Financial Times

[Commentary] Something profound is happening in advanced democracies. The forces at work are cultural, economic, social and political, driven in part by rapid technological change. In political terms, Brexit and the Trump triumph highlight the decline of the party system and the end of the old left/right divide. There is a widespread disillusion among western democracies with globalisation. The progressive abandonment of controls on capital, goods, services and labour, epitomised by the launch of the single European market and the single currency, reached its apogee in the summer of 2007. In 2016, we saw, finally, that this period — call it Globalisation 2.0 — is over. Free trade has become ever harder to sell to a public worried about job security and the competitive threat from developing countries.

Free movement is also in question. Trump’s winner-takes-all approach and his lack of respect for minority rights violates a cornerstone of democracy and free society, as set out in the 10th of the Federalist Papers written by James Madison, one of the founding fathers. His position mirrors the more extreme Brexiter demands that the “will of the people” be respected at all costs. Anyone who raises objections — the media, the opposition or, indeed, the judiciary — risks being branded “enemies of the people”. This is not merely populism run rampant. It is a denial of politics itself, which, as the late scholar Bernard Crick reminds us, is the only alternative to government by coercion and the tyranny of the majority. We have been warned.

[Lionel Barber is the FT’s editor]

Donald Trump’s transition team has reassured AT&T that its acquisition of Time Warner will be scrutinised without prejudice despite the President-elect vowing to block the deal because it concentrated too much “power in the hands of too few.”

America’s largest telecommunications group by market value has been encouraged by Trump’s appointments to his transition team of two former competition officials with a hands-off record on antitrust enforcement, people close to the company said. President-elect Trump picked as his antitrust advisers Joshua Wright, a former federal trade commissioner with traditional Republican views on competition policy, and David Higbee, who worked in the business-friendly administration of George W Bush. After talking with the president-elect’s team, AT&T executives are confident that their deal has a good chance of passing regulatory scrutiny.

Having been elected president, Donald Trump’s ambitions to become a media mogul appear to have been deferred indefinitely. Instead, he will have to settle for the opportunity to reshape the entire telecoms playing field.

As quickly as technology has evolved in the Obama era, displaced market leaders have tried to use their heft to keep up. But they had to contend with a Justice Department and Federal Communications Commission that became sceptical of a laisser-faire attitude to increased market concentration. While President-elect Trump has railed against corporate power, a rally in shares of cable television and broadband providers suggests he will let companies decide for themselves what services they will provide to consumers and at what cost.

Virgin Media is to test Europe’s network neutrality rules after launching 4G services in the UK that offer free access to Facebook’s messaging apps WhatsApp and Messenger.

Those services will be “zero rated,” meaning that they can be used without eating into a customer’s data allowance. Although European Union telecoms regulations do not forbid zero-rating, guidelines published by the Body of European Regulators for Electronic Communications — which will oversee the enforcement of the rules — have curtailed its usage. Networks are prohibited from providing free access to some apps if the data allowance is used up, for example.

During the first dotcom boom, CenturyLink was a barely considered long-distance telephone company serving about 2 million customers in the deep south of America. A little more than a decade later, the company stands to be transformed through the acquisition of Level 3 — a former darling of that tech boom and now one of the largest global internet providers critical to data-intensive businesses such as Netflix and Google. CenturyLink has grown rapidly in recent years to become the third-largest fixed-line telecoms player in the US behind AT&T and Verizon, as well as a major competitor in the market selling telecoms services to companies. But the acquisition of Level 3 will give the group global significance for the first time, propelling it above Verizon in the US enterprise market and greatly expanding its internet services business as data use rapidly increases.

CenturyLink will buy Level 3 Communications, which runs infrastructure that allows businesses connect to the internet, in a $34 billion deal. The tie-up with Level 3 will provide CenturyLink, which has historically focused on phone networks, the ability to increase its fibre-optic capacity, something that is especially important as it works to bring broadband internet to rural areas.

“The digital economy relies on broadband connectivity, and together with Level 3 we will have one of the most robust fiber network and high-speed data services companies in the world,” said Glen Post, CenturyLink’s chief executive.

[Commentary] If the future of entertainment is going to be about selling content to consumers directly, then the strongest players will be the ones with the most customer data. The combined AT&T-Time Warner will have a trove of it. If AT&T-Time Warner is approved, more deals should follow.

