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

Daily Local News (West Chester, PA) - - BUSINESS - By Tali Ar­bel AP Tech­nol­ogy Writer

NEW YORK >> AT&T and Time Warner are play­ing up how their $85.4 bil­lion merger will lead to in­no­va­tive new ex­pe­ri­ences for cus­tomers. But an­a­lysts, pub­licin­ter­est groups and some politi­cians are far from con­vinced.

Repub­li­can pres­i­den­tial can­di­date Don­ald Trump said it should be killed. Tim Kaine, the Demo­cratic vice pres­i­den­tial nom­i­nee, said less con­cen­tra­tion in me­dia “is gen­er­ally help­ful.” And the Repub­li­can chair­man and Demo­cratic rank­ing member of the Sen­ate’s an­titrust sub­com­mit­tee said that the deal would “po­ten­tially raise sig­nif­i­cant an­titrust is­sues.”

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 pro­grams and films could hurt con­sumers over­all.

Walling off Time Warner

The com­pany cer­tainly wants to do that. “With great con­tent we be­lieve you can build a truly dif­fer­en­ti­ated ser­vice,” said AT&T CEO Ran­dall Stephenson. “In par­tic­u­lar, mo­bile.”

Here’s how that would work. 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.

Free data for Time Warner

There’s an­other way AT&T could fa­vor 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 ze­rorate its up­com­ing livestream­ing 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.

Rich Green­field, a BTIG an­a­lyst, noted there’s no ev­i­dence that Com­cast’s 2011 ac­qui­si­tion of NBC led to lower prices. In fact, prices have been in­creas­ing broadly, al­though Green­field said there’s no way to know whether the deal contributed to that trend.

“There may not be dra­matic harm, but it’s cer­tainly hard to find clear ben­e­fit,” Green­field said.

THE AS­SO­CI­ATED PRESS

Pedes­tri­ans walk by an en­trance to the Time Warner Cen­ter in New York. AT&T and Time Warner are play­ing up how their $85.4 bil­lion merger will lead to in­no­va­tive new ex­pe­ri­ences for cus­tomers.

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