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Q. Issues of merger of AT&T and Time Warner: Comment on issues arising out of merger of AT&T and Time Warner.
Nov 03, 2016 Related to : GS Paper-3

Ans :

Introduction-

Recently giant telecom major of USA AT&T has announced that it will buy Time Warner, the home of HBO and CNN. Both companies have recently announced that their boards unanimously approved the deal. The proposed merger is likely to spur yet more consolidation among media companies, which have already looked to partners to get bigger. But many experts have opposed the merger of these two giants. 

Reasons -

  • According to some experts the proposed merger has become source of concern for not just for USA consumers but for consumers across the world, because of the precedent it would set.
  • Merger of AT&T and Time Warner is a vertical integration, which brings under a common ownership content supply and its distribution. 
  • The merger of carriage to content lends itself to abuse of market power, at the expense of the consumer.

Issues-

  • At present AT&T is America’s second-largest mobile operator and it has recently acquired DirecTV, a direct-to-home (DTH) satellite network.
  • Hence AT&T is well placed to distribute content to traditional TV viewers and to those joining the growing tribe of cord cutters, people who stream programming of their choice over the internet rather than subscribe to expensive programme bundles of cable and satellite companies. 
  • In such situation, a dominant distributor owns major content producers, two kinds of risk arise. 
  • Similarly this merger which creates an organisational structure that lends itself more easily to abuse and harm than to restraint is best avoided. 
  • Also the market power of the merged entity makes regulatory capture a whole lot more than theoretical speculation. 

Conclusion-

The merger of Time Warner with that of AT&T has created sharp speculations in the market and many have expressed apprehensions over possible monopoly. If there are any loopholes in regulations, then it may harm the interest of consumers. Hence regulatory authorities must look into it to protect the interests of consumers. 


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