So it’s with a certain degree of inevitability that the latest megamerger lumbers onto the scene. AT&T has offered $85.4 billion for Time Warner, which would give it control of, among other media goodies, HBO, CNN, the Warner Bros. studio and DC Comics.
Yes, AT&T would own Batman.
Consumer advocates responded to Saturday’s announcement with the expected concerns about market consolidation and dwindling competition, and they’re right to worry. I can’t think of a single merger of this scope that has resulted in lower prices or improved service.
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But the trend in both the telecom and media industries is clearly bigger is better, so it’s no surprise that yet another corporate swipe-right hookup has taken shape. I’m not freaking out about the sky falling.
I see this as an opportunity.
If federal authorities play this correctly, the AT&T-Time Warner merger actually could be beneficial for consumers. What they should do is press the case for skinny bundles and a la carte channels.
Despite all the political posturing, I expect the deal ultimately to be approved. There’s not a lot of overlap in AT&T’s and Time Warner’s operations, so the most troublesome element is creation of a corporate behemoth of Monster Island proportions.
To address that, the Justice Department and Federal Communications Commission almost certainly will impose a number of conditions to make the deal more palatable, including divestiture of some properties and commitments to play nice with other kids.
We saw the same when cable giant Comcast bought out NBC Universal a few years ago. As part of that arrangement, Comcast agreed not to discriminate against competing channels and to offer a fairly priced broadband internet service.
This time, though, officials should seize this chance to demonstrably improve things for consumers.
Because a merged AT&T-Time Warner would cast such a long shadow over the telecom and media industries, a requirement that the company offer smaller, reasonably priced programming packages and break off popular channels on an a la carte basis could have a sweeping effect on other pay-TV players.
“It’s always the case that when one party does something that’s more pro-consumer, others will follow,” said John Bergmayer, senior counsel at the advocacy group Public Knowledge.
He noted that the main opposition to a la carte has come from the big programming companies, including Time Warner. They prefer the current system in which pay-TV firms such as AT&T have to make customers shell out for all of the programmer’s channels, even if they never watch them.
However, if AT&T-Time Warner had to offer CNN, say, on an a la carte basis, that would pressure the owners of Fox News and MSNBC to follow suit. And guess what? Suddenly the marketplace is doing what free markets are supposed to do: Respond to consumers’ needs.
“Clearly we’re on a path to increased media consolidation,” said Tim Winter, president of the Parents Television Counsel, a longtime supporter of a la carte programming. “There’s a peril of less choice and higher cost.”
Attempts to end the practice of fat bundles of unwanted channels have failed to produce legislative or regulatory solutions, Winter noted. The AT&T-Time Warner merger thus represents a potential end run that would influence the marketplace by prodding one of its biggest players to be more consumer-friendly.
“Any step in the right direction is a step in the right direction,” Winter told me. “Regulatory approval must include a requirement of unbundling.”
On a conference call Monday, the heads of AT&T and Time Warner hammered repeatedly on the idea that combining the two companies would result in a festival of innovation. They used the word “innovate” nearly three-dozen times.
AT&T’s chief executive, Randall Stephenson, and his Time Warner counterpart, Jeffrey Bewkes, said they’re focused on leveraging the size and reach of the merged company to add more value to advertisers, shareholders, investors and, one way or another, customers (they’re still fuzzy on that last point).
Perhaps I can help. Aside from a required offering of skinny bundles and a la carte channels, and along with the usual admonishments to be kind to others, AT&T-Time Warner should have restrictions placed on how much it can charge for high-speed internet.
Broadband prices have been soaring as pay-TV companies increasingly accept that future growth will center on a bandwidth-heavy world of video streamers, gamers and cord cutters. If AT&T has to keep a lid on price hikes, at least for a while, rival companies will be forced to compete on price as well.
If AT&T and Time Warner were smart, they would get out in front of critics by offering this concession on their own. Then they could pitch the merged company as the one media heavyweight that gets what consumers are saying.
Whatever else, federal officials shouldn’t be hesitant about pressing their case. They should recognize this as a golden opportunity to shape the media landscape of the future, the one promised by all that pie-in-the-sky talk of convergence.
And if AT&T and Time Warner refuse to play ball, send ’em packing.
Consumers won’t be any worse off if this deal falls through.