Media Merger Mania

Cameron Little, Johns Hopkins University:

Facing wide-spread opposition from government agencies, elected officials, and Presidential candidates alike, the AT&T/Time Warner merger is likely to fail and for just reason. Recently the Department of Justice filed a suit against the potential deal, citing anti-trust issues. U.S. Senators Bernie Sanders and Al Franken have both been outspoken against the deal, naming a variety of issues with the deal, including potential cost hikes, unfair competition, and fewer consumer choices. Republican nominee Donald Trump is against the deal, but for a different reason, claiming that Time Warner’s CNN should not be in the hands of a telecommunication giant. Democratic counterpart Hillary Clinton has taken a very moderate position on the matter, saying that the deal “raises questions and concerns that should be looked into.” That Hillary Clinton has not taken a firm stance is interesting, because Time Warner is a top donor for the Clinton campaign.

Amongst the aforementioned criticisms and evaluations of the deal, the most probing problem is that AT&T will partake in both the content and distribution sides of entertainment. Although this can be seen as a path for innovation, this has the potential to be a serious problem for both consumers and the general public. The first overarching issue is that the deal will probably lead to hefty cost increases. This is quite likely, considering the historical fallout of similarly sized mergers. Although this is a vertical merger, meaning that AT&T and Time Warner do not compete against each other, the past gives consumers reason to be leery of price markups. When AT&T acquired DirecTV, it took less than six months for both AT&T’s broadband service and DirecTV to increase in cost.

Aside from the sheer likelihood of price increases, the deal cultivates unfair competition. While AT&T is second in telecommunications to Verizon (the two companies are the offspring of Bell Operating Companies, which was split during 1982) Time Warner is a major player in the media market, touting well-regarded operations in CNN, HBO, and DC Entertainment among others. Although there is decent competition in the media market amongst Disney, Comcast, Time Warner, Fox, and others, there is very little competition outside of Verizon and AT&T in the telecommunications sector. Arguably, AT&T competes in an oligopoly and the media market may be nearing such status. That being said, a merger would certainly not help in creating a more competitive, fair market and would, in turn, harm consumers and the overall business climate.

In addition to the business aspect, the possible merger poses a major ethical question in terms of news sourcing and information outlets. The American political process is already negatively affected by media bias, and this merger may pose further complications. In the event that AT&T and Time Warner were to merge, AT&T would control the media streaming market for both phones and TV (DirecTV), as well as the content production of Time Warner’s CNN. This conglomeration raises a major conflict of interest that could put Time Warner’s productions under pressure to act in the best interest of its partnership with AT&T rather than quality journalism. Free press is crucial to the overall success of the United States and its democratic process. Any negative tampering to the already criticized media is sure to further destabilize the American political system and its foundation on trustworthy information.

Despite the improvement of service that may stem from the AT&T’s merger with Time Warner, a megacorporation is not the answer—and the DOJ will most likely rule as such.  In today’s market, both media and telecommunications call for more competition and this deal is quite contrary to that. To keep the big capitalist machine running efficiently, the government needs to find ways to limit barriers to entry in its near oligopolistic industries, rather than promote consolidation amongst their already few companies.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s