Some early thoughts on the AT&T/Time Warner merger

[Commentary] It is far too early to predict with certainty which issues will be the focal point of regulatory scrutiny of the AT&T/Time Warner merger. But based on the issues flagged in the Comcast/NBC proceeding, one can expect that regulators will at least ask about the following topics:

Nondiscriminatory access to programming: Many of the conditions placed on the NBC transaction involved Comcast’s commitment to allow rival cable operators and potential online video distributors access to Comcast-owned content. One can imagine regulators will discuss similar conditions to assure that AT&T’s library of content post-transaction will not remain the exclusive prerogative of AT&T customers. It’s important to note that, independently of any merger conditions, the Federal Communications Commission’s program access rules give the agency jurisdiction to investigate such conduct if a cable company complains.

Management of Hulu: Although the transaction is primarily vertical, there is one potential anticompetitive wrinkle. Time Warner has a 10 percent stake in Hulu, which potentially competes with AT&T U-Verse, DirecTV, and the company’s proposed DirecTV Now virtual cable offering. In the NBC case, regulators required Comcast to be a silent partner with regard to its 33 percent stake in Hulu, out of fear that Comcast would steer Hulu in ways that limited competition. The Justice Department is likely to ask similar questions with regard to AT&T’s exercise of its shares as well.

Zero-rating of Time Warner content: The FCC conditioned its approval of the Charter-Time Warner Cable merger on the company’s commitment to avoid usage-based pricing. Given the heat and light about this issue, one might anticipate regulators to explore whether AT&T would be permitted to exempt Time Warner content from monthly wireless data caps. Such agreements might raise anticompetitive concerns, although I have written before that these concerns are probably overblown, particularly in today’s competitive wireless marketplace. Nonetheless, regulators are likely to consider this issue as part of their overall regulatory approval.

[Daniel Lyons is an associate professor at Boston College Law School]