Senators on antitrust subcommittee question CEOs Jeff Bewkes and Randall Stephenson about harm to consumers that could result from mega-merger
US senators grilled two of the most powerful men in media on Wednesday over anti-competitive harm that might result from the controversial $85.4bn acquisition of Time Warner Entertainment, the owner of HBO and CNN, by AT&T.
The Time Warner chief executive, Jeff Bewkes, and his AT&T counterpart, Randall Stephenson, answered questions at the Senate antitrust committee hearing about conflicts that might arise from the merger of a major media producer and a major distributor.
The Connecticut senator Richard Blumenthal pressed both men to address President-elect Donald Trumps threat to block the merger in retaliation for perceived negative coverage by CNN.
Blumenthal asked the pair to assure the Senate antitrust subcommittee that CNNs coverage would not changed based on Trumps threat to block the merger in what he called an absolutely abhorrent use of the blunt instrument of the law.
Blumenthal said: What troubles me deeply is that the president-elect has said that his justice department will enforce a different standard of law depending on what kind of coverage his administration receives. Will you commit that your coverage will in no way be influenced or impacted by what the president of the United States says about this transaction?
Yes, said Bewkes and Stephenson.
Trump has been broadly critical of the merger, saying his administration would not approve it as recently as October. He cited CNNs coverage of his campaign among other objections, saying the network was trying desperately to suppress my vote and the voice of the American people.
Minnesota senator Al Franken pushed Bewkes on the question of whether Time Warner would benefit from raising prices on AT&T competitors such as Comcast once it was owned by one of its distributors. Its not like selling toothpaste and not taking it to [New York City convenience store chain] Duane Reade, said Franken, himself a former TV and film actor. HBO isnt toothpaste. Its like CVS making the greatest toothpaste in the world and not letting Duane Reade sell it.
More to the point, Franken said, its really like HBO making Game of Thrones and not letting Comcast sell it. Or its more like making Comcast pay more for the privilege of having Game of Thrones or Veep or the rest of the lineup. Conditions had to be imposed on the merger to prevent such behavior, Franken told the executives, or else there would be no way to stop the new company from restricting access to programming in order to drive consumers to HBO or AT&Ts streaming services. Youd have every reason to do this if you could, Franken told Bewkes.
Bewkes disagreed: refusing to distribute through a company that paid handsomely for the privilege would cut off Time Warners nose to spite its face, he said. Weve been able to build our network only because we have broad distribution, Bewkes told the subcommittee. If we were to not offer our networks over any of the cable, satellite, or over the top platforms, wed be cutting off meaningful revenue to our company. Theres no incentive for us to do that.
Stephenson cast the proposed reconfiguration of AT&T as a force for consumer-friendly disruption in a market of established players. As we begin to innovate with Time Warner content, giving our customers unique and different capabilities, other companies will follow, Stephenson predicted.
Gene Kimmelman of the consumer advocacy group Public Knowledge said his group estimated that cable consumers were being overcharged by at least $45 a month already because there are too few players.
AT&T and Time Warner are excellent companies that have begun to compete in the over-the-top market, Kimmelman said. Thats wonderful, as separate companies contracting with each other in the marketplace. Merged together, he told the subcommittee, there are enormous incentives to favor yourself.
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