WASHINGTON — The biggest U.S. antitrust case of this century kicked into high gear on Thursday as a government lawyer warned that AT&T wants to buy media giant Time Warner to “weaponize” its must-have content — a move that would raise prices for consumers and hinder innovation.
“Time Warner would be a weapon for AT&T because AT&T’s competitors need Time Warner’s programming,” Justice Department lawyer Craig Conrath said in opening arguments in the government’s lawsuit to halt the planned $85 billion deal.
AT&T’s added leverage over pay-TV competitors to withhold content from some of the most valuable assets in entertainment — including HBO, CNN, TBS, TNT and Warner Bros., Hollywood’s largest TV and film studio — would cause prices to rise by more than $400 million a year for Americans, Conrath said.
AT&T also would be able to use the leverage to hinder the growth of online competitors, such as Google’s YouTube TV and Dish Network’s Sling TV, Conrath said as the antitrust showdown began in a Washington, D.C., courtroom after two days of sparring over evidence.
The outcome of the closely watched case, to be decided by U.S. District Judge Richard Leon after an estimated six- to eight-week trial, will have major ramifications for Hollywood and the rapidly evolving television industry.
AT&T’s lead attorney, Daniel Petrocelli, strongly disputed what he called “preposterous” government allegations in his opening arguments, saying consumer prices would go down and not up because of cost efficiencies and higher advertising revenue generated by combining the telecommunications giant’s subscriber information with new data about viewers of Time Warner programming.
Online rivals such as Google and Amazon have “radically transformed” the media industry, and AT&T is trying to bulk up to compete, Petrocelli said. The Justice Department’s case doesn’t recognize that, he said.
“The government is pretending we’re trying this case back in the 1980s or ’90s,” he said.
Even though AT&T doesn’t believe there will be a consumer price increase, Peterocelli said the government’s $400 million estimate amounted to just 45 cents a month for each the nation’s 90 million pay TV subscribers.
He spent a chunk of his opening argument disputing the calculations by UC Berkeley economist Carl Shapiro.
Petrocelli also tried to dismiss the government’s argument that that AT&T’s DirecTV would stand to gain customers who would ditch competitors’ services if AT&T withholds Time Warner content.
“You know how hard it is to cancel your pay-TV service?” he said, adding that customers have to call their provider and then “stay home” to wait for a new installation. “It’s a big pain.”
Conrath acknowledged that the changing media landscape but said traditional providers still dominate the market. The largest of them is AT&T, which purchased DirecTV three years ago. The company now has more than 25 million customer homes.
AT&T also has more than 100 million customers for mobile service, an increasingly vital market as younger Americans prefer to watch programming on their phones.
Conrath said the threat from innovative new rivals is fueling AT&T’s desire to buy Time Warner, but not so it could innovate. AT&T is desperate to keep its existing customers as new services try to lure them away.
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“They’re coming right for AT&T’s cash cow, but these innovators need Time Warner’s content,” Conrath said. “Buying Time Warner would give AT&T a weapon to slow down innovation and protect AT&T’s cash cow.”
It was one of several times Conrath used the words “weapon” or “weaponize” in his 45-minute opening argument.