There’s been plenty of skepticism over whether or not AT&T will be able to pull off its $85 billion acquisition of Time Warner as the deal faces regulatory approval.
AT&T’s argument is this is a vertical integration, meaning the carrier doesn’t compete with Time Warner and therefore won’t be removing any competition from the market.
But so far we haven’t heard much about so-called zero-rating content streamed over AT&T’s networks and how that could affect its rivals’ ability to compete for the future of TV.
Zero-rating means wireless carriers won’t count data used with certain streaming services against your data cap. For example, T-Mobile offers zero-rating for several popular services like Spotify, Netflix, and YouTube. Stream all you want, and don’t worry about your data usage.
That’s where AT&T can run into problems as it tries to make its case for buying Time Warner.
AT&T would likely make Time Warner pay a fee to have its content zero-rated on AT&T’s network. (T-Mobile pays for its zero-rated content, but reduces the quality to compensate.) But Since AT&T would own Time Warner, that money would just shift from one division of the company to another.
That could give AT&T an unfair advantage over other content providers like Netflix, CBS, Disney, and the rest that would have to pay the full price to get their content zero-rated on AT&T. In fact, AT&T could use the leverage it has with Time Warner’s content to force higher prices on Time Warner’s competitors.
This is slightly different than the so-called “fast lanes” that concern net neutrality advocates. With fast lanes, carriers allow data from select services to load faster if they pay for it, which cripples competition from companies that can’t afford to pay up.
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But all carriers have promised to deliver all content at the same speed. Zero-rating is their way around that promise, and it gives an advantage to the content companies that can afford it. A carrier that lets you binge on all the “Game of Thrones” you want – Time Warner owns HBO, by the way – without affecting your data cap will look more enticing than one that charges you out the nose when you hit your limit.
Then there’s the future of wireless, like the 5G networks that deliver insane data speeds that AT&T and its rival carriers are working on. 5G and similar networks have the potential to replace wired broadband one day, giving AT&T the opportunity to beam content over the internet not just to mobile devices, but also smart TVs and other screens in the home.
Couple that with AT&T’s ambition to deliver DirecTV (which it also owns) over the internet to everyone by 2020, and you have the recipe for a company with a major advantage over the competition for the future of connectivity and content delivery, with Time Warner content gaining favorability through zero-rating.
It sounds like AT&T has a pretty good case to buy Time Warner since the two companies don’t directly compete. But the companies have failed to discuss the future of how we get our content, and whether or not they’ll fairly charge competitors who want their content zero-rated. It’s something regulators should ask as the deal goes through scrutiny in the coming months.