AT&T-Time Warner: MegaContent Corps and the Anxiety of Zero-Rating Content

Nov 12, 2016


I have a general concern with the notion of a very small number of companies owning the keys to the entire firing chain for my content delivery. We already have to deal with observing Comcast NBCUniversal (CNU) down to the wire on everything they do. And despite the highly granular oversight, I just generally feel that there is always some manner in by which I am being taken, rather than feeling that CNU is using the synergies between the businesses it owns to make things more affordable for me as an end user.

Randall Stephenson, chairman and CEO, AT&T the Milken Institute Global Conference in Beverly HillsIn recent news, AT&T publicly announced its efforts to pursue approval for the purchase of Time Warner Inc. The first thing I had to get my head wrapped around was the fact that this is a merger of Time Warner Inc., not with Time Warner Cable, which was spu off and subsumed by CNU several years ago. So this is not a mega-merger of ISP’s, which is probably the type of deal that makes me the most nauseous. This is a merger of a big ISP + Telecom + Wireless Carrier with an entertainment company. Time Warner Inc’s big holdings include HBO, the Warner Brothers movie studio, and additional cable channels including CNN, TNT, Turner Sports, and TBS.

There are a lot of people lining up against this deal, including President-elect Donald Trump. And recent actions by AT&T may encourage others to cross the line from support to opposition. Following a model predominantly pioneered by T-Mobile, AT&T has announced that it will not charge its wireless customers data consumption when they are streaming DirecTV content. That’s cool for customers who are on DirecTV and AT&T Wireless. But it has the negative impact that if I am not on that combo, I feel like I’m being punished. And so customers will be have incentive to switch, enabling AT&T to leverage a competitive advantage from its consolidated holdings. Which is the type of thing that makes regulators and politicians wary that there are unfair trade practices being invoked.

The loophole here is that, despite having a long period of time to observe these types of deals being arranged, the FCC has not made a unilateral decision on its standing on zero-rating content. One issue that may be confounding them is whether this practice should be treated the same if it is one company brokering a deal with another company versus companies that exist under one corporate umbrella making similar arrangements. In short, should it be ok for T-Mobile, for example, but not ok for micro-companies inside CNU or AT&T or the Verizon conglomerates?

In every company I have been a part of, there are still internal transfers of cost between different business units for various services and products. So it is likely that while this exchange may appear free to end-users, somewhere money is probably moving from AT&T Wireless to DirecTV to show the cost transfer for General Accounting purposes. This may be the argument that AT&T makes to show that the corporation is clean if zero-rating content comes up in questioning about its implications on the AT&T / Time Warner Inc merger.The headquarters building of U.S. satellite TV operator DirecTV is seen in Los Angeles

And how does this practice and the merger weigh on Net Neutrality? There are some who will fear it. For me, I am not wholesale against the idea of companies being able to pay for higher bandwidth delivery along the last mile to customers for their content, or reaping some other advantage from offering product differentiation available due to mega-corps holdings. I feel that if there were a baseline established for each ISP’s QoS tiers, and a regulation that the “fast lane” could not exceed 10% or some set percentage of that bandwidth, then it should be manageable. Large companies who had earned the right to privileged access if they were willing to pay the higher cost would have that service available. Small companies and startups who complain that this would disadvantage them and their ability to reach consumers on an equal basis would not be so impugned that the faster delivery would be egregiously greater than the baseline.

56987631TJ003_mergerThis results in my own feeling being that I am not too concerned about how zero-rating impacts net neutrality. The truth is, being the payer of the bill on a family plan that has multiple family members on it, and where I have a set rule that plan members are not to stream video unless they are on WiFi, the concept of zero-rating content just has not impacted me yet. I am ok with these deals being brokered, because they help the demographic of user that does stream video on 3G/4G networks. Mainly because as long as T-Mobile can continue to put these things together, it gives what was once a carrier that almost went under, a fighting chance at a comeback. And, as a consumer, if you get a bonus because you stack your choices of carrier and cable provider together, that should be ok, too. I have lots of other reasons why I am not a fan of this idea of an AT&T-Time Warner Inc. merger. But zero-rating content on wireless carriers just isn’t one of them.