The Hyperbole of the AT&T/Time Warner Merger

0

By Roger Entner


The reaction to the announcement of AT&T and Time Warner agreeing to combine has been nothing short of fascinating.

The fact that only a press release and a one-page letter to employees has been released thus far has not stopped consumer advocates from making all sorts of claims about the merger — from allegations that the merger is between AT&T and the cable company Time Warner Cable, which it’s not, to suggestions that the merged entity will bring an end to consumer video content as we know it.

These sorts of machinations are to be expected in the highly charged political atmosphere in Washington, D.C., but a few of the points being alleged call for deeper analysis. The amount of shooting from the hip in the spirit of “there isn’t a merger that I have ever liked” is not helping anyone.

There is a lot of anxiety around free data and the bundling of content and delivery. Combining content with transport is commonplace in the video landscape. How do you think cable TV and Satellite TV works? Customers get one bill that combines the content and the delivery charge. Putting satellites in space and cables in the ground or on poles costs money. Why is wrapping the transport charges into the content bill over the internet any different?

For all I know, this hubbub about zero-rating is only a temporary phenomenon. The matter of fact is that data buckets and zero-rating are only Band-Aids until supply has caught up with demand. In the case of T-Mobile and Sprint, both companies are restricting the resolution at which customers can view video to 480p. The quality difference between 480p and higher resolutions is somewhere between non-existent and non-perceivable. Combined with compression technology, T-Mobile was actually able to reduce data usage while increasing the number of people and the time that these people were watching TV.

Considering that everyone pretty much has access to the same technology, AT&T and Verizon could do the same thing within a few months. For whatever reason, they would rather let consumers choose the resolution at which they want to watch video. Instead, they are experimenting with free data. What’s wrong with different choices and approaches? Customers do change carriers and make the decision that is best for them. After all, T-Mobile CEO John Legere already announced that they are going to provide free data access to DirecTV streaming services.

Customers are not going to be locked in to one carrier. Isn’t it nice how competition works?

Even without compression technology and managing video resolution, it is only a matter of time – albeit longer – until unlimited data is back. The moment that carriers can figure out how much data customers are going to use in the future will be when they will offer unlimited data plans.

We have seen it before with voice.

The moment it became clear that 1,200 minutes of talk time is what the vast majority of people would use, unlimited talk plans emerged from all carriers. For a while, there were 1,500 minute plans available for less than an unlimited plan, but customers preferred to pay a premium for unlimited. Carriers have an incentive to offer unlimited plans.

Also, it is unlikely that anyone will actually look seriously at the transaction until next summer. We will probably get a new Attorney General, a new head of the Antitrust Division, a new FCC Chairman, and they will likely have new senior staff reporting to them.

The DOJ should certainly take a good look at the facts of the merger when the facts are provided. In the meantime, the rest of us can continue reading the fantastical allegations that are coming out on an almost daily basis.

Oh, and there is also a presidential election on Tuesday.

 

Roger Entner is the founder of Boston-based Recon Analytics. He previously spent two years as SVP and head of research and insight at The Nielsen Company, and is a former director at The Yankee Group.