AT&T suggests Dish and DoJ are collaborating

With AT&T’s WarnerMedia and Dish arguing over a distribution deal, one AT&T executive has suggested Dish and the Department of Justice are collaborating to reverse the green light on the Time Warner acquisition.

The conspiracy theory is hitting new highs here. AT&T is effectively accusing Dish of actively working to create a no-deal situation in negotiations with WarnerMedia over rights to air HBO content. Although having HBO and Cinemax channels go dark on the Dish service would have a negative impact on business, it does coincidentally work well for the Justice Departments case appeal against the Time Warner merger.

WarnerMedia have been in negotiations over the right to air content, with it claiming it offered to extend the previous contract while negotiating but Dish declined. As a result, HBO content has disappeared from the Dish service.

“Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement,” said Simon Sutton, HBO President and Chief Revenue Officer, in a statement to Reuters.

With the appeal based on the grounds the AT&T acquisition of Time Warner would offer it undue control and influence in the industry, stagnant negotiations certainly add credibility to the objections from the Department of Justice. Manipulating the playing field however, as AT&T is accusing Dish of, is a serious no-no when it comes to the courts.

“This behaviour, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” said a representative of the Department of Justice. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

“The Department of Justice collaborated closely with Dish in its unsuccessful lawsuit to block our merger,” WarnerMedia responded. “That collaboration continues to this day with Dish’s tactical decision to drop HBO – not the other way around. DOJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

The $85 billion acquisition of Time Warner proved to be a messy affair for AT&T. While some would have expected some resistance from the industry, the objections of President Trump seems to have encouraged the Department of Justice to chase down every lead, and make life as difficult as possible. The Department of Justice’s appeal against the approval of the deal, is effectively built on the assumption Judge Richard Leon didn’t know what he was talking about.

Publicity stunt? Monopolistic ambition? Nefarious schemes? Whatever the basis of this story, more fuel has been added onto one of the longest running sagas in the telco industry.

Justice Department eyes up social media probe over competition

Department of Justice spokesman Devin O’Malley has raised the prospect of an investigation into whether the social media giants are impacting competition through ‘intentionally stifling the free exchange of ideas’.

In a statement following the Senate Intelligence Committee grilling, O’Malley outlined plans to meet with state attorneys general to discuss the concerns over the next couple of weeks in Washington. While this does not necessarily mean a full investigation or any legal action, the social media giants are receiving plenty of unappreciated attention currently.

“The attorney general has convened a meeting with a number of state attorneys general this month to discuss a growing concern that these companies may be hurting competition and intentionally stifling the free exchange of ideas on their platforms,” said O’Malley.

Attorney General Jeff Sessions has apparently taken on President Trump’s battle against the social media giants. Aside from the Senate Intelligence Committee questioning the effectiveness of social media giants in providing an unbiased and uninfluenced platform for free speech and news, Trump is going tweeting crazy as well.

Trump’s latest target is Google as the President accuses the search platform of political bias. The remarks have escalated the conservative campaign against the internet industry, accusing the technology company of burying Republican orientated news in search results while offering more prominence to the opposition. While the ‘everyone is evil except me’ rhetoric from the President is starting to become boring, we are waiting to see whether the irony of one of the social media giants creating unprecedented exposure for his vile opinions will ever hit home.

Of course, while these are sub-plots, yet to emerge as major thorns for the social media companies, the current saga is focused on the Senate Intelligence Committee. Yesterday saw Facebook COO Sheryl Sandberg and Twitter CEO Jack Dorsey face the grilling, attempting to justify their actions. The questions focused on efforts to keep Russia, Iran and others from disrupting elections and causing other problems. Some Senators found it difficult to believe there isn’t a political bias on the platforms, but that is to be expected.

The current political climate is such that temper tantrums will be thrown and accusations dished out if there is any minor disagreement to propaganda. The concept of the press questioning claims and presenting their analysis to allow citizens to make up their own minds seems to have disappeared. And we thought government was run by mature adults.

While these two internet heavyweights seemingly performed admirably in defending their positions, Google’s empty chair took more than its fair share of criticism. Rather than facing the questions of the Senators, Google decided to skip the hearing after alternative representatives were rebuffed. Instead of defending itself, Senators took aim and fired. Google has largely enjoyed a good relationship with both parties in the US political shark tank, though how this snub impacts the relationship remains to be seen.

With the Senate Intelligence Committee attacking the social media giants from the front, the Oval Office using their own platforms to attack in the virtual world and the Department of Justice gathering support on the horizon, it is looking like another couple of uncomfortable months. We suspect the US political system has already decided who is to blame, but a series of investigations and hearings are needed to justify the accusation. You know, the normal way to identify guilt.

DoJ appeals AT&T/Time Warner deal on grounds of ignorance

The Department of Justice has attacked a trial judges approach and methods when reviewing AT&T’s much debated acquisition of Time Warner, in it’s against the greenlight for the deal.

