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How the AT&T/Time Warner Deal Could Hurt Low-Income Families

5 minute read
Timothy Karr is the senior director of strategy for Free Press, an advocacy organization that fights for everyone’s rights to connect and communicate.

AT&T executives think their plan to take over Time Warner is too big to fail. But the proposed merger’s astronomical cost may prove them wrong.

The $85 billion deal, combining the nation’s largest phone, Internet and pay-TV provider with an entertainment and news colossus whose holdings include CNN, HBO, TBS, TNT and Warner Bros. Studios, would be one of the largest media mergers ever.

The resulting enterprise would have an approximate market value of $300 billion. That’s nearly three times the value of Comcast after it bought NBCUniversal in 2011.

For the deal to go through, AT&T and Time Warner need the approval of government regulators, especially those at the Department of Justice, who will vet it to see if it violates antitrust laws.

But there’s another metric by which regulators should evaluate the merger: its impact on real people, especially low-income households and communities of color.

If approved, the merger would saddle AT&T with a whopping debt load estimated to be $187 billion, according to industry analysts. AT&T took on tens of billions of dollars in debt last year when it completed its $69 billion takeover of DirecTV, a move soon followed by price increases for DirecTV and AT&T broadband customers.

There’s every reason to believe that similar rate hikes would follow AT&T’s acquisition of Time Warner. But the deal’s biggest proponents certainly won’t admit that. “I think anyone who characterizes this as a means to raise prices is ignoring the basic premise of what we’re trying to do here,” AT&T CEO Randall Stephenson told investors during a recent conference in California.

Stephenson and Time Warner CEO Jeff Bewkes went on a largely unsuccessful tour of media outlets to pump the deal and address its doubters. “This will be essentially a catalyst to more competition, more innovation,” Bewkes said during a stop at CNN studios in New York. “More competition leads to lower prices and happier consumers.”

Stephenson and Bewkes are ignoring some fundamental math here. AT&T will need to regularly pay interest to service its massive debt. The telecommunications giant doesn’t print cash; it bills customers. In other words, to pay down its interest, AT&T will have to hike prices.

It’s likely those cost increases would occur in its consumer-product markets, including broadband, where AT&T faces little to no real competition. It could also raise the rates it charges and restrict the offerings it makes to other cable distributors that carry channels like HBO and CNN, limiting what people can see and generating new costs that would be passed along to pay-TV subscribers everywhere.

This trickle-down of higher prices would be felt not in the boardroom but in the living room, where working families are already struggling to keep up with escalating costs for Internet, wireless services and pay-TV.

Higher prices would put Internet access further out of reach of the more than 30 million adults in this country stuck on the wrong side of the digital divide. According to U.S. Census data, this gap is most pronounced in African-American and Hispanic communities. People already suffering from generations of systemic racism are disadvantaged further by lack of access to the educational and work opportunities that are at the fingertips of those with high-speed connections.

For the enormous amount of money AT&T is shelling out to acquire Time Warner, it could run super-fast gigabit-fiber Internet services to every single home in America. That would truly serve as “a catalyst to more competition, more innovation,” to borrow Bewkes’ words.

But neither he nor Stephenson care about providing better, more affordable services to more people. These mergers aren’t about that. They’re about increasing the company’s control and increasing shareholder value. On that score Stephenson and Bewkes may succeed. For his part, Bewkes could get a nearly $400 million payout by exercising his stock options at the close of the deal.

Enriching investors (themselves included) is Stephenson and Bewkes’ job. It’s the job of regulators at the Department of Justice to decide whether this deal’s alleged benefits outweigh antitrust concerns.

There’s no doubt that this mega-merger doesn’t benefit ordinary Americans. People want reliable, cheap and fast connections to the open Internet. We also need a choice of providers, not a few bloated companies controlling access to both the Internet and the content that flows across it.

The merger of AT&T and Time Warner is just too big and costly to accomplish that. For that reason, it must be blocked.

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