AT&T Purchase of Time Warner Likely to Face FCC Review
October 27 2016 - 6:40AM
Dow Jones News
AT&T Inc.'s blockbuster acquisition appears likely to face a
full-scale review by the Federal Communications Commission because
Time Warner Inc. holds dozens of licenses from the agency, experts
and people involved in the deal said.
An FCC review—focusing on whether the deal is in the public
interest—would subject it to a broader and potentially tougher
examination than the antitrust review that already is expected by
the Justice Department.
The $85.4 billion deal, agreed upon Saturday, involves only a
single FCC broadcast television license, for an Atlanta station
owned by Time Warner. That led many on Wall Street and in
Washington to speculate that an FCC review could be avoided if that
particular license is sold.
But FCC licensing records also show dozens of active satellite,
wireless and radio licenses held by Time Warner operations
including HBO, CNN and Turner Broadcasting. The licenses themselves
say they cannot be transferred without permission of the FCC.
In an interview on Sunday, AT&T Chief Executive Randall
Stephenson said he expected FCC review of the deal. "Avoiding any
kind of regulatory review is always a benefit," Mr. Stephenson
said. "But we aren't naive. We aren't thinking that that won't
happen."
Some concerned lawmakers already have started pushing for an FCC
review.
"As the chief federal watchdog for telecommunications, the FCC
should be unleashed on this merger to protect consumers," Sen.
Richard Blumenthal (D., Conn.), a member of the Senate antitrust
subcommittee, said on Wednesday.
Although the FCC's mandate is to regulate U.S. airwaves, it has
used past merger reviews to impose conditions on other parts of the
industry. For example, the FCC required AT&T to further build
out its broadband network when it blessed its $49 billion purchase
of satellite-TV provider DirecTV last year.
AT&T could seek to delay or even avoid FCC oversight, for
example by getting rid of the Time Warner licenses, some experts
said. Jeff Bewkes, Time Warner's CEO, said on Sunday that owning
the local Atlanta station was "not really necessary."
While sales of broadcast TV stations or cellular spectrum are
closely scrubbed, the transfer of satellite licenses such as those
used by CNN or HBO historically has required only pro forma review
by the FCC, said Christopher Yoo, an antitrust expert at the
University of Pennsylvania.
So far, the company hasn't said it is planning to dump the
licenses. AT&T said it is still reviewing "which FCC licenses,
if any, will be transferred to AT&T" from Time Warner. It
acknowledged, however, that "to the extent that one or more
licenses are to be transferred, those transfers are subject to FCC
review."
"One way or another, I expect the FCC to be very engaged in
evaluating the competitive concerns with this deal," said Gene
Kimmelman, the president of high-tech public-interest group Public
Knowledge and a former Justice Department antitrust official.
AT&T and Time Warner have played down concerns the deal
wouldn't get regulatory approval. The companies have argued that
prices won't rise from the combination and the merger will bring
new competition to the cable television and advertising
markets.
However, shares of Time Warner are trading at a wide discount to
AT&T's takeover price, suggesting Wall Street is worried about
the transaction closing.
Analysts at FBR & Co. said it was crucial for AT&T to
avoid an FCC review as the combination "would have a hard time
getting through the FCC, which has a public interest standard that
is loose and subject to political influence and has no real
timetable."
FCC Chairman Tom Wheeler has sought to bring more competition to
broadband and other services where local cable companies often
dominate, but he has also taken a tough stance on both
consolidation and regulation of the telecom and cable
industries.
Multiple people close to Mr. Wheeler said he may stay in the
chairmanship role well into 2017 if Hillary Clinton wins the White
House. But Mr. Wheeler's tenure might not stretch as long as a
potential FCC review of the deal.
On Wednesday, Messrs. Wheeler and Stephenson sat side by side at
an industry task force on robocalls, and appeared friendly.
"As I read in the press, you have not stopped your day job it
seems, Randall," Mr. Wheeler said at one point.
Write to John D. McKinnon at john.mckinnon@wsj.com and Thomas
Gryta at thomas.gryta@wsj.com
(END) Dow Jones Newswires
October 27, 2016 06:25 ET (10:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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