Senate panel questions benefit for consumers in AT&T-Time Warner deal

WASHINGTON

At a two-and-a-half-hour hearing, Klobuchar, Franken and others questioned AT&T chief Randall Stephenson and Time Warner chief Jeffrey Bewkes about why marrying one of the country's biggest internet, cable and wireless providers with one of the country's biggest sources of movies, shows and news would not end in restrictions or charges that would drive up bills for customers and competing companies.

"We have seen this plot before," Klobuchar said. "Like a tired movie franchise, we can predict the ending before it begins. The promise of thriving competition collapses, replaced by dominant firms with monopoly power."

Both executives pledged under oath that they would not favor their own distribution platforms over others who wanted to distribute their entertainment and news products. They also said they expected the merger to reduce prices.

AT&T has 15.6 million internet connections, 45.5 million video connections, most through Direct TV, and 141.8 million wireless connections in the U.S. and Mexico. Time Warner owns CNN, HBO, Warner films and Turner Broadcasting. Consolidation would create a company with a huge hold on distribution and content. But executives offered a new Direct TV Go product that provides a 100-channel package for $35 a month as proof of their intent to drive down prices.

Klobuchar questioned whether that charge would go up once the merged company controlled much of the market. She pointed to a new study by Consumer Federation of America that showed the "typical" American household now includes two cellphones, one landline, a broadband connection and a multichannel video service costing about $2,700 per year. The study estimated even before the proposed merger, earlier consolidation in the market was already costing consumers $45 per month more than they should pay.

Franken bored in on the fact that the proposed merger has been submitted for antitrust vetting by the Justice Department, but has not yet been sent to the Federal Communications Commission (FCC) where the companies would have to prove that the deal would benefit consumers in order to have it approved.

The deal received a thumbs-up from another hearing participant, Mark Cuban, who owns an independent film company and TV network, as well as a string of movie theaters. Cuban, owner of the Dallas Mavericks NBA team and a regular on the hit entrepreneurial business show "Shark Tank," said a merger of AT&T and Time Warner was less of a monopoly threat than existing mega-distributors Google, Facebook, Microsoft and Apple.

The $85 billion merger attracted the ire of President-elect Trump when he was campaigning. Trump promised to block the merger because the company it created was too big. But Judiciary Committee member Richard Blumenthal, D-Conn., worried that Trump might exact compromises in news coverage by CNN in exchange for approving the merger. Bewkes promised that CNN will remain an independent source of journalism.

Much of the hearing focused on the wireless platforms where video content is increasingly distributed. Stephenson and Bewkes said the AT&T-Time Warner merger aims to let customers pay once for content that can be viewed on several kinds of platforms, including new 5G wireless devices. Both executives said the new company would disrupt the market in ways that create competition and lower prices and that competing distribution networks would have access to content under the same terms as AT&T.

But independent network executive and filmmaker Daphna Ziman warned that the merger would make it harder for women and minorities to find places to broadcast their shows and movies.

Gene Kimmelman, CEO of Public Knowledge, a group promoting open internet and consumers rights, said a smaller merger of Comcast and NBC Universal had not produced lower prices for consumers and had led to court battles over discriminatory placement of shows. Kimmelman said that unless AT&T and Time Warner can show that their merger will do neither of these things, the government should reject it.

Jim Spencer • 202-662-7432