Why AT&T Should be Encouraged to Purchase Time Warner

At first glance, allowing AT&T, a large, powerful telephone company to purchase the invaluable media assets of Time Warner makes one wonder if the resulting organization will be too rich and powerful. The answer is, if executed properly – hopefully better than AOL’s attempt, it will be a whopper of an organization which has a limitless list of valued assets such as CNN, Warner Brothers, DC Comics, HBO and TNT.

Keep in mind, AT&T has multiple modes of distribution from wireless to wired and satellite. So really, even at second glance, it would seem we are putting together an organization with so much market power, competitive companies will be slaughtered.

Regulators will likely force AT&T to divest some assets or agree to some stipulations which keep the market from being excessively harmed – but let’s discuss what the new AT&T could do in a worst-case unconditional buyout scenario.

You can already stream unlimited DirectTV on the AT&T Wireless network at no additional cost, giving the carrier an advantage over other wireless carriers. This market however is in a price war so consumers are looking to spend less. Adding value with deals on Time Warner assets is certainly an effective way to get even more consumers to choose your service over the others.

Verizon of course has content like Huffington Post and soon Yahoo – but no one will likely consider any of it an added value like say HBO.

AT&T will have a slight competitive advantage in the primary wireless space it competes in if the merger is allowed.

The real competition in the future however comes from Apple, Amazon, Facebook and Google.

Google was providing fiber for a while but arcane state regulations made it very difficult for the company to turn this into a real business. They hedged with balloon-powered internet. Facebook is experimenting with drone-powered internet. White space or unused spectrum internet will eventually be a real thing as well. Micro-satellites could become a market mover as well.

For all practical purposes, Apple has a device and service monopoly, Amazon has an ecommerce monopoly and very strong content and cloud arms, Google has a search advertising monopoly, Facebook has a social advertising monopoly. All of these companies are gunning for AT&T and they are all flush with cash and experimenting with ways to take them out. They’ve even invested in undersea cable.

An effective counterbalance would be to allow AT&T to have prized content – if for no other reason to thwart the advances of the tech companies encroaching on their turf.

The losers in this deal will be less well-financed competitors like T-Mobile and Sprint – although T-Mobile CEO John Legere thinks the deal will take AT&T’s eye off the wireless ball. This should give regulators some hope that the deal won’t be terribly anti-competitive.

To summarize – if you had to weigh the positives and negatives of the deal for consumers its likely 60/40 positive. I do have some lingering concerns about AT&T being too powerful but in the last ten years, we’ve seen the smaller wireless carriers and Silicon Valley in general able to do very well with a strong AT&T in the market. If they get stronger, the competition will likely still be able to thrive. 

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