AT&T Preps "Media Colossus" with Time Warner at Customers' Expense

A mega-merger between AT&T and Time Warner, which could come as early as this weekend, would create a "media colossus" at the expense of customers and fair competition, watchdogs warned on Saturday.

The companies are reportedly in "advanced talks" for AT&T to acquire Time Warner--thus taking over CNN, HBO, TBS, TNT, and Warner Brothers, among other properties--at a time when federal regulators and lawmakers are beginning to respond to consumer demands for programming diversity and safeguards against discrimination.

According to anonymous insiders, Time Warner is asking AT&T to pay $90 a share, which would put the price of the deal at around $70 billion--one of the largest of the year, out-pricing even Bayer's takeover of Monsanto, which opponents have referred to as a "five-alarm threat."

Massive mergers are often followed by price hikes on users to offset the costs of the acquisition, as happened with AT&T's other recent purchase of DirecTV, the advocacy organization Free Press said. The group cautioned that the proliferation of media empires risks net neutrality rules that dictate fair competition and prevent discrimination against smaller providers.

"Any time you hear media executives talking about synergies, throwing around the business-babble that always accompanies these rumors, you know it's time grab your wallet and hang on tight. Big mergers like this inevitably mean higher prices for real people, to pay down the money borrowed to finance these deals and their golden parachutes," Free Press policy director Matt Wood said.

"The deals are driven by Wall Street's insatiable desire for short term growth at any cost. And just as AT&T's recent purchase of DirecTV was quickly followed by price hikes, there's every reason to expect this potential tie-up would cost internet users and TV viewers dearly too," he said.

As the New York Times reported, this deal is not the only one in the works:

More combinations, possibly involving Comcast, Viacom or Apple, could reshape the media landscape. Already, the family that controls Viacom and CBS has asked their boards to study a possible merger, a deal that could happen before the end of the year.

Regulators have been wary of allowing combinations of businesses that could create less competition and thwart innovation by start-ups, and a tie-up of AT&T and Time Warner could raise concerns. It is a bold move in an election year that will usher in a new administration and a fresh set of regulators.

Wood continued: "It's a good thing there's a renewed interest among lawmakers and antitrust enforcers in addressing this merger-mania. It's also a good thing we have solid net neutrality rules on the books--even though companies like AT&T continue to test those rules in the market, threaten them in Congress, and challenge them in the courts."

"In the absence of strong antitrust enforcement and nondiscrimination rules, we know how AT&T will use acquisitions like this. They'll deny programming to other distributors and favor their own content--slashing their own costs, but without passing any of those savings along to their customers," he said.