AT&T defends Time Warner megadeal to skeptical lawmakers

AT&T defended its $85 billion megadeal with Time Warner on Wednesday saying it would be "pro-competitive," but lawmakers and consumer advocates expressed skepticism over the creation of new media-tech powerhouse.

"Our intent is to disrupt the existing pay TV model," AT&T chairman and chief executive Randall Stephenson told a Senate hearing on the merger of the huge telecom and broadband provider with the media-entertainment giant.

The deal would give consumers "new lower-priced options and the power to decide themselves," he said.

President-elect Trump, who has made public bargaining with major corporations a feature of his transition to the White House, said prior to his election that he opposed the pending merger, which was announced in October. But he has been mum since the election.

In public appearances this week, however, CEOs for both companies appeared upbeat about the prospects for approval from government regulators.

In his prepared statement to the Senate subcommittee, Stephenson said "because this transaction will make us a more formidable competitor to cable, it's going to increase competition. In fact, it would be a gross mistake to view this transaction as anything but pro-competitive."

He said the two firms, with no overlap in their services, would make it easier to offer innovative content and distribution in an era facing disruption from online services such as Netflix and Amazon.

But senators on a Senate Judiciary Committee panel on antitrust and competition policy expressed concern the deal could concentrate too much power in one firm.

Subcommittee chairman Senator Mike Lee said the deal raises questions about "all sorts of anticompetitive abuses."

Lee said AT&T "could increase the price or reduce access to Time Warner content" if it holds a dominant position as both a pay-TV and content provider.

And Senator Chuck Grassley said he worries "that a combined company will give preferential treatment -- for example, favorable channel placement and zero-rating pricing -- to Time Warner's premium entertainment programming to the disadvantage of other content producers.

"There's concern about the merged company?s ability to employ 'bullying' tactics to dictate rates and terms to other networks. There?s concern that this acquisition will concentrate too much power into one conglomerate, resulting in higher prices and fewer programming options for consumers," Grassley said.

- Tech industry 'gatekeepers' -

Billionaire entrepreneur Mark Cuban, chairman of the cable network AXS, told the hearing he favored the merger because it would create an entity sizeable enough to compete with tech industry giants who are now the "gatekeepers" for content on the internet, where users increasingly prefer to watch movies and shows over traditional cable television.

"We need more companies with the ability to compete with Apple, Google, Microsoft, Amazon and Facebook," Cuban said.

However, Gene Kimmelman of the consumer group Public Knowledge warned that allowing the deal to proceed would likely mean "higher costs and fewer choices for video services, and lower-quality and less diverse programming."

Kimmelman said it remains unclear how such a deal would impact emerging giants in video like Netflix.

"If a single company is able to control many of the key inputs to online video, from content production to last-mile transmission, then the competitive promise of this new market could be snuffed out, or at least limited," Kimmelman said.