What the AT&T and Time Warner Merger Would Mean for You

By
Photo: Matt Cardy/Getty Images, HBO

With news that AT&T has agreed to buy Time Warner for $85.4 billion, consumers across the country are facing the prospect of yet another media-conglomerate behemoth to spend hours waiting on the phone to contact. AT&T, the second-largest provider of cell-phone service and the largest U.S. pay-TV distributor in America, also provides internet service to 16.5 million Americans. Time Warner, the world’s third-largest media conglomerate, holds assets including TV channels like HBO and CNN, media properties like Game of Thrones, Harry Potter, and DC Comics, and scores of smaller channels and properties (such as pretty much every NBA game broadcast).

The deal is a reaction from both companies to a shifting media landscape. AT&T is watching its core business of mobile cell-phone service become increasingly competitive, with profits harder to come by. Time Warner, meanwhile, is watching cable subscribers become cord-cutters in record numbers.

So, if the deal should go through, what would it mean for you?

You wouldn’t need to subscribe to AT&T’s DirecTV to watch HBO — or any other Time Warner property

No, you won’t need a DirecTV package to see whether Daenerys is going to make it to Westeros on Game of Thrones. Why? Restricting channels like HBO or CNN only to DirecTV would be tremendously harmful to Time Warner’s bottom line. Time Warner is in the business of creating things people want to watch, and then getting them seen by as many people as possible.

Play the scenario out: Say all of Time Warner TV’s content were suddenly gated off only to AT&T subscribers. AT&T would gain new subscribers who had no choice whether to tune into to CNN to watch Wolf Blitzer smile distantly while wandering around The Situation Room. But Time Warner — which has already paid millions of dollars for Wolf Blitzer’s AI brain and uncanny-valley eyeballs — would lose enormous amounts in the profits to be made in additional advertising. Whatever nominal amount AT&T gained in extra subscribers would never equal the amount of money they would leave on the table by trying to gate off Time Warner’s content.

But! AT&T would maybe make it worth your while to be a subscriber if you want to watch Westworld

There’s a concept in telecommunications called “zero rating.” What it means is that AT&T could, if it so chose, remove data caps for all content owned by Time Warner. Want to stream the latest Avengers movie? That’s owned by Disney, so if you have a monthly data limit, that’ll bump up how much data you’ve used for the month. Want to watch Batman vs. Superman: The Edge of Kissing? That’s an upcoming Time Warner film that I just made up (but really should exist), so AT&T could allow you to stream it for free, without worrying about data limits. This isn’t just a theory, by the way — AT&T is currently already doing this for its subscribers who want to watch DirectTV over their mobile-data connection.

While zero rating has been said to violate “the spirit of net neutrality,” it’s not currently against any law. That said, it’s precisely this part of the deal that has net-neutrality activists — who want to keep an internet where every site and every service gets no preferential treatment by carriers — so worried. Verizon has already hit back at AT&T’s DirecTV zero-rate deal by offering its subscribers zero-rated data for livestreaming NFL games, and T-Mobile has done its own version of the deal for YouTube, Netflix, and HBO Go.

You wouldn’t get screwed on your cell-phone bill

Unlike, say, if AT&T and Verizon merged, AT&T and Time Warner do fundamentally different things. AT&T provides ways for you to access media, whether that’s a phone call, delivering cable television to your house, or providing an internet connection. Time Warner is in the business of creating stuff you want to watch. The world of mobile cell-phone plans remains extremely cutthroat — I’m still not over the heartbreaking betrayal by the “Can you hear me now” guy — and AT&T, regardless of whether it owns Time Warner, will have to remain competitive. If anything, it’s because the world of mobile data plans is so competitive that the acquisition of Time Warner makes sense for AT&T.

There’s a chance the deal would avoid any scrutiny by the FCC

AT&T has said that it believes it can avoid the deal coming under the tighter scrutiny of the FCC because it would involve no transfer of spectrum. As long as Time Warner didn’t transfer any TV stations over to AT&T, the FCC would likely not get involved. And there’s only one TV station that Time Warner owns: WPCH-TV in Atlanta. If the deal looks like it will move forward, it’s likely WPCH-TV will be sold by Time Warner.

But you may have read all this for nothing, because the deal could still get killed

A quick list of people who dislike this deal, as of Monday afternoon: both presidential candidates. Multiple consumer-advocacy groups. Wall Street (shares for both companies, as of about 2 p.m. ET, are currently down for the day). And while AT&T may argue the FCC shouldn’t get involved because no spectrum is changing hands, the FCC can still do so when it believes mergers are “against the public interest.” Plus, the Department of Justice could also get involved, and regardless, in today’s political climate, the deal would face a fair amount of scrutiny. In the end, it may not even be the FCC or the Department of Justice that shuts down the deal — when Comcast and Time Warner Cable attempted to merge in 2014, reports that the Justice Department was going to become involved were enough for Comcast to back out of the deal. The same could easily happen here, with the potential costs of the merger simply outweighing any benefits the acquisition could hold — and one or both of the companies simply deciding to walk away.