AT&T placed an $85.4 billion bid to acquire Time Warner channels, like HBO, CNN, and TNT, last year. “They’re in a pricing war with Verizon; cellphone bills keep going down, which is great for us, but not great for the companies,” writes Recode’s Ed Lee. “They think, by buying Time Warner, they’ll be able to create new kinds of online video and also sell what’s known as targeted advertising. They’ll marry AT&T’s data with Time Warner’s content and sell ads at a higher rate.”
The Justice Department sued, “arguing that it would limit competition and raise costs.” AT&T said, in a court filing:
“The evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to reduce prices, offer innovative video products, and compete more effectively against the increasingly powerful, vertically integrated ‘FAANG’ [Facebook, Apple, Amazon, Netflix, and Google] companies,” AT&T told US District Judge Richard Leon in the brief.
“There is no sound evidence from which the Court could fairly conclude that retail pay-TV prices are likely to increase,” AT&T said in that same filing.
On June 12, 2018, Judge Richard J. Leon of the United States District Court in Washington allowed the merger to proceed without any conditions, saying that “the department hadn’t proved its case that the deal would suppress competition in the pay-TV industry.”
Here’s the predictable outcome: Twenty days after winning a case where they argued that rates wouldn’t increase, AT&T announced that rates will increase by $5 for all DirectTV packages.
“In the 18 months since our launch, we have continued to evolve our DIRECTV NOW products to serve this new customer set and compare favorably with our competitors. To continue delivering the best possible streaming experience for both new and existing customers, we’re bringing the cost of this service in line with the market—which starts at a $40 price point.”
Unrelated to their merger (but related to their price gouging methods), AT&T raised their administrative fees several times recently. “The company has increased prices twice in the last three months, first by 50 cents, then by a further 73 cents in June,” writes Engadget. “Customers are now paying an additional $1.23 in administrative fees, adding up to an estimated $800 million in extra revenue for the telecommunications carrier.”
We’re living in the golden age of mergers with telecoms, content providers, or the combination of both:
- Verizon, who purchased AOL last year, bought Yahoo!’s internet business for $4.48 billion to enhance their media, online advertising presence, and user data. “It’s pretty much the fox taking over the henhouse,” said Marc Rotenberg, president of the Electronic Privacy Information Center via the LA Times. “Verizon has always been sneaky about its privacy practices, and Yahoo is the poster child for security breaches.” Though the brand could stick around, Yahoo! is essentially gone.
- Disney purchased the entertainment assets for 21st Century Fox for $71 billion; a merger that interestingly sailed through the Justice Department despite a two-year battle with AT&T. Disney acquires 21st Century Fox’s film, TV studios, and most cable TV networks, in the deal. Comcast also made a failed $65 billion bid for 21st Century Fox.
- T-Mobile USA and Sprint are attempting to merge in an effort to compete against Verizon and AT&T; Sprint would become a direct subsidiary of T-Mobile USA.
The oligopoly in the tech market thrives today. Previous acquisitions from the big five include:
- Google purchased YouTube, Android, and Nest.
- Amazon purchased Audible and Twitch.
- Facebook purchased Instagram and WhatsApp
- Microsoft purchased Skype, Nokia, and LinkedIn.
“Even Apple, which typically shuns big deals and doesn’t even disclose many smaller acquisitions, bought its own chip design company, P.A. Semi; Beats, the headphone maker and music service; and Siri, the voice-controlled assistant service,” writes the Verge. “In nearly every case, these acquisitions — and many more obscure ones — have made the Gang even more powerful and ubiquitous. Can you imagine Google today without Android or YouTube? Can you imagine Apple’s iPhones and iPads without their super-fast custom processors or (for all its flaws) Siri?”