A merger of AT&T and Time Warner could cost consumers an extra $571 million annually, UC Berkeley professor Carl Shapiro said during a recent court testimony held as part of the ongoing legal battle between the second largest wireless carrier in the United States and the Department of Justice. The figure quoted by the expert would be reached by 2021, according to his own calculations, with Mr. Shapiro claiming AT&T would only take several years before significantly ramping up the average TV bill in the country. The new estimate is higher than Mr. Shapiro’s mid-March forecast by $135 million.
The DOJ called for the professor to testify in order to strengthen its argument that AT&T would be likely to increase the licensing costs of Time Warner’s content so as to squeeze out more from its rivals and put it at a competitive disadvantage compared to its in-house distribution services such as DIRECTV. The Dallas, Texas-based telecom giant repeatedly dismissed those allegations, having said that ramping up the cost of Time Warner’s content, particularly that from the firm’s flagship Turner division, would only devalue the assets it’s prepared to acquire for over $85 billion. The DOJ’s attempt to block the consolidation through a lawsuit is largely unprecedented, with AT&T proposing a vertical merger that doesn’t take out any competition from the market in a direct manner and is a type of a tie-up that historically saw little to no opposition from Washington until now.
The bulk of the DOJ and Mr. Shapiro’s argument is that Time Warner’s programming is invaluable and would cause AT&T’s distribution competitors to lose customers if they decided not to carry it due to pricing concerns. Turner itself owns CNN, TNT, HLN, and Cartoon Network, whereas Time Warner also boasts properties like HBO and Warner Bros. If AT&T gets its hands on everything from Game of Thrones to Batman, the company would have significant leverage when negotiating licensing prices with distributors that compete with its own content delivery units, according to the federal plaintiff. The first-instance trial between AT&T and the DOJ is expected to be concluded later this spring.