AT&T-Time Warner merger may not do con­sumers much good

Jamaica Gleaner - - BUSINESS - – AP

AT&T AND Time Warner are play­ing up how their US$85.4-bil­lion merger will lead to in­no­va­tive new ex­pe­ri­ences for cus­tomers. But an­a­lysts, public-in­ter­est groups and some politi­cians are far from con­vinced.

The po­ten­tial harm to con­sumers from this deal could be sub­tle – far more so than if AT&T were sim­ply ac­quir­ing a di­rect com­peti­tor like a big wire­less or home broad­band com­pany.

Time Warner makes TV shows and movies; AT&T gets that video to cus­tomers’ com­put­ers, phones and TVs. But the con­cern is that any­thing AT&T might do to make its broad­band ser­vice stand out by ty­ing it to Time Warner’s pro­grammes and films could hurt con­sumers over­all.

The com­pany cer­tainly wants to do that.

“With great con­tent, we be­lieve you can build a truly dif­fer­en­ti­ated ser­vice – in par­tic­u­lar, mo­bile,” said AT&T CEO Ran­dall Stephen­son.

Here’s how that would work. The AT&T logo ap­pears above the post where it trades on the floor of the New York Stock Ex­change on Mon­day, Oc­to­ber 24, 2016. Be­cause of Time Warner’s world­fa­mous shows and movies – Game of Thrones, the Harry Pot­ter films, pro­fes­sional basketball – and AT&T’s abil­ity to gather in­for­ma­tion about its tens of millions of cus­tomers, AT&T thinks it could do a bet­ter job tai­lor­ing ads and video to user pref­er­ences. It could then cre­ate more at­trac­tive sub­scrip­tion pack­ages suited for phones, where peo­ple are in­creas­ingly watch­ing video.

But many con­sumers al­ready con­sider ads that know ev­ery­thing about them creepy or in­va­sive, and dig­i­tal-rights groups com­plain that any pref­er­en­tial deal AT&T could of­fer with, say, HBO, would hurt com­pe­ti­tion.

Say AT&T re­served HBO for its cus­tomers only. That would cut HBO’s reach and hurt its value.

“This cre­ates mas­sive strate­gic ten­sions that are al­most im­pos­si­ble to re­solve,” wrote Jack­daw Re­search’s Jan Daw­son in a note. AT&T can ei­ther dis­ad­van­tage Time Warner by re­strict­ing who can watch its stuff or limit ben­e­fits for its own cus­tomers so much that they barely rate at­ten­tion, he sug­gested.

There’s another way AT&T could favour its own me­dia of­fer­ings. The com­pany cur­rently lets many of its wire­less cus­tomers stream from the DirecTV app on their phones with­out count­ing it against their data caps, a prac­tice known as ‘zero rat­ing’. AT&T has sug­gested it may also zero-rate its up­com­ing live-stream­ing DirecTV Now ser­vice, which doesn’t re­quire cus­tomers to in­stall a dish on their homes.

If AT&T did that with, say, HBO shows and TNT’s basketball games, it could up­set other video providers, who could rea­son­ably worry that cus­tomers might shun their stream­ing ser­vices to avoid ex­ceed­ing their monthly data limit and pos­si­bly suf­fer­ing slower data speeds as a re­sult.

The com­pa­nies also say that re­ly­ing more on tar­geted ads could help lower the cost of making ap­peal­ing shows and films. Even if that’s the case, the sav­ings might not get passed on to con­sumers.

AP

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