• Comcast, the world’s largest cable operator, already has an impressive content portfolio through its ownership of NBCUniversal, but it lacks wireless capability. It could buy an operator such as T-Mobile or Sprint.
• Verizon, meanwhile, has wireless and broadband but lacks a sizeable content production business, other than the recent digital acquisitions of AOL and Yahoo. It has the capacity to strike more deals.
• Charter Communications, which acquired Time Warner Cable, is America’s second largest player in cable but also lacks wireless capability. John Malone will not want any of his most-prized investments to be left behind.
• Then there is Rupert Murdoch and his sons, James and Lachlan, at 21st Century Fox. They were rejected when they tried to buy Time Warner two years ago. They also have the kind of entertainment assets that a mobile or wireless operator would covet, including cable channels, a film studio and a broadcast studio. But hell is likely to freeze over before the Murdochs sell, so they may opt to bulk up instead. The most likely outcome for them in the world of a combined AT&T-Time Warner would be a renewed bid for the rest of Sky, the European pay-television operator. Fox already owns a 39 percent stake.
• Disney owns arguably the world’s pre-eminent collection of content assets, including ESPN, Marvel, Pixar and Lucasfilm, but subscriber growth at ESPN, the main driver of Disney’s profits, is slowing. This has led to speculation that Disney may look for a meaty acquisition that gives it the ability to distribute its content direct to consumers at scale.

If US regulators impose conditions on an eventual approval of the proposed AT&T-Time Warner tie-up, they are likely to start with the more than 150 provisions they required for a similar transaction five years ago.

In its most significant orders, the US Department of Justice in January 2011 forced a merger between Comcast and NBCUniversal to license programming to other distributors, refrain from retaliating against content providers who supply rival cable companies and give equal treatment to competing online products on its internet network. The head of DoJ’s antitrust division at the time applauded the compromise. “The conditions imposed will maintain an open and fair marketplace while at the same time allow the innovative aspects of the transaction to go forward,” says Christine Varney, now head of the antitrust practice at Cravath, Swaine & Moore, which is representing Time Warner in the AT&T deal. But technology, markets and politics have all changed since 2011, potentially complicating the AT&T-Time Warner union, according to antitrust specialists in Washington.

[Commentary] Splashy mergers and acquisitions in the media sector have a poor record. Maybe things will be different this time. But even if not, the risks to AT&T from this “bolt-on” acquisition are muted. AT&T believed that just contracting with television networks restrains technical innovation.

This has become important now that video consumption is migrating away from traditional television to smartphones. Research firm eMarketer thinks time spent on smartphone digital video consumption will have grown at a 21 percent annual rate between 2013 and 2018. It remains to be seen how AT&T can extract value from Time Warner without antagonising its competitors and regulators. The arithmetic of a 50/50 cash plus stock deal buys the company time as its thesis works itself out. Its own price-to-earnings ratio of 12 times is dwarfed by the 20 times it will pay for Time Warner. But with $40 billion of debt costing under 4 percent, and $1 billion in annual savings, AT&T should be able to maintain both its dividend (5 percent yield) and an investment-grade rating. Meanwhile AT&T’s rivals can do little.

Steve Case took to Twitter when he heard about AT&T’s proposed $85.4 billion takeover of Time Warner, coining a new hashtag: #DejaVu. The former chief executive of AOL knows a few things about buying Time Warner, having led the $164 billion purchase of the media company in 2000 in a deal widely regarded as the worst ever, given that it was swiftly followed by a $100 billion writedown. There is little chance of history repeating itself, despite Case’s wry tweet.

Randall Stephenson, AT&T’s chairman and chief executive, did not go into details about how he planned to turbo-charge Time Warner’s film and television programming but he made clear that it would help the company sell new products and services. “When we combine Time Warner content with our scale and distribution … we’re going to have something really special,” he said. It is unclear what that combination will look like. Stephenson said AT&T would be able to innovate more rapidly by owning its own content yet the company will still need to strike other licensing deals if the direct to consumer mobile and digital offerings it is planning are to be comprehensive. For example, an AT&T that owns Time Warner can offer classic cartoons from the Cartoon Network but none from Walt Disney. It can offer cable news from CNN but would need a separate licensing deal to also offer Fox News, which is owned by Rupert Murdoch’s 21st Century Fox. It can boast superheroes from DC Entertainment but will need an additional deal if it is to offer Iron Man, Captain America and The Avengers, which are owned by Disney’s Marvel Studios. The point is that vertical integration can only do so much.