What the AT&T/Time Warner Deal Really Means

December 6, 2016

December 6, 2016

By Ernest Worthman

Executive Editor, AGL Small Cell Magazine

We have seen it for some time now, the carriers are making moves to acquire content providers. Today, that is a given. But there are underlying issues here that go further than just acquiring content providers.

It appears that this trend is going to remove any particular moniker from these players. No longer are they carriers, content providers, MNOs, etc. They are now simply integrated media companies. Why that is important is because they will own both the content and the distribution channels. This works because connectivity, mobile and otherwise, is now a commodity and no one cares any longer about the how and who of it.

Going forward, content will be king. And it won’t matter if AT&T, Comcast, Verizon, Yahoo, AOL, or anyone else will be the distributor. The real money will come to those that can deliver what the consumer wants, when and over whatever channel.

This fusing of the media and delivery chains is seen as a golden egg for these new media giants. Revenue from carrier services is going flat, even decreasing. So content is seen as the new golden ring – something that can make these new media giants a lot of money. With access to over-the-top (OTT) services, these giants are salivating. For example, AT&T expects $1 billion in annual run-rate cost synergies within three years and improvements to its financial structuring through international diversification and lower capital intensity.

But there is a bit of a dark side to all of this. We all are led to believe that there has been competition among carriers long before any of this media mania came about. But many critics have long argued that whatever competition does exist, is mostly perception. It may seem that competition works to keep the prices down, but over and over there are cases of gouging and other nefarious activities by carriers to skirt the basic cost programs.

So what leads us to think that once these media conglomerates form, that things will be any different? I am not alone in this. Trump has voiced concern over the way this playing out and threatens to review 2013 NBC Universal/Comcast deal.

It will be interesting to watch all of this unfold.