DOJ, AT&T Head To Court As Settlement Talks Collapse

It looks like AT&T is going to fight the Department of Justice's injunction to stop the wireless provider from acquiring Time Warner in court, now that settlement talks between the two parties have failed, according to a court document filed Friday that was obtained by Reuters.

Last month, the DOJ revealed that it planned to sue to stop AT&T, owner of DirecTV and the No. 2 U.S. wireless company, from buying Time Warner for $85 billion, ostensibly because of concerns that it could raise prices for rivals and pay-TV subscribers and hamper the development of online video. According to several leaks in the press, the DOJ's aim was to push AT&T and TW to agree to spin off CNN and the rest of the Turner Broadcasting Network properties. That, of course, sounds suspiciously similar to a threat issued by President Donald Trump during the campaign, when he threatened to stop the merger between the two parties.

“All parties have engaged in good-faith settlement negotiations, but despite their efforts, have not been able to settle the matter,” the filing said.

Accoding to Reuters, AT&T and Time Warner last month offered to agree to terms that would forbid Turner from “going dark” on any distributor for seven years after the deal closes if they were to reach an impasse in negotiations with the DOJ. In preparation for the trial, final fact witness lists will be exchanged by Feb. 2 and all pretrial motions should be filed by March 12, according to the court filing.

As we explained last month, there's little doubt that AT&T - with its inferior network and dependence on copper telephone lines - badly needs the Time Warner deal.

There is no doubt that AT&T needs the Time Warner deal...badly. Their land-based distribution network, which is dependent on old copper telephone lines, is far inferior to their cable competitors which have since installed coaxial or fiber lines that supply far faster internet speeds to data-hungry homes and businesses.

 

Of course, just a few years ago, AT&T attempted to 'solve' their copper network problem by ignoring the value of land-based networks altogether and instead buying a satellite TV business, DirecTV, for $67 billion.  Predictably, that decision has been a total disaster as DirecTV has done nothing but shed hundreds of thousands of subscribers ever since...something AT&T management should have been able to predict if they didn't discredit the growing value of streaming services...a necessary oversight for a company with an inferior network.

 

Now, rather than ignore the value of distribution, AT&T has apparently decided to pursue mergers that allow them to control content...content which the DOJ feels could be held hostage to make their inferior network somewhat more attractive to customers thus stemming the tide of subscriber losses for AT&T.

Of course, if the DOJ prevails, the precedent may kill any and all hopes of future mega media deals between distribution companies and content providers, and have a chilling effect on future M&A.

A trial to decide the matter is set to begin on March 19, and run about 15 days, according to the filing. The two sides noted in the filing, which set out an agreed schedule leading up to the March trial, that there had been unsuccessful settlement discussions between the two.