Question

Will you explain the merger between AT&T and Time Warner? Why President Trump and his Department of Justice filed a lawsuit against the participants in this merger?

Answer 1

The company has its roots in the American Bell Telephone Company founded by Alexander Graham Bell in 1877 and later acquired by the American Telegraph and Telephone Company (AT&T) in 1899. Due to perceived security threats during World War I, the U.S. government consolidated all patents related to radio communications. This led to two government-sponsored monopolies: General Electric gained control of wireless communication, and AT&T took over wired communication. AT&T’s monopoly on telephony also extended into Canada through the Bell System, and the company used its position to raise rates and restrict the business opportunities of prospective competitors (Danielian, 1939). The Bell System was eventually broken up through an antitrust settlement in 1982. Under the settlement, AT&T agreed to divest its local exchange operating companies in exchange for a chance to enter the computer business (see United States v. AT&T Co.). The breakup did not last long, however, as AT&T reacquired its previously divested assets in 2004. Today, AT&T has holdings in fixed line and mobile telephony, satellite and digital television, and broadband Internet access. Also, the company recently initiated a spate of acquisitions, including the purchase of the Mexican telecommunications firms Iusacell and Nextel Mexico in 2014. It subsequently combined these two companies into AT&T Mexico in 2015. The company also acquired the direct broadcast satellite service DirecTV in 2015. The proposed acquisition of Time Warner is aimed at expanding AT&T’s media holdings.
A combined AT&T-Time Warner could pass along the massive acquisition costs, which include billions of dollars in Time Warner debt, to consumers, just as AT&T did after acquiring DirecTV. Even if you subscribe to a different service for cable or satellite TV, you could wind up paying more, because AT&T could raise the prices it charges competitors for HBO, CNN, and other highly desirable Time Warner programming.
Meanwhile, AT&T-Time Warner would have every incentive to favor its own content over that of others, meaning that AT&T users might not have access to the programming they want – like the competing content of Netflix and Hulu – on the same terms. Because of AT&T’s large footprint in the wireless internet market, their acquisition of a massive content provider poses a serious threat to net neutrality.
The the Forbes arget of the acquisition, Time Warner, ranks #156 overall and as the #3 broadcasting and cable company on “Global 2000” list. The company has its roots in two separate companies: Time Inc., which began in 1922 as the publishing company for which also began in the early 20 th Time magazine, and Warner Bros., century when it was one of five vertically integrated film studios that dominated Hollywood. The two companies combined in 1989 to produce the world’s then largest media company with holdings i n music, magazine, book publishing and filmed entertainment. After subsequent acquisitions in the 1990s, particularly in cable television, Time Warner looked for a way to enter the emergent digital media business. In 2000, it announced a merger with Americ a Online (AOL). It is now widely regarded as one of the most spectacular megamerger failures in history. Within just three years of the merger, AOLTime Warner reported a $98 billion loss, its stock fell by 90% and its debt reached $29 billion (Fitzgerald , 2012, 2017). Today, Time Warner continues its efforts to recover from the failed merger. Having divested its properties in music, book publishing, and magazine publishing

The government says the merger will be bad for consumers. A combined AT&T and Time Warner would have much more heft and could force higher prices on TV distributors, leading to higher cable and satellite TV bills.

“Consumers will end up paying hundreds of millions of dollars more than they do now to watch their favorite programs on TV,” the Justice Department said in court filings.