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Opinion | How AT&T Fooled the Federal Judiciary

HBO has lengthy been the crown jewel of American tv. It was once HBO, in the 1990s and 2000s, that kick-started the golden age of tv, investment and working presentations like “The Sopranos” and “The Wire.” And it’s HBO that also captures wide audiences with presentations like “Game of Thrones.”

So it’s disheartening to look this venerable establishment of popular culture wielded as a weapon by means of AT&T — HBO’s new proprietor since the blockbuster merger in June between AT&T (a telecommunications massive) and Time Warner (a media massive). Last week, HBO went darkish for each DISH and DISH-Sling, the primary competition to DirecTV and DirecTV Now, AT&T’s tv services and products. This overtly anticompetitive technique does no longer portend a cheerful long run for the viewing public, or for HBO itself.

At the possibility of claiming “we told you so,” it was once broadly predicted ahead of the merger that AT&T would use HBO and different Time Warner media homes in simply this fashion. When the Justice Department sued (unsuccessfully) to dam the merger ultimate 12 months, its case was once premised on the concept that AT&T would use its possession of such homes to harm its competitors in telecommunications. And now it’s doing so.

Post-merger, AT&T has the approach and the incentive to lift costs on treasured content material (like HBO or the protection of the N.C.A.A. “March Madness” basketball match) for less expensive, “unintegrated” telecom competition which have been saving customers cash. If its competitors refuse to pay up, it might withhold the content material solely, diminishing them as competition.

Defending its proposed acquisition of Time Warner in federal court docket in the spring, AT&T declared, swore and promised that it will by no means use Time Warner’s media homes as leverage in opposition to its competitors. The acquisition was once all about “vision” and a “new AT&T” — an organization that will be capable of higher compete with the content material advent and distribution skills of upstart powerhouses like Amazon and Netflix.

At trial, AT&T’s leader government, Randall Stevenson, was once requested if AT&T may use its possession of content material like HBO to lift costs or differently undermine its telecom competition. Under oath, he responded that the premise was once “absurd.”

But what appears to be like absurd now could be the reasoning of Judge Richard Leon of United States District Court in Washington, who took Mr. Stevenson’s bait, hook, line and sinker. Sitting as pass judgement on and jury, Judge Leon gave the impression to purchase AT&T’s self-serving testimony, ignoring or pushing aside the warnings of most of the people in the business. He concluded that AT&T was once simply making an attempt to retool itself for the 21st century, no longer in search of a structural merit.

To succeed in that conclusion supposed neglecting some elementary economics. Presented with a transparent demonstration by means of the economist Carl Shapiro of ways AT&T’s bargaining energy would build up after the merger, Judge Leon opted to suppose that AT&T was once no longer desirous about benefit maximization.

Unfortunately, there may be each explanation why to suppose AT&T will stay the use of HBO and different media homes as guns in the business. The extra it raises costs or withholds content material, the extra it both harms its competitors or positive aspects new shoppers for itself. It’s a win-win state of affairs made conceivable by means of the merger’s integration of content material and content material supply.

Nor will have to we forget about the results of AT&T’s anticompetitive ways on the nature of the content material created by means of HBO and its different media homes. After all, the extra other people there are who watch HBO, the simpler HBO is as a weapon for attacking different telecom firms and pushing other people into changing into AT&T or DirecTV subscribers. This creates an incentive for AT&T to refashion HBO right into a community that goals for the widest conceivable target audience — versus its conventional emphasis on high quality.

Is it a twist of fate that AT&T not too long ago close down the drastically widespread FilmStruck subscription-streaming provider from WarnerMedia (as Time Warner is now named), which gave audience get admission to to the absolute best of Turner Classic Movies and Criterion Collection movies? Or did FilmStruck fail the a very powerful check of offering enough leverage?

Given the new and urban proof that AT&T does plan to make use of HBO in an anticompetitive type, state and federal govt ought no longer take a seat on the sidelines. The Justice Department has already appealed Judge’s Leon’s merger approval, and whilst judicial evaluate is usually confined to the file of the case, the court docket of appeals may remand the case for extra fact-finding or cite AT&T’s post-merger habits as proof of the mistakes in Judge Leon’s financial reasoning.

Meanwhile, it’s not too overdue for a state to carry an antitrust lawsuit to undo the merger, in line with the new proof. The most evident candidate is New York, the place HBO is headquartered, and the place Letitia James, the legal professional general-elect, may need to turn out her bona fides.

Whoever takes the lead, there may be merely no calculation wherein the use of HBO as an anticompetitive weapon is excellent for the long run of America — for its telecom business, its shoppers or its TV presentations.

Tim Wu (@superwuster) is a legislation professor at Columbia, the writer of the impending guide “The Curse of Bigness: Antitrust in the New Gilded Age” and a contributing opinion creator.


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