A federal judge decided yesterday that AT&T may buy Time Warner’s video and motion picture content companies, including HBO, CNN and the Warner Brothers movie studio. Judge Richard Leon, who was appointed by president George W. Bush, put no conditions on the acquisition. He simply ruled “the government’s request to enjoin the proposed merger is denied”.
The 172 page decision does an excellent of outlining the current state of the video distribution market. AT&T wants to buy Time Warner so its DirecTv and other video services – delivered via satellite and mobile and wireline networks – can better compete with the likes of Netflix, Comcast (which also owns an extensive stable of content companies) and Amazon. Leon’s decision picks apart, and ultimately rejects, the federal justice department’s claim that the deal would “substantially lessen competition in the video programming and distribution market”.
What the decision doesn’t do is examine AT&T’s ability to use its monopoly/duopoly control over consumer Internet access in the U.S. to freeze out competing programming and online content distributors, and to raise prices for captive subscribers. That concern is particularly high this week, with the end of federal network neutrality rules that might have prevented that kind of harm.
AT&T will use its online muscle to make the most of this $85 billion purchase, as Leon’s decision makes clear…
AT&T witnesses testified that they believe the company’s future lies in the use of online and mobile wireless connections to access premium video. As John Stankey, the AT&T executive who will be tasked with running Time Warner should the merger proceed, explained, AT&T acquired DirecTV in 2015 not in an effort to double down on the satellite business—a concededly mature and indeed declining asset—but to “pick up a lot of new customers that we could work on migrating” to new, innovative products necessary to compete in the future.
It’s possible that the federal justice department will challenge Leon’s decision, and could ask an appeals court to put the deal on hold while it’s under review. That’s all speculative, though. As of now, AT&T and Time Warner can close the sale next week as planned.