The US Department of Justice and AT&T are currently slugging it out in court over whether or not the cable giant should be allowed to acquire Time Warner, the media giant that owns HBO and CNN, among other channels. The government is arguing that AT&T would “weaponize” its content holdings to take subscribers from other cable companies and prevent the growth of streaming services. AT&T, shockingly, is saying the opposite.
Up until this point, the government has been calling on a relatively abstract notion of consumer harm to make its case. But according to the LA Times, an economist acting as a government witness has come up with some very specific figures: $571 million per year by 2021 in additional fees to consumers if the acquisition is allowed to go ahead.
Carl Shapiro is a professor at UC Berkeley who analyzed the deal and is testifying on behalf of the government. “I’ve concluded the merger will harm consumers,” Shapiro said. “The harm is significant.” One of AT&T’s main arguments during the case is that it wouldn’t make sense to raise prices for channels it owns, since it only makes money by having other cable companies pay to carry those channels. However, Shapiro explained that AT&T having ownership over Time Warner implicitly changes the bargaining situation when negotiating with other cable companies.
“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,” said Shapiro. “Charter is going to be a weaker competitor. You go through the logic, this is the fundamental.”
According to Shapiro’s analysis, US consumers would end up paying $571 million in extra fees and costs by 2021, as the price that Time Warner charges for its channels would go up, and other cable companies would pass those costs onto consumers. That works out to around $10 more per cable subscription, based on the current number of cable households in the US.
AT&T, of course, disputes Shapiro’s analysis. As is common in cases like this, AT&T has its own economics expert in court today to provide an alternative take on the transaction.