Photo: Reuters/Pawel Kopczynski
Photo: Reuters/Pawel Kopczynski

AT&T’s US$85.4 billion bid for Time Warner is seen as possibly marking the end of Alphabet’s and Facebook’s dominant positions in the US media market and heralding new antitrust action by the administration of President Donald Trump.

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The administration is looking at taking long-overdue antitrust action both by the Department of Justice (DOJ) and Federal Trade Commission (FTC) after the previous administration of Barack Obama gave a “free ride to Google, Facebook and Silicon Valley”, a Washington-based antitrust lawyer close to the Trump transition team said.

AT&T chief executive officer Randall L Stephenson is reinventing the firm as a content-delivery company after its acquisition of Direct TV for $67 billion and the takeover of Time Warner and its main content units HBO and CNN.

Trump said during his election campaign last year that he would block an AT&T takeover of Time Warner, but the antitrust source said Trump spoke too soon, as the AT&T bid poses fewer antitrust issues – it is a vertical integration and not a takeover of another wireless carrier like  AT&T’s failed bid to acquire Deutsche Telekom unit T-Mobile in 2011.

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Stephenson said the main driver for wireless carriers would be video on demand and the ability to have must-see content on the AT&T network as opposed to recycled content on social-media platforms like YouTube, Facebook, SnapchatInstagram and Twitter.

“A new Renaissance of original content is about to happen. Everyone knows that social media’s biggest weakness is that it depends on others for free content,” a top lawyer specializing in media mergers and acquisitions said.

In an effort to win US regulatory approval, AT&T’s Stephenson has all but decided to divest Time Warner’s Cable News Network (CNN) to CBS Corporation. CBS, which lacks a 24-hour cable news channel but works closely with CNN through 60 Minutes, has been looking to acquire CNN for years.

The Atlanta-based news network founded by Ted Turner generates about $600 million in annual operating profit that is not dependent on viewer ratings but on CNN’s unique status as a “must have” in all cable TV packages and strong international sales.

Insiders expected an announcement regarding the sale of CNN to CBS when CBS CEO Leslie Moonves is interviewed by The Carlyle Group co-founder and co-CEO David Rubenstein at The Economic Club of Washington, DC, this Thursday.

The sale of CNN to CBS would also allow Vice Media founder and CEO Shane Smith to take over CNN’s domestic HLN (formerly Headline News) channel as a direct cable distribution channel for Vice News.

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Time Warner sources said Smith had already made a bid for HLN but his offer was rebuffed by Time Warner CEO Jeff Bewkes.

The tattooed journalist from Quebec has in a few short years transformed the Brooklyn-based Vice Media group into a company worth more than $2.5 billion, with important minority shareholders such as Rupert Murdoch’s News Corp and A&E.

The AT&T deal will also happen after the Trump administration appointed “free market” Republican Ajit Pai to replace Tom Wheeler as Federal Communications Commission (FCC) chairman. A former lobbyist, Wheeler has been consistently closer to Silicon Valley interests than those represented by traditional media owners such as 21st Century and News Corp executive chairman Rupert Murdoch and minority-owned media operators.

Speaking to Capitol Intelligence/BBN at a Wall Street Journal CEO Council event in Washington, Murdoch said the AT&T deal brought the debate regarding Net neutrality – the principle that Internet service providers should enable access to all content and applications regardless of the source – closer to his point of view rather than that of Google.

The FTC concluded in 2012 that Google Inc under executive chairman Eric Schmidt used anti-competitive tactics and abused its monopoly power in ways that harmed Internet users and rivals, The Wall Street Journal reported in March last year based on a leaked FTC report.

The report recommended that the FTC bring a lawsuit challenging three Google practices that would have been the highest-profile antitrust suit since the DOJ sued Microsoft Corp in the 1990s and the 13-year  IBM antitrust battle in 1976.

In fact, Schmidt became the Washington lobbyist for Google founder Larry Page and Sergey Brin almost immediately after Obama took office.

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There has been a revolving presence of Google executives at the White House and Google was the second-largest corporate source of campaign donations to Obama and by far the biggest Silicon Valley cheerleader for Democratic presidential candidate Hillary Clinton last year.

Schmidt, unlike Page and Brin, is not afraid to meet the public and socialize with people who do not come from the US West Coast tech world. Schmidt is so DC-savvy he was the keynote speaker at a closed press event hosted by Supreme Court Justice Ruth Bader Ginsburg at the court and organized by the Salzburg Global Seminar in November 2014.

In fact, the stock market is showing that the social-media bubble, as witnessed by the current market caps of almost $50 billion for Uber, $30 billion for Airbnb, and those of Google and Facebook will meet the same fate as, and most probably worse than, the bubble crash of 2000.

One potential target of new antitrust initiatives by the Trump administration’s DOJ or the FTC could be the founder and owner of the $34 billion Bloomberg LP financial news and data empire, Michael Bloomberg.

Antitrust experts argue that Bloomberg could be viewed as having monopoly of access to algorithmic trading platforms, regulatory news and information after the acquisition of the Bureau of National Affairs, and the closed-circuit nature of its terminal chat and e-mail systems.

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Speaking to Capitol Intelligence/BBN at a City Lab event with Baltimore Mayor Catherine Pugh, Bloomberg denied that his company could be considered a target for regulatory review.

He also denied that he sought or raised between $5 billion and $10 billion though the securitization of Bloomberg terminals almost a decade ago. Sources close to Bloomberg told Capitol Intelligence that Michael Bloomberg held numerous meetings with Purchase, New York-based MBIA and Ambac Financial Group Inc for the terminal securitization.

Copyright Black Business News (BBN), a news service of Capitol Intelligence Group – Turning Swords into Equity®.

PK Semler

Peter K Semler is the chief executive editor and founder of Capitol Intelligence. Previously, he was the Washington, DC, bureau chief for Mergermarket (Dealreporter/Debtwire) of the Financial Times and headed political and economic coverage of the US House of Representatives and Senate.