**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in July-August 2015.**
AT&T has weighed in on Charter’s proposed acquisition of Time Warner Cable and Bright House Networks, warning that coordination among cable companies could lead to a “single national cable company.”
In July, the FCC approved AT&T’s $48.5 billion acquisition of DirecTV, subject to AT&T meeting a number of conditions that will generally remain in effect for four years after the merger closes — so the timing of AT&T’s concerns is curious.
In its letter to the FCC, AT&T said that while it does not oppose the Charter/Time Warner Cable/Bright House merger, the companies should instead compete with one another. The letter was submitted by Henry Hultquist, AT&T’s vice president of federal regulatory.
The cable industry, as the merging parties concede, is marked by a lack of head-to-head competition, according to the letter. Cable companies have chosen not to compete and instead coordinate to gain shared advantages over rivals, which further industry consolidation will only facilitate, it said.
Careful scrutiny of cable coordination is “especially warranted” because this increased consolidation and coordination comes just as new competitive threats are emerging, Hultquist said.
“This emerging competition is vulnerable to coordinated exclusionary actions by cable,” he said.
AT&T points out that FCC staff and the U.S. Department of Justice concluded that allowing Comcast and Time Warner Cable to merge would create a dominant national platform that could “block the adoption of innovative products, including ‘over-the-top’ video services that threaten the traditional cable business model.”
“Cable companies share common, national rivals in broadband, video, and telecommunications services,” Hultquist said. “These geographically segregated cable companies therefore have incentives to coordinate their activities to fend off these common rivals and have demonstrated the ability to do so. The cable industry has formed a variety of exclusive associations, organizations, and other ventures to advance the competitive interests of cable companies. These joint initiatives, although opaque to outsiders, are transparent to cable-company members who may use them to coordinate strategies against rivals. The proposed merger could make that easier.”
The transaction would reduce by two the number of major cable operators, and create a second cable giant alongside Comcast that “together would be able to dictate strategy for the entire cable industry,” he said. The underlying question is whether the combined entity will, along with the other major cable companies that have chosen not to compete with each other, act as a single national cable company capable of impairing broadband service, video distribution and program access, he said.