Photographer: Patrick T. Fallon/Bloomberg

Time Warner Attacks U.S. Data Underpinning AT&T Merger Suit

  • MIT professor testifies about estimate of subscriber losses
  • Expert used survey, not real-world data, Time Warner says

Time Warner Inc.’s attorneys launched a withering attack on the U.S. government’s evidence that its proposed sale to AT&T Inc. could trigger large subscriber losses for pay-TV rivals and lead to an abuse of leverage in programming deals.

On the fifth day of the Justice Department’s antitrust trial to stop the deal, Time Warner said the U.S.’s expert estimates were disconnected from real-world data, and even got a government witness from Comcast Corp. to back the companies’ argument on cross-examination.

Time Warner attorney Peter Barbur on Thursday questioned the government’s estimate that pay-TV providers would lose about 12 percent of subscribers if they fail to reach a programming deal with Time Warner and channels like CNN and TNT become unavailable on their systems for a protracted period. That risk of losing customers would give AT&T leverage in programming negotiations with competitors, according to the U.S.

Blackout Survey

The projection is based on a survey conducted by Massachusetts Institute of Technology professor John Hauser. When questioned by Barbur, Hauser acknowledged that he didn’t use data from actual programming blackouts, for example when Time Warner went dark on Dish Network Corp. in 2014. A Dish executive said the company lost 30,000 subscribers, or less than 1 percent of its total.

“I believe my numbers are accurate,” Hauser said.

The Justice Department is presenting its case that AT&T’s takeover of Time Warner would allow the telecom giant to raise costs for Time Warner programming sold to other pay-TV distributors, which in turn would raise prices for consumers. The estimated loss of subscribers is a key input used by the department’s economics expert, University of California Berkeley economist Carl Shapiro.

Hauser testified that pay-TV companies would lose 8 percent of their subscribers in the first month of a blackout, with the number rising to 12 percent after a year. Barbur pointed out that Hauser’s survey methods were criticized by the federal judge who oversaw intellectual property litigation between Apple Inc. and Samsung Electronics Co.

‘Big Number’

Greg Rigdon, an executive vice president of content acquisition for Comcast Corp. who works on negotiations with programmers, contradicted Hauser’s analysis.

“I would say in one month that seems like a big number,” Rigdon said.

Rigdon also contradicted the centerpiece of the government’s case: that in acquiring Time Warner, AT&T would gain too much leverage and use it to raise prices.

“You don’t actually think that’s going to happen, do you?” Time Warner lawyer Kevin Orsini asked.

“I don’t have any reason to believe it will impact my negotiations with Turner,” Rigdon said.

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