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The AT&T Time Warner merger will be back in court sooner than we expected

Published Jul 21st, 2018 12:01PM EDT
AT&T Time warner appeal ruling

When Judge Richard Leon ruled in favor of AT&T’s merger with Time Warner last month, he explicitly warned the Department of Justice against seeking a stay of the ruling in order to delay the date the merger would take effect. The DoJ didn’t seek a stay, but it has decided to appeal the judge’s decision, and do so quickly. The federal appeals court on Thursday approved the DoJ’s request for an expedited schedule for the appeal, with legal briefs due by October 18th and oral arguments to come “as soon as practicable.”

The schedule is significantly accelerated compared to a usual appeal, which is in the best interests of both parties.With the merger approved by the judge, AT&T has already taken steps to integrate Time Warner into its business. It has been renamed WarnerMedia, and AT&T has rolled out a $15-a-month streaming service that heavily uses some of the content owned by WarnerMedia. The longer an appeal takes, the harder it will be for the two companies to reverse any steps they’ve taken if an appeal is successful.

The Justice Department’s main argument against the merger was that by owning Time Warner’s content, which includes must-have channels like CNN, AT&T could raise prices for pay-TV rivals and keep costs prohibitive for online streaming services. The transition to streaming services, away from traditional cable, is one that’s costing pay TV companies millions of subscribers and billions in revenue every year.

With control over a significant portion of the content, AT&T is now in a good place to keep prices high among rivals and prevent streaming TV services from offering cut-price cable alternatives. With cheap home internet increasingly becoming a reality, cable companies are faced with the prospect of millions of subscribers cutting the cord over the next decade.

AT&T has already raised the price of DirecTV Now to $40 a month, up from $35, following price increases from other streaming services. AT&T’s expert witnesses claimed during the trial that merging with Time Warner would create efficiencies and allow the company to lower the prices charged to consumers.

During the trial, the Justice Department revealed emails from AT&T execs that show the telecoms company wanted to buy Time Warner to help keep the “cash cow” of cable alive. Daniel York, current CCO of the AT&T Entertainment Group and a former top exec at DirecTV, called content providers “shortsided whores” for dealing with other streaming services.