The Department of Justice unleashed its harshest condemnation yet of the proposed purchase of Time Warner by AT&T when the agency revealed Wednesday that the $85 billion merger would cost consumers more than half a billion dollars per year in additional cable costs.
As part of the ongoing antitrust case filed by the government in attempts to stop the merger and placate Donald Trump’s vendetta against Time Warner property CNN, lawyers from the DOJ called on University of California at Berkeley economics professor Carl Shapiro to provide his analysis of the deal, The Washington Post reported. Shapiro found that by 2021, consumers could be paying an extra $571 million in TV fees. “I’ve concluded the merger will harm consumers,” Shapiro told the court. “The harm is significant.”
When approached for comment on Shapiro’s figures, AT&T referred to its 76-page pretrial brief filed last month. Time Warner did not respond to request for comment.
At the heart of Shapiro’s math is the fact that the merger will give AT&T control over a number of popular cable networks owned by Time Warner, including CNN, HBO, TBS, and TNT. That would give AT&T a significant advantage, as the company could raise the rates for competing cable companies to carry the channels. Those increased costs would trickle down to consumers.
“Why will they have more leverage? What’s new is that AT&T and DirecTV will benefit if Charter doesn’t have Turner’s content,” Shapiro said. “Charter is going to be a weaker competitor.”
John Simpson, the Privacy and Technology Project Director at Consumer Watchdog, told Gizmodo in a phone interview that he hadn’t done the economic analysis to confirm the DOJ’s findings but said, “it sounds like the Department of Justice has and it sounds like a serious concern.”
Simpson noted that AT&T’s purchase of Time Warner would represent the “merging of both the pipes [that deliver content] and content provider.” He called such a merger “a huge problem” that “presents real harm to consumers.”
The same problems that arise for cable and satellite providers could also apply to streaming services, which exist as the primary alternative to expensive TV packages. AT&T has a foothold in that industry too with DirecTV Now. Variety reported earlier this week that AT&T executive Devin Merrill told the court the service has more than one million subscribers. A 2016 email from Merrill, obtained by the DOJ, revealed that he wanted to make the streaming service “as strong as possible without killing the golden goose” of premium cable and satellite subscribers.
While the DOJ may be pursuing its antitrust case because of a Trump grudge, at this point the reason matters less than the result. If the merger is allowed to go through, you’ll be paying for it one way or another.