The Justice Department’s antitrust case opposing the merger of media giants Time Warner and AT&T is in its final stages. And on Thursday, AT&T CEO Randall Stephenson took the witness stand to argue that the deal couldn’t hurt competition because the company will launch a new skinny bundle for just $15-per-month!
According to CNN, the courtroom exploded with activity when Stephenson vaguely explained the service that he said will be called, “Watch.” He said it will be part of an initiative to encourage more mobile TV viewing and costs will be kept low because it won’t include any sports channels.
Later, a company spokesperson told reporters that “Watch” will be available to anyone, and AT&T unlimited wireless customers will get it for free. Apparently, AT&T had already mentioned the service before the trial, saying that it “would launch a new service with Turner and a small number of popular cable networks.” Now we have a price, a name, and a launch date sometime in the “next several weeks.”
First of all, let’s just wildly speculate what this bundle might look like. With DirectTV Now, you get 65 channels at $35 a month, which comes out to about $0.54 per channel. At that rate, $15 a month could get you around 27 channels. But it seems likely that there would be some trade-offs in order to maintain DirectTV Now’s value, maybe an absence of DVR capabilities and say, 20 channels total. All-in-all, this package sounds inferior to a set of digital rabbit ears and a Chromecast.
Stephenson’s announcement is clearly a head fake in the merger case that by most accounts hasn’t gone great for the Justice Department. From the beginning, the core issues have been a confusing clusterfuck. Donald Trump’s attacks on CNN raised suspicion over the Justice Department’s reported request that Turner networks be spun off from Time Warner in order to get approval for the deal. It appeared that a political vendetta was playing out. This all overshadowed the fact that AT&T is the world’s largest telecom and when combined with Time Warner, it would become the world’s largest entertainment company, as well.
AT&T and many observers have made the case that the DOJ hasn’t traditionally blocked “vertical mergers,” but there’s plenty of precedent for such a move. Part of the problem with the trial process has been this quibbling over dollar amounts that would immediately affect consumers. The DOJ brought in an expert witness to claim through complex economic models that the deal could end up costing Americans an extra $571 million a year by 2021. AT&T only needed to bring in its own competing study to muddy the waters. Now, the company is wildly throwing out a new streaming service that would be cheaper than the competition and won’t launch until the trials all over.
The problem is that immediate effects aren’t the issue. The statute this deal falls under explicitly bars mergers when the outcome “may be substantially to lessen competition, or to tend to create a monopoly.” AT&T will undoubtedly have more bargaining power over its cable TV and streaming rivals if this deal goes through. Hell, it’ll even be picking up Time Warner’s partial ownership of Hulu. Maybe it won’t turn the screws on other cable companies in negotiations right away, but it will someday. And in the absence of new net neutrality protections, it’ll have even greater leeway to take advantage of internet fast lanes to crush other streaming services and ISPs.
This is about too many companies becoming too big. Blocking a single merger won’t solve the problem, but it would at least pump the brakes.
Correction: A previous version of this article listed the individual price of channels on DirectTV Now as $1.85 rather than $0.54. This is because we’re bad at math, especially in the middle of our first cup of coffee. We regret the error and accept the shame.