Time Warner, AT&T execs pressed at Senate hearing, critics charge merger arguments ‘ain’t true’

In a live stream of the event, AT&T Randall Stephenson spoke at Senate hearing about the company's proposed purchase of Time Warner.

Top executives from Time Warner and AT&T faced criticism from a number of legislators, public-internet groups and others during a Senate hearing on the proposed $84.5 billion merger between the telecommunications and media giants.

Perhaps one of the most pointed exchanges occurred between AT&T CEO Randall Stephenson and Sen. Al Franken, D-Minn.: Franken argued that one of Stephenson’s primary arguments for the merger “ain’t true.”

Specifically, Stephenson explained that AT&T would not withhold Time Warner content from its competitors if it was successful in merging with the content company. “The business model’s fundamental premise for attracting talent, for attracting investors to content, the fundamental premise of that is wide and broad distribution of their content,” he said of Time Warner. “While one could argue that it might advantage our distribution business to somehow give proprietary access to Time Warner, it would make no sense to a $100 billion business we’re acquiring to do that. It would impair the value of that business dramatically. … The Clint Eastwoods, the Steven Spielbergs will not bring their talent and their capabilities to a company like this that is limiting distribution of that content. It is a fundamental basis of the value of the company.”

Stephenson concluded: “We have little value if we start limiting access to content.”  

But Franken, a former comedian who has appeared on shows including Saturday Night Live, countered that argument. “It’s the opposite,” he said. “You had to pay to get The Sopranos [TV show on Time Warner’s HBO]. And everybody wanted to get The Sopranos. So this idea, which is this basic premise, that everybody went to HBO, because we guaranteed everybody would see you, ain’t true. So I just don’t get that.”

For his part, Time Warner chief Jeff Bewkes argued that a merger with AT&T would provide Time Warner with more firepower in an increasingly competitive TV industry. “Today we’re competing for consumers’ attention not just with other TV networks but with everyone from Netflix and Amazon to YouTube and Facebook. Great content is not enough,” Bewkes said. “You need to deliver great consumer experiences and that’s what joining with AT&T will allow us to do.”

But others during the Senate hearing argued that a merger between Time Warner and AT&T would squeeze out smaller competitors and consolidate too much market power among too few companies.

“More consolidation is not the answer. In the current state of the media industry, the survival of independents is at a significant risk,” said Daphna Ziman, a filmmaker who runs the Cinémoi channel. “Further consolidation would be catastrophic to diversity.”

And in conjunction with the hearing, the Consumer Federation of America released a report (PDF) that said four companies (AT&T, Verizon, Comcast and Charter) unfairly dominate the communications and video markets.

“The result is a ‘tight oligopoly on steroids,’ that is abusing its market power to overcharge the typical household (with two cell phones, video and broadband) about $45 ($540 per year),” the firm said in a release. “This represents almost one quarter of the household communications expenditures. The report shows that the total overcharges (almost $60 billion per year) result in a massive waste of resources that are spent in mergers and acquisitions accumulation of liquid assets and excessive dividends.”