AT&T’s $85 billion bid to acquire Time Warner Inc. will likely fall under the purview of the FCC due to the several FCC licenses held by Time Warner.
According to the Wall Street Journal, experts and people involved with the deal say that the licenses, held by Time Warner properties like CNN and HBO, can’t be transferred without FCC consent and will likely trigger a public interest review on the part of the FCC.
After the transaction was announced last weekend, speculation followed that the deal could avoid an FCC review as long as Time Warner divested its single FCC broadcast license held by Turner in Atlanta. When AOL merged with Time Warner in 2001, Time Warner transferred a number of FCC licenses as part of the deal. In the years following, Time Warner also spun off Time Warner Cable, AOL and Time Inc., transactions that likely changed Time Warner Inc.’s full FCC license inventory.
Still, as the report points out, AT&T CEO Randall Stephenson seems fairly certain that avoiding an FCC review of the deal isn’t realistic.
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“Avoiding any kind of regulatory review is always a benefit,” Stephenson told the Journal. “But we aren’t naive. We aren’t thinking that that won’t happen.”
New Street Research analyst Jonathan Chaplin said regulatory approval of the deal is likely but expects it would come with a laundry list of conditions.
“We believe a government review of an AT&T/Time Warner Entertainment (the T/TWX Deal) would likely result in approval but is not without significant risks and will likely face major conditions,” wrote Chaplin. “While traditional market analysis suggests the integration of distribution and content assets raises only modest concerns, as we learned in the proposed Comcast/Time Warner Cable and the AT&T/DirecTV transactions, the government’s competition analysis is considering new market dynamics, which have both positive and negative implications for a new deal.”
Chaplin further noted that factors including the outcome of the presidential election, the president-elect’s regulatory appointees, and other pending deals may impact approval.
“In a sense, our task is like trying to predict the taste of a cake without knowing all the ingredients. Still, we make our analysis based on the facts we know, not based on the facts we wish we knew, and so, for reasons detailed further below, we conclude that approval is likely,” wrote Chaplin.
The FCC’s approval in 2011 of the Comcast-NBCUniversal deal – a so-called vertical integration similar to the proposed tie-up of AT&T and Time Warner – can be viewed as a potential touchstone in predicting what conditions might be imposed.
As part of the FCC’s approval of that deal, Comcast/NBCU were required to take “affirmative steps to foster competition in the video marketplace; increase local news coverage to viewers; expand children's programming; enhance the diversity of programming available to Spanish-speaking viewers; offer broadband services to low-income Americans at reduced monthly prices; and provide high-speed broadband to schools, libraries and underserved communities, among other public benefits.”
Of course, AT&T is already on the clock to meet conditions placed by the FCC on its recently approved $49 billion acquisition of DirecTV. As part of that deal, AT&T agreed to expand its high-speed fiber broadband footprint to 12.5 million customer locations.