AT&T closed it’s $108 billion acquisition of Time Warner two days after District Court for the District of Columbia Judge Richard Leon gave his seal of approval, though the Department of Justice is not done yet. An appeal has been launchedx      , arguing competition would be distorted in the pay TV market as a result as AT&T would have a bargaining advantage over rivals, with the main focus of the appeal seemingly being directed at the Judge Leon.

“The district court held otherwise, but only by erroneously ignoring fundamental principles of economics and common sense,” the appeal document states. “These errors distorted its view of the evidence and rendered its factual findings clearly erroneous, and they are the subject of this appeal.

As you can see from the statement above, the Department of Justice seems to be claiming Judge Leon was not able to consider the long-term economic impact of the acquisition of competition, but also has found issue with the court made the ‘vast majority’ of its evidentiary rulings during sealed bench conferences and declined to release the transcripts of these conferences to anyone during the trial.

“The district court substantially constrained the government’s presentation of evidence showing that the merged entity would have greater bargaining leverage,” the appeal reads.

Part of these discussions included evidence which the government would have wanted access to, AT&T’s own analysis of the potential competitive impact of the acquisition for example, but also that Judge Leon dismissed public FCC filings made by AT&T and DirecTV explaining the potential competitive harm from vertical integration, refusing to treat the documents as relevant submissions. The Department of Justice also argues it was not given enough air-time to question economic experts or evidence presented by AT&T.

The implication seems to lean on the idea of bias. Although it has not been directly said, the Department of Justice seems to be hinting Judge Leon favoured AT&T and was not able to offer an independent evaluation of the saga.

While this is a massive acquisition, vertical deals are not unusual in the technology industry, in fact, some might suggest it is the norm for growth. With big ticket acquisitions becoming more common in the industry, some might suggest the Department of Justice’s opposition to the deal might be more political than economical. President Trump’s distain for Time Warner owned brands are no secret, a public hatred which might be fuelling the theories.

Huawei gets US probe for suspected Iran naughtiness

Few will be surprised the US government is looking to weaken the already limited position of Huawei in the US, the emergence of a probe from the US Department of Justice is just another stepping stone in US/Chinese tensions.

According to the Wall Street Journal, the US Department of Justice has launched an investigation to see whether Huawei violated US sanctions against Iran, which will have numerous companies throughout the US as nervous as Huawei. The whole ZTE saga started with a similar investigation and escalated to a Denial Order effecting not only the firm’s ability to sell in the US, but also source products and services from the country. Suppliers to Huawei should be watching developments here very acutely.

Sources have stated the investigation follows administrative subpoenas on sanctions-related issues from both the Commerce Department and the Treasury Department’s Office of Foreign Assets Control, those a criminal investigation from the Department of Justice is on another level. Consequences could be very severe here.

This of course isn’t the first time Huawei has received attention from the US government. US Congressman Mike Conaway was looking to have both Huawei and ZTE banned in the US in January, political pressure on AT&T ended any prospect of selling devices through the carrier, while numerous committees and investigations have pointed the espionage finger at the vendor. It was only a matter of time before the tale escalated and higher offices were brought into the picture.

There have been no official confirmations of the investigation just yet, but is there really any need? The US government has had its eyes set on ridding both ZTE and Huawei from its shores for some time now, so it should come as little surprise to anyone. The US has been battling China for control of the digital economy, with the globalisation trend threatening Silicon Valley’s (as well as the US on the whole) dominant position at the top of the technology world.

The government has already effectively banned any public sector contracts with the giant, though this will be another step along the line. While we should expect a response from the Chinese government, the fact it hasn’t done anything drastic to date suggests it has an eye on the bigger picture. In banning ZTE from US shores, there has been substantial damage done to US companies. While it might sound like the US is winning the trade war, it is isolating its own economy from the global scene, with friendly-fire scattering everywhere. It does seem to be incredibly short-sighted, especially when you look at the dependence of some of the US’ largest companies dependence on Chinese manufacturing capabilities, most notably Apple.

It was only going to be a matter of time before such an investigation kicked off, and it will only be a matter of time before the Chinese government reacts as well. We’ve said this before, but it is worth reiterating, there will be no winners as a result of this trade war. Everyone involved will only be in a worse position than today if it continues to escalate.

AT&T slams DoJ antitrust claim in Time Warner battle

The trial hasn’t even begun yet and the lawyers are already at each other throats as AT&T files a pre-trial briefing attacking the basis of the Department of Justice case.

There had been rumours over the last couple of weeks that the telco would use President Trump’s perceived bias against the $85 billion Time Warner acquisition as a defence against the DoJ, but after a quick ‘Control+F’ none of ‘Trump’, ‘President’ or ‘White House’ appear in the document, aside from a footnote referring to Reed Hastings’ President title at Netflix. Instead, the telco has taken the more sensible route of attacking the credibility of foundations at the base of the DoJ objections.

