AT&T this week in court claimed that Charter Communications made changes to a study alleging consumer prices will rise if AT&T buys Time Warner, in order to bolster the Justice Department’s case to block the merger.
The DOJ has argued that a combined AT&T and Time Warner would result in raising the total annual U.S. pay TV bill by $436 million, a figure based on the research by University of California, Berkeley economics professor Carl Shapiro. The study was commissioned by Charter, a rival pay TV operator to AT&T.
According to Bloomberg, Stefan Bewley, a director at consulting firm Altman Vilandrie & Co., used Shapiro’s research to put together the Charter-commissioned study, which predicted Charter would lose 9% of its subscribers if it couldn’t carry Time Warner company Turner’s networks including CNN, TBS and TNT.
Daniel Petrocelli, attorney for AT&T and Time Warner, cross-examined Bewley, who admitted that the figure was 5% in the study when it was originally handed over to Charter in April 2017.
Bewley said it was his decision to change the figure and that Charter had given him more time to alter the Turner figures in the study before submitting it again.
In trial prebriefs, the DOJ cited Shapiro’s research amid concerns about rising consumer costs if the AT&T-Time Warner merger goes through.
"If TV program distributor AT&T acquires TV-program producer Time Warner, American consumers will end up paying hundreds of millions of dollars more than they do now to watch their favorite programs on TV," the DOJ wrote. "In short, the transaction violates Section 7 of the Clayton Act, because its effect 'may be substantially to lessen competition.' Prices for current services will go up and development of emerging competition will slow down.”
AT&T countered by saying that, even after the study was tweaked, the cost increase predicted would still be unsubstantial.
“In his initial report, the government’s expert claimed, with startling and implausible precision, that the merger will cause consumer pay TV prices to rise by a monthly total of 27 cents per subscriber, or less than 0.2% of a consumer’s average monthly bill,” AT&T wrote. “Just a few weeks later, after fiddling with some input dials, the expert managed to almost double that insubstantial result to a still-insubstantial 45-cent monthly increase, all of 0.4% per bill, which is where the government currently stakes its case.”