The merger between AT&T and Time Warner is a raw deal for the rest of us

Al Franken

It’s long been impossible to imagine a family budget that doesn’t include line items like electricity, gas, and groceries.  Today, it’s impossible to omit digital communications services like cable or satellite TV and high-speed broadband -- both in your home and on your phone.

The typical American household spends $2,700 on these items each year – despite the fact that many Americans often complain about the service they receive from their cable, internet, or cell phone provider.

I think they’re getting a raw deal.  And I worry it’s about to get even worse.

Over the past two decades, the handful of massive corporations that dominate this sector have consolidated their grip on the market.  Effectively dividing up the country to protect regional monopolies, they’ve conspired to limit direct competition, and thus consumer choice: few Americans have more than one or two real options for cable or broadband service.

Meanwhile, they’ve engaged in a practice known as “vertical integration.”  Eight years ago, cable TV giant Comcast purchased NBCUniversal, a major content provider, thus giving Comcast the ability to control both the programming and the pipes that carry it.  I objected to the deal at the time, concerned that Comcast would have strong incentives to favor its own programming over other content creators’ offerings, and then restrict access to its own programming by competing distributors.

In order to get the deal approved by regulators, Comcast agreed to conditions that would have protected content neutrality and limited its ability to lock consumers into high-priced TV/broadband “bundles” -- but it promptly violated those conditions, engaging in exactly the kind of behavior I warned about.

For example, the new Comcast/NBC placed MSNBC and CNBC (channels it now owned) near other news networks on its TV channel lineup, while consigning competitor Bloomberg News to the outer reaches of the dial.  Since buying NBCUniversal, Comcast has served its own bottom line well, but consumers and competitors have paid the price.

Now AT&T -- which, having already gobbled up satellite giant DirecTV, is the nation’s largest pay-TV provider -- is attempting to purchase one of the world’s largest content producers, Time Warner.

This $85 billion deal dwarfs even the massive Comcast-NBCUniversal merger.  And so do its implications: AT&T’s subscriber base is more than four times the size of Comcast’s at the time it purchased NBCUniversal.

Any day now, the Department of Justice will announce whether this mega-merger will be permitted.  And anyone with a cell phone, a cable subscription, or an internet connection has a huge stake in this decision.

A combined AT&T-Time Warner could pass along the massive acquisition costs, which include billions of dollars in Time Warner debt, to consumers, just as AT&T did after acquiring DirecTV.  Even if you subscribe to a different service for cable or satellite TV, you could wind up paying more, because AT&T could raise the prices it charges competitors for HBO, CNN, and other highly desirable Time Warner programming.

Meanwhile, AT&T-Time Warner would have every incentive to favor its own content over that of others, meaning that AT&T users might not have access to the programming they want – like the competing content of Netflix and Hulu – on the same terms.  Because of AT&T’s large footprint in the wireless internet market, their acquisition of a massive content provider poses a serious threat to net neutrality.

And that’s not all.  Should regulators sign off on this deal, it could have enormous long-term implications for the media landscape, as other major industry players -- of which there are fewer and fewer -- will increasingly argue that greater scale or their own vertical deal is necessary in order to compete with the behemoths of AT&T and Comcast.

In fact, the next big wave of consolidation may already have begun.  A few weeks back it was reported that T-Mobile is seeking to acquire Sprint, in a deal that would merge the third and fourth largest carriers in the U.S. wireless market.

Unlike the cable market, competition among wireless carriers is relatively robust, and consumers are reaping the benefits.  In June of this year, the Wall Street Journal reported that cell plan prices were down 12.5 percent since April of 2016, the largest decline in 16 years, and attributed the drop to “intense competition” among the top four cell-service providers.

But a deal between T-Mobile and Sprint would curb this considerable progress and result in higher prices for consumers.  It could also disproportionately impact lower-income families and communities of color, many of whom rely on mobile broadband as their primary internet connection.  I urge both companies to reexamine the anticompetitive and anti-consumer effects -- effects that regulators publicly acknowledged just a few short years ago -- and refrain from finalizing a proposal.

Take a step back, and the implications of the rapidly accelerating trend of media consolidation are clear and concerning.  Time and time again, deals like the proposed AT&T-Time Warner acquisition result in even higher prices, even fewer choices, and, as tends to follow the elimination of real competition, even worse service for American consumers.  That’s reason enough for the DOJ to block this deal.

More broadly, as someone who used to work in the entertainment industry, I worry about the chilling effect this trend could have on independent creators and producers whose work is at the heart of the American tradition of creativity.  And as a citizen, I worry about the distortive effect media consolidation has on the free flow of information in America, and what it means for our democracy.

But as a Senator representing more than five million Minnesotans, I know that this is a pocketbook issue first and foremost, one that affects nearly every American family.