There have been two developments on the regulatory front this week: The US Department of Justice (DOJ) has filed a lawsuit to block AT&T’s proposed $85 million acquisition of Time Warner Inc; and the FCC has set a vote to repeal the Obama-era net neutrality rules.
The DOJ is arguing that if AT&T (the nation’s largest pay-TV company) acquired Time Warner (the third-largest media company worldwide and owner of HBO, Turner Broadcasting, CNN and the Warner Bros studio), it would gain too much control over programming and distribution, and potentially represent an antitrust situation. To wit: The fear is that the merged company’s size would be such that it would impede competition from online video distributors and raise content prices on its rivals on the distribution side—all of which would translate into higher prices for consumers.
“This merger would greatly harm American consumers,” said DOJ antitrust chief Makan Delrahim. “It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy.”
The DOJ’s complaint, filed in the US District Court for the District of Columbia, seeks a permanent injunction on the merger, on the grounds that it violates the Clayton Act anti-monopoly statute.
AT&T said it plans to fight the litigation, noting that similar mega-mergers, such as Comcast’s union with NBCUniversal, which made it the second-largest media company in the world, have been greenlighted.
“[The] DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent,” said AT&T general counsel David McAtee II. “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.”
Meanwhile, FCC Chairman Ajit Pai announced that the regulatory body would vote on net neutrality rules on 14 Dec. It’s expected that the GOP-dominated court will vote to roll back the regulations introduced in 2015, which prohibit ISPs from throttling OTT traffic, and which prevents them from establishing paid ‘fast-lanes’ for OTT companies.
Net neutrality fans argue that absent such regulations, ISPs, which are usually also pay-TV providers, could simply slow down content they don’t like or which is competitive to their own services. In addition, they say a rollback could have a chilling effect on OTT diversity, given that not all startups could afford to pay for pricey carriage tiers.
Despite such fears, Pai has long called net neutrality a mistake, and did so again on Tuesday.
“For almost 20 years, the internet thrived under the light-touch regulatory approach established by President Clinton and a Republican Congress,” said Pai. “This bipartisan framework led the private sector to invest $1.5 trillion building communications networks throughout the United States. And it gave us an internet economy that became the envy of the world.
He added: “In 2015, the prior FCC bowed to pressure from President Obama. On a party-line vote, it imposed heavy-handed, utility-style regulations upon the internet. That decision was a mistake. It’s depressed investment in building and expanding broadband networks and deterred innovation.”
Pai plans to lay out a specific replacement proposal this week.