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Column: The dangerous AT&T takeover of Time Warner

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The purchase of the entertainment conglomerate Time Warner Cable by telecommunications company AT&T is part of a grim and expanding trend in American business.

The close to $86 billion acquisition is monumental in both its size and projected impact, with the world’s second largest mobile phone provider obtaining the world’s third largest television network. Consumer choice, content diversity and competition are all made more vulnerable if the purchase isn’t followed by appropriate government regulation.

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The consolidation was the subject of harsh questioning from consumer advocates, members of Congress and regulatory authorities, echoing worries that combining content production with media distribution could lead to perverse conflicts of interest. While AT&T’s gambit to purchase its direct competitor T-Mobile was foiled by regulators in 2011, ownership of a media powerhouse like Time Warner Cable can also result in an unsettling confluence of roles that have traditionally remained separate.

When a massive telecommunications company like AT&T controls media outlets such as CNN—which is under the umbrella of Time Warner Cable, what’s to stop the telecom colossus from filtering stories and reports that are unfavorable to its broader business interests? Would a media giant like CNN even bother filling the airwaves with negative yet truthful coverage of its ever-expanding parent company?

Another worry is the increased homogenization of entertainment media. As content production companies become more consolidated under one brand, a single, ever-strengthening source regulates the ideas presented in politically tinged television shows, movies and radio programs.

TBS and HBO, both companies that are now under the control of AT&T, are host to several programs and comedy shows that present political and social satire. Consumers should question whether acquisition of these outlets by the same company, and possible purchasing of more in the future, would have a good or bad impact on the diversity of perspectives in the entertainment industry.

An additional concern is the impact such a consolidation would have on consumers. Increasing the size and reach of companies like AT&T could give it more latitude to increase rates for data and mobile services. Enlarged size also grants AT&T more bargaining power with other service providers and increased leverage in setting rates for consumers. Without federal regulation, AT&T could even increase charges on rivals like Verizon and Comcast to broadcast their content from CNN, HBO, TBS or TNT. Such selective charging would be inimical to competition and burdensome on consumers.

The true import of this decision can't be viewed in just the present. This purchase is part of a growing trend of media distributors purchasing media producers. In 2011, a majority of NBCUniversal’s trading stock was purchase by the cable giant Comcast for $30 billion. This consolidation was just the first step in a growing trend of distributors controlling media companies. Citizens should consider the logical, ethical and commercial outcome of allowing this merger process to continue unregulated.

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Advocates will argue that mergers like this are inevitable and ultimately beneficial to consumers. With the rise of online streaming services like Netflix and Amazon Prime, Time Warner Cable's traditionally reliable base of users is dwindling. In order to stay afloat, merging with a larger content distributor like AT&T is a cost effective way to reach a broad audience. Such mergers also enhance the prospects for innovation in the emerging mobile video industry. If content producers and distributors can work together directly, advocates of the merger argue, the process of providing specialized content consumers is optimized.

But in order for these benefits to outweigh the costs from conflicts of interest, increased homogenization of content and pressures on consumers, government must play a leading role in ensuring fair play. The merger between Comcast and NBCUniversal was only approved after anti-trust regulators hammered out specific rules the company had to follow. Among many regulations was the requirement for equal treatment of other content providers that streamed material from NBCUniversal.

To avoid concentrations of media power that stifle diversity and competition, consumer and anti-trust advocates must pressure government officials to keep businesses accountable. Promises of fairness and neutrality from AT&T will meet short shrift if consumers are complacent and the perverse incentive of increased profits plays the dominant role in these mergers.


Follow Isaac Rounseville on Twitter.



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