AT&T-Time Warner Deal Affirmed, but What Does It Have to Do with the Channel?

The channel is also seeing vertical mergers.

James Anderson, Senior News Editor

February 26, 2019

3 Min Read
Judge and Gavel

Three judges all but shot down any opposition to AT&T’s merger with Time Warner, affirming the telco’s plan to distribute organic content of its own.

A U.S. Court of Appeals panel rejected the U.S. Department of Justice‘s complaint against the $85.4 billion merger between the service provider and media company. The panel confirmed the decision District Court Judge Richard Leone made last June.

The Justice Department could appeal to the Supreme Court, but its 15-month campaign against the merger nears an end. The federal agency asserts that AT&T would use Time Warner’s media content “as a weapon” against rival platforms in order to “substantially lessen competition.”

The appeals court unanimously affirmed Leone’s decision, arguing that the Justice Department failed to shoulder its burden of proof.

Keep up with the latest channel-impacting mergers and acquisitions in our M&A roundup.

“The government offered no comparable analysis of data and its expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System’s post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model,” Rodgers, Wilkins and Sentelle wrote in their decision.

The panel also faulted the original District Court decision, criticizing how it calculated AT&T’s potential net earnings. The appeals decision ultimately came down to the Justice Department’s lack of evidence. (Read the panel’s full argument, which includes a rather heady discussion of mathematician John Nash‘s bargaining theory.)

“Undoubtedly the district court made some problematic statements, which the government identifies and this court cannot ignore,” the panel said.

Reuters called the Justice Department’s opposition a unique intervention against a vertical merger. A vertical merger brings together companies from two different industries or different parts of the supply chain. One of the reasons for political resistance (aside from sharp criticism from President Trump) is that more and more companies like Verizon and AT&T are trying to acquire content. Comcast last year made a play to purchase 21st Century Fox but appears to have lost to Disney.

Gil Regev, chief communications officer of RGK Mobile, told us in 2017 that mobile operators will inevitably assume control of content providers, leading to a “much-necessary revolution” in TV as well as distribution in general.

“We are really laying the foundation here for a future that is all about mobility, and the fact that operators are finally partaking in this ecosystem and not [using it] as a mere means to an end is an exciting one,” Regev said.

Companies in the indirect IT/telecom channel are also reconsidering the role of distribution, but in reverse fashion. AppDirect’s purchase of master agent WTG actually exemplifies a product/solution (content) acquiring a company to …

… gain a new route to the consumer.


AppDirect’s Dan Saks

AppDirect Co-CEO Daniel Saks said his cloud commerce company has changed its go-to-market approach to reflect a more human-driven distribution model.

“My conviction is that trusted people matter, and now we’ve proven that’s more the case than ever,” Saks said at an event in December. “I speak to technology CEOs who said, ‘Yeah, 10 years ago we thought there was no chance we would embrace the channel and we thought that everyone would buy online. But now less than 5 percent of our revenue is online. It’s all through people.'”

And on the other hand, WTG and rival master agents like Telarus have been developing their own proprietary technology.

“In order to transform and be successful in the long term, master agents in the field truly need to partner with technology companies to do more,” WTG CEO Vince Bradley said.

Check out the Verge’s think piece if you’d like to soak in a more negative view of the AT&T-Time Warner merger.

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About the Author(s)

James Anderson

Senior News Editor, Channel Futures

James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.

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