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December 17, 2017
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Stephenson: AT&T-Time Warner Would Be Disruptive Cable Competitor
Posted On: Dec 08, 2016

AT&T chairman Randall Stephenson is pitching the AT&T-Time Warner deal to Congress as creating a new, disruptive video entrant to compete against established dominant players, something of a switch for the iconic company used to being regarded as an 800-pound incumbent telecom gorilla.

That is according to Stephenson's prepared testimony for a Dec. 7 hearing in the Senate Antitrust Subcommittee on the proposed merger.

He says the combined company would "disrupt the entrenched pay-TV models," while accelerating the deployment of 5G wireless broadband.

He also says AT&T is already shaking up the status quo and uses DirecTV Now as exhibit A.

He plans to tell Congress the new subscription-based online service is targeted to the 20 million-plus households who have cut the cord or had the scissors in hand.

While merger critics are concerned about combining that online distribution with Time Warner content, afraid the company will favor that, Stephenson bills the combination as a way to bring more innovative services to the marketplace more quickly to "threaten cable's entrenched and still dominant position."

He said the ability to give customers what they want has been constrained because AT&T owns little of its own programming. "Instead, we have to negotiate those matters with third-party content owners, and in a fast-changing marketplace like video, it is particularly difficult to obtain flexibility to pursue new and untested business models."

The deal will help AT&T "break out of that box and reshape the competitive landscape" with a "stable" of Time Warner content to use as a "launching pad" for an array of content, Stephenson said, including for mobile. Armed with those content resources, the company can "innovate more quickly, experiment more readily, tweak our offerings as we gauge consumer response, and bring consumers the options they seek."

He also framed the "zero rating" portion of the plan as instead data charges included in the price for AT&T Mobility customers. The FCC has signaled zeroing out the cost for an affiliated service like DirecTV Now may run afoul of network neutrality rules, though that is the Democratic-led FCC and a new Republican FCC would likely take a different view.

As to speeding 5G, he said that with the Time Warner content, AT&T will have a strong incentive to optimize the additional value of our content by having a robust mobile network and can deliver advanced video services made possible by the transaction."

Stephenson says it would be a "gross mistake" to view the merger as anything but pro-competitive, a mistake a number of merger critics and Hill Democrats have apparently been making given some of their comments following the deal's announcement. He says it would be irrational for AT&T to do anything but offer widespread distribution of Time Warner content, which he says "is more valuable when distributed to as many eyes as possible."

As to limiting access to competing programming, "as a distributor of video services, AT&T must offer the programming its customers want, regardless of whether or not AT&T owns that programming."

Stephenson's final word was an assurance about Time Warner's news operations.

"We are committed to continuing the editorial independence of CNN," he said. "That independence is what makes CNN so popular and valuable, and we will not do anything to change that."


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