AT&T-Time Warner could actually benefit from FCC review, analyst says

Time Warner Center. Image courtesy of Time Warner, Inc.
Image: Time Warner

The prevailing wisdom is that FCC involvement in the AT&T-Time Warner deal could hurt chances of approval but, according to a new report (sub. req.) from MoffettNathanson analyst Craig Moffett, that may not be the case.

To gauge AT&T’s chances of having its $85 billion bid for Time Warner Inc. approved by regulators including the Department of Justice and possibly the FCC, MoffettNathanson spoke with former FCC commissioners and chairmen, former FCC chief economists, heads of public affairs at various telecom and media companies, congressional staffers, academics and industry experts. Among the insights gleaned from the interviews is the expectation that an FCC public interest of the review is not exactly a death knell.

Two of the sources interviewed by the firm offered differing reasons why the FCC could help the AT&T-Time Warner deal along.

“The irony is that having the FCC review the proceeding may increase the chance of getting the deal done,” said one source. “The DOJ generally does not like behavioral remedies but has relied on existence of such conditions in an FCC order. If the FCC cannot condition the approval, the DOJ will have [fewer] tools to get to yes…”

Another source suggested one potential scenario where FCC intervention could turn into a win for AT&T and Time Warner.

“If [the FCC] doesn’t approve, it sets the application for a trial-type hearing before one or more Administrative Law Judges. The FCC and its staff haven’t done a trial-type hearing for decades and the staff is deathly afraid of being crushed and embarrassed by the applicants’ high-priced and very experienced trial lawyers,” the source wrote.

Of course, many of the sources interviewed for the report said it’s likely that more clarity on the deal’s chances won’t be easily attained until after the upcoming presidential election.

Despite all the insight, MoffettNathanson’s conclusion that the deal stands a 50-50 chance of being approved remained largely unchanged.