Comments
Tw + att
AT&T had announced plans with time Warner for 85.4 billion. I was very shocked as I heard about this because that is a lot of money for a deal plan. They also have a deal with Comcast which is very good for AT&T. The deal with direct tv was 48 billion and now the debt is 170 billion I find that is a lot of debt to be in for a good company.
costs
As I recall, Comcast said it's purchase of NBCU would lead to lower costs due to increased competition, etc. I read somewhere that was not the case. I think AT&T is making the same arguement on this deal.
JohnBarnes
10/24/2016 10:51:46 PM
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Re: costs
Mike,
It's an old paradox in economics. Making competitors more effective at competing does not necessarily increase competition. In fact it often reduces it.
Suppose you've got a game of Ultimate Musical Chairs going on, with the chairs far apart and the music a bit soft, and competitors not allowed to wear helmets and pads. Then you decide everyone gets to compete more effectively by putting the chairs much closer together, equipping everyone's helmets with amplifiers and a signal alarm that plays the instant the music stops, and basically letting them wear armor.
If competition is measured as the chances of the average player winning--everyone is competing better, i.e. more effective individually, but wins are going to concentrate in fewer and fewer hands, and everyone's going to use the same strategy (knock down everyone between you and the nearest chair as soon as the end-music alarm goes off).
AT&TT-W would be a very formidable competitor indeed. And once a competitor is formidable enough, there's hardly any competition to speak of.
JohnBarnes
10/24/2016 10:52:55 PM
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Re: costs
I should add that I'm indebted for the musical chairs analogy to Thomas Schelling, the late Nobel-prizewinning economist.
faryl
10/25/2016 9:46:10 PM
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Re: costs
I love that analogy - great imagery!
afwriter
10/24/2016 11:49:53 PM
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Re: costs
@Mike Isn't that always the case? They will always tell you what you want to hear until you get that first bill. In this case, I am interested to see what AT&T's end game is here. They obvious have been plans in mind.
Re: Tw + att
Virtually every mega-merger is justfied on some combination of lower costs/more efficient operations, increased competition and better tasting lunch meat. Lower costs are generally achieved via head count reductions (aka firings). More efficient operations is harder to prove because the operation is now a behemouth and who's to say how efficiently it can run.
As others have pointed out, the increased competition argument is a bit specious. Are we paying lower fares now that there are fewer, larger airlines?
I for one have never understood the merging of content and service delivery. It's like when Movie studios used to own their own theater chains. You can't keep content exclusively for your own use because that shrinks demand. Same if you try to price-gouge competitors or restrict their access.
What customers want is more access to more content in more places. This means almost ubiquitous 5G which could enable last-mile cord cutting. Add in an open, flexible service delivery capability where content owners can automatically onboard themselves as easy as I can list something for sale on eBay. Then underpin this with revenue sharing partnerships.
To me, that's a much better use of $80B.
DHagar
10/25/2016 5:35:13 PM
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Re: Tw + att
@JamesWarner, clearly it merges the content and networks and creates a new architecture that would change the level of competition.
Although I have been impressed with AT&T's vision and strong moves into network development on impressive platforms, I also question if this will be a good investment from them and/or will derail their earlier investments.
It is a bold move, but one that may reverse the strides they have been making.
Re: Tw + att
@DHagar No disagreement. Call me a cynic but I happen to believe there is another way to achieve network/content/services synergy without having to undertake a mega-merger with all its associated downsides (less competition, lower customer service, slower moving, etc.).
DHagar
10/25/2016 6:01:21 PM
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Re: Tw + att
@JamesWarner, you have my interest - I believe the meta-merger may be a well-worn but less successful model. I am interested in your alternative method.
Re: Tw + att
@DHagar - Apologies for the delay. My way of thinking has 2 parts. 1. A somewhat radical business model shift for telcos and, 2. A technology platform to support said model.
I actually think the CSPs are close to the answer. Their error, IMHO, is they are trying to re-invent themselves without shedding the model they've grown accustomed to for the last 30+ years. And all the while, the market is mutating faster than they are changing.
At the risk of self-promotion, I wrote an article last week on the business model aspect and will follow that up with one on the platform. They key is open and automated on-boarding.
http://www.telcotransformation.com/author.asp?section_id=401&doc_id=727082
DHagar
10/27/2016 6:22:42 PM
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Re: Tw + att
@JamesWarner, outstanding assessment and outline of real-world status on the transformation for CSP's! That makes great sense and I believe is quite accurate.
Thanks for sharing piece you wrote - great insights - with those insights, self-promotion is most welcome!
Thanks for sharing your expertise!
Ariella
10/28/2016 11:04:56 AM
User Rank Author
Re: Tw + att
<They key is open and automated on-boarding.>
@James does the same apply to off-boarding?
Re: Tw + att
Absolutely.
The most common complain I hear from content providers/owners is that CSPs are incredibly hard to work with. The idea of being able to onboard/off-board simply and easily has a huge benefit to both parties. Today, so much work gets invested in creating "the deal" that if things don't work out, people get reluctant to "cut bait" and move on even though that's probably the smart thing to do.
I see an opportunity to make all sorts of offerings - content, software, services - as easy as becoming an Amazon merchant.
