After AT&T announced its plans last Saturday to take over Time Warner in a multibazillion-dollar merger, a strange thing happened. Well, a bunch of strange things.
First, Donald Trump unexpectedly blasted the merger, saying it was “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”
Then journalists started asking hard questions about a media merger on national television, a rare sight. “Less concentration, I think, is generally helpful, especially in the media,” vice-presidential nominee Tim Kaine said on Meet the Press. (Hillary Clinton later weighed in, calling for “a very thorough analysis.”)
Even Wall Street analysts — who often treat every proposed merger as a fait accompli — were looking downright skeptical about the deal’s prospects. On Monday, a trader told The Wall Street Journal the merger had only a 40-percent chance of succeeding. By Wednesday, analysts were saying 28 percent.
As a veteran watcher of these media mega-deals, I’ve rarely seen one go south so fast. Which is good news.
Unless you’re a Time Warner shareholder, C-suite senior executive, or an AT&T lobbyist, this merger would be a disaster. It must be blocked.
A Big Deal. Really Big.
This merger is ginormous. It would put the nation’s largest multichannel video provider (thanks to newly acquired DirecTV), the second-largest wireless company and the third-largest broadband provider under the same corporate umbrella as HBO, CNN, TBS, TNT and the Warner Bros. movie studio.
Forget Ma Bell. This is Monster Bell.
On paper, this deal is nearly three times the size of 2011’s huge Comcast-NBCUniversal merger. And the $85 billion figure most of the press has cited doesn’t include another $22 billion in debt that AT&T would take on in the merger. In total, AT&T would be saddled with more than $350 billion in liabilities if the deal goes through. That’s entering too-big-to-fail territory.
Guess who will be left holding the bill? You will, each and every month.
That’s the deal’s main selling point to investors. “Let’s be honest, prices aren’t going to go down because of this,” analyst Rich Greenfield of BTIG Research told The New York Times. “I don’t think vertical integration lends itself to consumer benefits.”
The only way AT&T is going to be able to right its balance sheet is by hiking prices on its customers — many of whom have no other option for broadband and are already paying too much. High prices are one of the biggest barriers to broadband adoption, especially in communities of color, and this deal could widen the digital divide.
Not an AT&T customer? The company will still be reaching for your wallet. With its acquisition of must-see cable-TV channels, Monster Bell would have every incentive to restrict access to prime content and raise the rates it charges to other cable distributors, costs that will be passed along to subscribers everywhere.
And for all we’re sure to hear from AT&T about all the corporate synergy and technological innovation, industry analysts are predicting that the deal’s enormous debt load would crimp investment in future projects like advanced 5G wireless networks.
AT&T Can’t Be Trusted
For years and through multiple merger proceedings, AT&T has promised to expand high-speed broadband and failed to deliver, only to resurrect the same promises when it’s ready to make another deal.
AT&T’s list of lies and chicanery is too long to reprint here. But here are some recent highlights:
- Last month, the company was caught overcharging its poorest customers for super-slow internet service in Cleveland and Detroit. It refused to change its policy until advocates went to the press. (Would CNN still do stories like this under its new bosses?)
- At the start of this week, during the merger rollout, AT&T CEO Randall Stephenson insisted the company’s longstanding opposition to net neutrality was history. “Net neutrality is done,” he told CNBC. “That’s behind us.” But Stephenson forgot to mention the company is still suing in federal court to overturn the Federal Communication Commission’s open internet rules.
- The next day, The Daily Beast uncovered new documents showing AT&T has been making millions mining and selling its customers’ data to law enforcement agencies without a warrant. This is just the latest example in AT&T’s decades-long efforts to aid the government’s unconstitutional spying on phones and internet traffic.
To be fair, AT&T doesn’t always lie. For example, in congressional testimony in 2014, Stephenson admitted that the company’s takeover of DirecTV wouldn’t lower prices.
He delivered on that promise: Monthly bills went up for AT&T and DirecTV customers just a few months after the deal closed.
When Ma Bell Goes Back to Washington
AT&T is used to getting its way in DC. The company employs 100 registered lobbyists (and many more who don’t fill out the official paperwork) while financing a series of front groups and sock-puppet think tanks.
The Justice Department’s antitrust division will review the merger, and the FCC might get involved because Time Warner owns one broadcast station and several other spectrum licenses.
One thing that makes this deal different from previous ones is the timing. Announcing the merger just weeks before a presidential election has forced both campaigns to go on the record with serious concerns.
The real test will come in the post-election appointments, when nominees from the new attorney general to the head of the DoJ’s antitrust division to FCC and FTC commissioners will all have to explain how they would approach such a deal. A merger debate that normally would happen away from the public eye should now get a lot more attention.
And the next Senate, whichever party ends up in control, is likely to be much more aggressive on antitrust issues. Sens. Mike Lee (R-UT) and Amy Klobuchar (D-MN) already have called for bipartisan hearings on the merger. Should the Democrats win the majority in November, fierce critics of economic and media concentration, like Sens. Al Franken (D-MN), Ed Markey (D-MA), Bernie Sanders (I-VT) and Elizabeth Warren (D-MA) will have more power and influence.
“If Hillary Clinton is elected president we must do everything possible to make certain that her administration mounts a vigorous antitrust effort,” Sanders told The Washington Post this week. “We must reject the AT&T/Time Warner merger. We need more diverse media ownership, not less.”
Clinton herself has been speaking out on antitrust issues since last year. Before the AT&T merger was announced, at a rally this month in Toledo, Ohio, she pledged: “As president, I will appoint tough, independent authorities to strengthen antitrust enforcement and really scrutinize mergers and acquisitions, so the big don’t keep getting bigger and bigger.”
The next president will have the opportunity to make appointments and policies that send a clear message that antitrust enforcers are again willing to challenge vertical deals like this one. They will be able to break with the recent past and stop treating mergers, in the words of New America’s Lina Khan, as “some inexorable force of progress, rather than as corporate decisions with profound public implications.”
More Than Just a Merger
It’s important to recognize just how much the political landscape has shifted. There is deep popular distrust of the rigged system that AT&T/Time Warner represents and broad bipartisan frustration with the failure of merger after merger to deliver any public benefits.
The AT&T/Time Warner deal is ultimately about much more than how you’re going to access Game of Thrones or NBA highlights. It’s an opportunity to confront how runaway corporate consolidation hurts the economy and our democracy.
The outcome of this battle could be a bellwether in a much bigger struggle ahead — one that could transform the media landscape and upend how we contend with corporate power in American politics and policymaking. It’s the first step, perhaps, in not just stopping monstrosities like this deal but actually moving to break up these corporate behemoths.
That will happen only with sustained public pressure that continues long after Election Day. This fight can’t be won by well-intentioned lawyers and policy wonks alone — or even by Elizabeth Warren. It will take a genuine popular movement and lots of organizing. That work must start now.
Is there really enough popular and political will to stand up to AT&T’s lobbying juggernaut and block this deal? Stranger things have happened.