The filing reads:

“There is no fact-based evidence that this merger will harm competition. Nothing will be withheld from competitors; consumer prices will not go up. To the contrary, the government now concedes it would not be profitable for the new company to withhold its television networks from pay-TV distributors and that the new company’s prices to its own television customers will go down. As a result, the government’s suit to block this merger is not only baseless in fact, but it is affirmatively contrary to consumer welfare, making it difficult for the government even to allege a viable antitrust claim, much less prove one.”

The focus of this attack is of course at the central pillar of the case against the acquisition; AT&T would not play nice with the rest of the industry. The theory is that AT&T is acquiring some pretty notable titles through the deal, some of which are sold to distributors, some of whom would be considered AT&T competitors. Withholding this content would be considered poor form, though government experts have since rubbished this claim.

The idea of collaborative competition is one which has been gaining some traction in recent months, and if the telcos are going to make any money out of buying organizations like Time Warner they are going to have to do business with competitors. This point was raised by the government economic expert, and emphasised by the AT&T lawyers. The argument no longer stands firm as the government case has been undermined by one of its own.

“Now, what remains of the government’s case, ‘like a Persian cat with its fur shaved, is alarmingly pale and thin’,” the filing reads slightly obnoxiously.

What is slightly more believable is that instead of withholding content from competitors it would use the position to hold competitors to ransom, demanding more than what would be considered fair price. Of course, AT&T has pointed to the fact that Time Warner would not be able to tolerate such business practises and the acquisition is more about cost-synergies. We find it tough to believe AT&T would not use any acquired asset to its advantage, but only time will tell as to whether this is a good enough reason to block the deal.

Perhaps the most interesting claim from AT&T however is that should the government block the deal it would be worse for the consumer; the Department of Justice is the one which is encouraging an anticompetitive environment.

If the argument is that streamlining the industry is would decrease the choice for the consumer, and therefore decrease competition, this transaction would of course be bad. However, AT&T argues that by streamlining the industry and creating a new entertainment beast, competitors would be forced to come up with new initiatives (perhaps lower pricing or additional bundles), therefore it would be in the consumers interest. Just when we were thinking AT&T were doing this to make more money, it turns out they are just trying to make things better for the consumer, who knew.

Such posturing and claims are hardly unusual in the build up to a trial, but whether it has any impact remains to be seen. You would hope the Department of Justice can come up with a better argument than it has at the moment, as it seem to be in a very strong position as it stands.

AT&T/Time Warner vs. Department of Justice; bout set for March 19

Judge Richard Leon of the District of Columbia has set a date for the antitrust trial to finally settle AT&T’s $85 billion acquisition of Time Warner and the Department of Justice’s wobbly.

What started as a relatively simple acquisition process for AT&T has quickly turned into a nightmare as the DoJ sued both the telco and Time Warner in an attempt to block an acquisition it views as anticompetitive. There is a glimmer of hope the saga might be resolved by the April deadline set by the two companies to complete the acquisition, but Judge Leon has warned any optimists should not hold their breath.

AT&T had been pushing for an earlier trial date due to the looming deadline on April 22. Should the acquisition not have completed by this time, the telco would have to fork out an extra $500 million to Time Warner investors. That said, it is not unusual for companies to agree deadline extensions, and this is certainly a situation which would warrant it.

Earlier this year, everything was rosy. AT&T was securing approvals all over the world for the deal, and it had found a couple of routes around US watchdogs to ease the regulatory process. Prior to the summer, few of the AT&T execs would have been worried about the April 22 deadline, but how things have changed.

President Trump has very vocal about his opposition to the deal, though a couple of commentators have pinned this down to his hatred of CNN (owned by Time Warner), and the Department of Justice has sued both parties. These lawsuits are seemingly built on the idea that AT&T would charge its rivals extortionate amounts of cash to access popular content, such as Game of Thrones. What is unclear is how much the DoJ has been influenced by the opinion of the Commander in Chief.

One comfort for AT&T is Judge Leon himself. The judge is known for handling high profile cases, and also a no-nonsense attitude towards basically anyone and everything. Politically he also appears to be pretty neutral.

What we find quite amusing is the government’s self-righteous stance on consumer protection when the Trump-led administration seems to be doing everything its power to destroy consumer protection when it comes to net neutrality and privacy. The current administration has continued to grant more powers and less accountability to intelligence agencies, while simultaneously scaling back all net neutrality regulation.

In terms of the net neutrality story, a lighter touch to regulation was probably a sensible decision to make, telcos have to be allowed to make money after all, but FCC Chairman Ajit Pai seems to have seen the line and sprinted as far past it as possible. Removing all net neutrality regulations is probably going too far, but that is the partisan nature of American politics. It’s all a game where the goal is to beat the politicians on the other side of the isle rather than help the American people.