Merger Fatigue In A Time Of Media Oligopolies

An AT&T store is seen on 5th Avenue in New York on October 23, 2016. 
AT&T unveiled a mega-deal for Time Warner that would t
An AT&T store is seen on 5th Avenue in New York on October 23, 2016. AT&T unveiled a mega-deal for Time Warner that would transform the telecom giant into a media-entertainment powerhouse positioned for a sector facing major technology changes. The stock-and-cash deal is valued at $108.7 billion including debt, and gives a value of $84.5 billion to Time Warner -- a major name in the sector that includes the Warner Bros. studios in Hollywood and an array of TV assets such as HBO and CNN. / AFP / KENA BETANCUR (Photo credit should read KENA BETANCUR/AFP/Getty Images)

AT&T and Time Warner's announced merger warrants serious concern about concentrated media power. The combination of AT&T's vast telecommunications networks with Time Warner's massive content production company would spawn one of the world's largest media conglomerates.

AT&T is the United States' largest pay-TV operator since its acquisition of DirecTV. It's also the second largest wireless data provider and the third largest broadband provider. AT&T controls the signal to televisions in 25 million households and to the wireless devices of more than 130 million individuals. By acquiring Time Warner's media empire--which among many other holdings includes a major news network (CNN), a major cable channel (HBO), and a major movie studio (Warner Bros.)--the corporate titan is poised to control Americans' daily media consumption across numerous platforms and pathways.

Despite being treated as a fait accompli by the merging parties, this deal isn't a slam dunk. It's yet to pass regulatory review, a process that will likely take many months. The deal will also continue to be subjected to various political pressures. Thus far, condemning the merger seems nearly universal. In a rare moment of consensus, Donald Trump, Tim Kaine, Hillary Clinton, Bernie Sanders, and other leading politicians from both parties have all either aggressively come out against the merger or expressed serious skepticism about it. Grassroots activists and public interest advocacy groups are also opposing it, and many regulatory experts are predicting that the deal will not pass regulatory muster. The speed with which this plan fell from grace was extraordinary.

There are good reasons for this resistance. When the same company that owns the pipes also produces and controls the content flowing through them, a number of potential hazards arise that can harm consumers and the quality of our information system. This kind of industry concentration is known as vertical integration, and democratic societies have long known that it creates structural vulnerabilities and systemic incentives for anti-competitive and anti-consumer behavior. For example, AT&T could privilege its own programs over competitors' and prevent other internet and cable companies from having access to them. This would likely harm consumer choice and lead to higher prices.

There's also a net neutrality angle if AT&T gives preferential treatment to streaming video from Time Warner's companies. Right now, the company cannot legally block or slow down competitors' online content (AT&T has been trying to overturn net neutrality in the courts), but it could allow customers to freely stream HBO shows, for example, without it counting against their data caps.

AT&T also would incur an enormous amount of debt from this acquisition, and these costs would, in one way or another, likely be passed on to its customers. The deal could also spur a new wave of mergers between other content and distribution companies, further consolidating an already highly concentrated media system.

AT&T's recent actions have not helped its case. This past September it was caught overcharging some of its poorest customers, and was recently found to be profiting from gathering and selling its customers' data to law enforcement agencies. A mega-merger with Time Warner will only increase its political and economic power.

Since the age of Ma Bell, AT&T has often had monopolistic tendencies. But there was a time when the dangers from these vertical combines were more readily acknowledged and prevented. We need to reclaim this great American tradition of antitrust activism. Elizabeth Warren and others have begun to talk openly about America's monopoly problem, and tackling it in our media and technology sectors would be a good place to start. Warren has also come out against this specific deal on the grounds that it reflects America's revolving door problem, given that Christine Varney, a top corporate antitrust attorney working on the merger, was not long ago leading the government's antitrust efforts under President Obama.

In the coming weeks and months, we will hear from AT&T representatives that this merger will provide many public benefits. But the lessons from recent history should give us pause as to the veracity of these claims. Challenging this merger may provide a crucial test case for whether the era of digital media monopolies has begun to recede. But successfully turning the tide will require tremendous grassroots energy and organizing, including educational efforts that connect the dots between people's daily grievances with their communication services and the excesses of corporate media power.

Poor service and outrageously high bills are the costs of living under lightly regulated media oligopolies--which is the broader context for why such a merger deserves close regulatory scrutiny from the Justice Department and from the Federal Communications Commission regarding, respectively, antitrust and public interest concerns.

One corporation controlling so much production and distribution of news and entertainment media could raise prices and reduce media options for millions of consumers, and it could harm the information system that supports our democracy. America's communication networks are already plagued by unnecessary costs and poor services, and this merger would likely make things worse.

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