On the 22nd of October 2016, telecommunications giant AT&T have announced that that they will be buying Time Warner for $84.5 billion (USD). This merger looks to combine the leadership and creative innovation of Time Warner with the consumer base of AT&T and could pose potential benefits and disadvantages for consumers.
Net-neutrality is the concept that ‘Internet service providers should enable access to all content and applications regardless of the source, and without favoring or blocking particular products or websites.’ Although this merger has not yet been approved by the Federal Communications Commission (FCC), various net-neutrality concerns have been raised due to the fact that this is a vertical merger, meaning the two companies do not compete.
In my opinion, at first read this merger seems to be a win-win situation for both AT&T consumers and the company as this will provide consumers with the possibility of new creative media content, a potential competitor to cable or even a zero-rating system – when service providers exempt certain online activity from counting in your data plan. These advantages are not only beneficial to consumers but also to the company as AT&T will gain a powerful competitive advantage. However, I believe that this merger has the potential to prove harmful to consumers especially those not subscribed to AT&T.
Firstly, consumers and small businesses need more competition and not more consolidation. Competitive markets can provide consumers with a lot of purchasing power as the consumers have a lot of variety of services to choose from. This also results in lower prices for consumers. However, this merger is a consolidation of two of the biggest companies in the world. This could pose the threat of exclusivity and self-dealing where AT&T could make services such as HBO exclusive to those subscribed to AT&T. Furthermore, this could result in a rise of prices of AT&T subscriptions because of the market share that they will own.
I believe that subscribers of AT&T are going to approve of this merger because of the benefits they reap while the remainder of the consumers in the market might disapprove of this because of the breaches of net-neutrality. In my view, it is important that the FCC should consider the potential threat to consumers and smaller companies should they approve the merger.
In another students blog, https://blogs.ubc.ca/arvidnordquist/2016/10/02/should-spotify-buy-soundcloud/, it was interesting to see his viewpoint on a different acquisition with the focus of the benefits to both companies. I particularly found it thought-provoking when the author wrote about what would happen to current consumers of the companies.
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Bibliography
https://openmedia.org/en/what-heck-zero-rating-and-how-does-it-undermine-net-neutrality
http://www.npr.org/sections/alltechconsidered/2016/10/25/499185907/the-at-t-time-warner-merger-what-are-the-pros-and-cons-for-consumers
http://mashable.com/2016/10/22/att-time-warner-deal-80-billion/#fX5JUQUGcmqH
http://mashable.com/2016/10/22/yes-you-should-care-about-att-time-warner-deal/#DzQWP5PNEqqV
http://mashable.com/2016/10/23/att-time-warner-fcc/#PGwSD9DXUEqS