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AT&T/DirecTV Gets Hotter Seat In Senate

Franken, others take aim at price, power and some pledges 6/24/2014 06:15:00 PM Eastern

The AT&T/DirecTV deal got a bit rougher treatment at the hands of both witnesses and legislators in the Senate antitrust subcommittee's hearing on the deal, the second of two hearings Tuesday on proposed merger.

From the outset, Subcommittee chair Amy Klobuchar (D-Minn.) set the tone.

“We’re not here to judge whether the merger is better for the bottom lines of these two companies or their shareholders, we’ll leave that to Wall Street,” Klobuchar said in her opening statement. "What we’re here to do is to make sense of what it will mean for consumers across the country,” Klobuchar said. She had questions about the deal's size and impact on programming and over-the-top video competition.

The cost to consumers was another big issue. AT&T has said there would be $1.6 billion in savings, primarily from lowered programming costs, over the first three years.

AT&T Chairman Randall Stephenson would not commit to saying that those synergies would translate to lower consumer costs, going only so far as saying it would likely stem the annual rise in prices, which he attributed primarily to increased programming costs.

Sen. Richard Blumenthal (D-Conn.) pressed Stephenson on the point, given that AT&T has said the deal would provide synergies, combined with downward pressure on AT&T programming costs. But Stephenson said he could not quantify that. Blumenthal, who said he was putting himself in consumers' place, found the answer unsatisfying, but added that he had problems with the deal as a senator as well as a stand-in consumer.

More criticism came from a familiar face, Sen. Al Franken (D-Minn.). He said that when AT&T had promised to offer standalone broadband as part of the deal to buy Bell South back in 2006, AT&T did not promote that option, but instead "hid" the offering. Franken said that sounded like a promise not kept. Stephenson did not respond to that characterization, though during the House hearing on the deal earlier in the day, he said a blogger's characterization that AT&T had not fulfilled all its promises in that Bell South deal was patently untrue.

In any event, Stephenson unequivocally pledged to provide a clear and visible stand-alone broadband option as part of the DirecTV deal, saying broadband, not video, is what drove his businesses--video is a money loser, though he has said the DirecTV deal will change the economics of that.

Franken also hit AT&T hard over the issue of municipal broadband.

Franken said he understood that AT&T had spent a lot of money to lobby for legislation that would prevent municipal broadband, which Franken suggested could otherwise provide "excellent and affordable" service in competition to private companies. He said he was worried about AT&T spreading its rural broadband footprint, as it has pledged to do as part of the deal. He said, "outlawing" municipal broadband that might compete with private companies was blatantly anti-consumer, and asked why AT&T would try to do that.

Stephenson said he did not have a problem with municipal broadband to un-served areas, but did not agree with taxpayer-subsidized broadband where private investment was already providing it. He said that seemed "inconsistent” with the free market.

Franken asked him whether he was denying that AT&T had spent money on legislation preventing municipal broadband. Stephenson said he was not aware of that spending, but when pressed again by a seemingly incredulous Franken said he wasn't saying they hadn't.

Also adding some heat to the light shed by the witnesses on the relevant issues--access to programming, pricing, vertical integration among them--was Writers Guild of America President Christopher Keyser.

The former LA Law writer laid down the law from the independent programmers' perspective. He said from the outset he was there to oppose the deal, saying that seven big companies already determine "what I am allowed to write and you are allowed to watch." He said the combined company would use its power to discriminate against unaffiliated programmers, which will mean a reduction in quality and innovation. He also warned of big companies turning the Internet into an encore presentation of reduced access to broadcast networks--something Franken tied to the scrapping of the FCC's financial interest and syndication rules. The Connecticut senator asked Keyser for the figures of how much independent programming was on the networks before and after the rules, which prevented domestic syndication of network-owned programming, were scrapped. Keyser said it went from about 70-80% to more like 10%, with much of that reality rather than scripted.

He said the current model of consolidated control over distribution meant that independent product was, metaphorically speaking, hidden away on shelves in the back corner of the store.

But he was not done with the metaphors. Keyser said that character is destiny and that giant companies, will try to own their own content online as they did on air. That, he said, will be mourned as a missed opportunity. He said he has seen this story before, and while some will say this time the ending will change, he didn't think so.

If you put the butler in line to inherit, and give him a candlestick in the drawing room, he told the senators, someone will wind up dead by the last act.

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