Posted by: coastcontact | May 19, 2014

Merger and Acquisition Leads to Monopoly

What if there was just one phone company, one television service provider, and one company owning all the supermarkets? Do you believe that prices would be lower or higher?

This proposed $48 billion merger of AT&T with DirectTV along with the proposed Comcast-Time Warner Cable merger will enable two very large companies to become even bigger. The benefit will be reduced competition for the newly formed businesses. The impact will be higher cost cable and satellite TV service for the public. Unless the public is very vocal these mergers will be approved. The company lobbyists will begin making their rounds to congressional offices starting now. Every congressman needs to be scrutinized before the next election.

AT&T is a relatively small player in its offering called U-Verse television service. Their acquisition of DirectTV will make them a major participant in the TV service business. AT&T claims this will in no way reduce competition. That is the same argument Comcast makes in its proposed purchase of TWC. The consequences are more significant than merely permitting two or three companies dominating the delivery of television services.

There will be less competition and the decisions those companies make will determine the programs you watch.

Interestingly Morningstar, the on-line evaluator of stocks and bonds, does not believe there is any financial or strategic benefit in the AT&T acquisition.
“The biggest benefit to AT&T from this deal would be increased leverage in negotiating with content owners like Disney. By highlighting the fact that other pay television providers need to keep pace with Comcast and putting its own deal forward, AT&T is forcing regulators to consider a world with significantly increased concentration in media distribution.”

Consumer Reports lobbying arm, Consumers Union, says that neither of these consolidations are good for consumers.

Both Federal Communications Commission and Department of Justice must approve this merger. The Washington Times reports that every single member of the Senate Judiciary Committee, holding hearings on the Comcast purchase of TWC has taken money from Comcast.

So if you were betting on the approval of that purchase, what do you believe the outcome will be?

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