Ariella
10/28/2016 11:35:46 AM
User Rank Author
Re: Tw + att
<Today, so much work gets invested in creating "the deal" that if things don't work out, people get reluctant to "cut bait" and move on even though that's probably the smart thing to do.> @James true, part of the sunk cost cognitive bias.
elizabethv
10/29/2016 9:53:09 AM
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Re: Tw + att
@Ariella - That's a good point. I do think at some point people feel they are "pot-committed" and reluctant to scrap the whole thing, even if it seems like the best thing to do. In the end, it's the consumer overall that will suffer from most from the merger.
clrmoney
10/25/2016 10:57:56 AM
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Time Warner merges with AT&T
This is great ofr both of them because time warner offer cable but they have not been as popular as other competitors and AT&T is one of the largest phone service provider in the world so this will mean more revenue in the long run with what both have to offer.
Re: Time Warner merges with AT&T
Chris, Time Warner is seperate from Time Warner Cable, the latter of which was bought by Charter.
Iain Morris has a good story on LR about how this merger could impact AT&T's traditional vendors.
faryl
10/25/2016 9:52:49 PM
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Re: Time Warner merges with AT&T
It hadn't occurred to me there was a distinction. That makes it seem less monopoly-ish and more potential conflict-of-interest-y to me now.
elizabethv
10/26/2016 4:49:28 PM
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Re: Time Warner merges with AT&T
@faryl - I would almost see it as less "conflict-of-interest" and more trying to corner the market. If you can get the two aspects of telco working together harmoniously, they would likely be able to walk away with advantages other companies just don't have.
freehe
10/29/2016 3:45:36 PM
User Rank Platinum
Time Warner AT&T Merger
It is the same old story. Companies get too big, get slapped on the hand by the FCC or FTC. They are forced to break up into smaller companies. Then they get too big again, then they are allowed to merger to get bigger, then they are forced to breakup again.
I would really like the FCC and FTC to allow startups and smaller companies grants and funding to develop affordable products and services for customers.
Big company business only benefits the company. Customers always lose and in this instance Time Warner and AT&T customers will lose. I am not a customer of either but caution those who are. Start comparing products and services now to save yourself the headache later.
elizabethv
10/30/2016 9:25:35 AM
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Re: Time Warner AT&T Merger
@freehe - Grants to smaller companies to help them get their footing would be a great idea. There is so much talk in this country about the importance of allowing for businesses to develop, but anymore all of the "breaks" seem to go to the bigger, already established companies. Whereas small businesses are forced to figure things out for themselves.
dlr5288
10/31/2016 7:07:53 PM
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Re: Time Warner AT&T Merger
So true! Big businesses just get cut up and then they merge with other small businesses just to get big again. It's really just a huge cycle.
elizabethv
10/25/2016 5:02:00 PM
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Regulations
I think it's important to point out the regulatory review of such a merger. And as someone who is generally not a big fan of mega-corporations - I'm going to have to say I sincerely hope this is blocked. I think when companies get this big they start really blocking out the ability of little guys to play, which doesn't decrease costs for the consumer, doesn't encourage technicalogical growth for competition and in reality, rarely benefits most people other than the ones with the pockets the money is being deposited into.
DHagar
10/25/2016 5:38:17 PM
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Re: Regulations
@eliabethv, it would most certainly inhibit competition from other players without the content/networks. And pretty much shut down the appetite for smaller players to get into the markets with newer options. It may make sense from the top-down, but from bottom up appears predominately focused on taking control of the market place - whether intended or not.
elizabethv
10/26/2016 4:51:49 PM
User Rank Platinum
Re: Regulations
@DHagar - I would speculate without a doubt these mega corporations are trying to take over the market. They likely just want you to think it's unintended so you leave them alone and let them take whatever they can. I'll just have to sit and hope that regulations work as they should and keep something like this from happening. But also prepare for it to happen anyway, because that's just how things tend to go anymore.
DHagar
10/26/2016 5:14:37 PM
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Re: Regulations
@elizabethv, it definitely is true that if you have an elephant in the bathtub that is going to change the dynamics in the markets and potential squeeze out the smaller players.
I notice that there is already speculation that this merger would make AT&T larger than Disney and that there is pressure now on Disney to consider another acquisition (maybe Netflix) to add content and retake #1.
While everyone is fighting over being #1, if you make the cost of entry - or opportunity to make a sustainable profit - too steep you will limit the competition. That would indeed inhibit continued innovation and/or new consumer choices.
elizabethv
10/29/2016 9:48:34 AM
User Rank Platinum
Re: Regulations
@DHagar - The continued need to be #1 is a dangerous one that will never end. Though I would also assert that where Disney specifically is concerned - it is unnecessary. Disney exists in a field all its own, and in that field, will always be number one. They have made themselves irreplaceable in the minds of generations of people Even I, who is immediately hesitant of all corporations, holds a special love for Disney.
DHagar
10/31/2016 2:54:43 PM
User Rank Platinum
Re: Regulations
@elizabethv - I am with you on Disney. But I think there is a difference, ie Disney, in companies that want to be #1 as a result of being the best choice - and build a good experience, service, product for their customers. That's a scenario where everyone wins. And yes, Disney holds a special place with most of us as a "trusted" experience/brand.
faryl
10/25/2016 10:04:01 PM
User Rank Platinum
Re: Regulations
I agree. I hadn't realized it still needs FCC approval - have only had a chance to browse headlines until now, so thought it was a done deal.
jbtombes
11/29/2016 8:43:40 PM
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Virginia pol
Delayed response here, Mike. (Doing some background research on the caption contest.) It's a moot point now in electoral terms, but as a citizen of the Commonwealth of Virginia, I feel obliged to note for the record that the first name of the running mate for the Democratic Party was Tim, not Tom.
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