Photographer: Michael Nagle/Bloomberg

AT&T Judge Hones In on ‘No Blackout’ Offer

  • Judge asks if merger remedy can be changed to satisfy concern
  • Time Warner has vowed not to pull programming on distributors

The federal judge weighing whether to block AT&T Inc. from buying Time Warner Inc. on antitrust grounds asked whether an arbitration offer made to cable and satellite TV companies could be restructured to resolve concerns about the merger.

Time Warner has offered arbitration to pay-TV companies if there’s an impasse in negotiations over programming distribution. AT&T and Time Warner say the proposal addresses the Justice Department’s lawsuit challenging their deal because they can’t threaten to pull content like CNN off the air.

The plan hasn’t won over executives from cable and satellite-TV companies who have testified in the trial. U.S. District Judge Richard Leon on Wednesday asked one of them, Tom Montemagno from Charter Communications Inc., why he thought the offer was risky for Charter.

"What if the arbitration was restructured?" said the judge, who also asked if there were changes that would make the process satisfactory to Charter.

In addition to Montemagno, AT&T’s Vince Torres testified Wednesday morning. HBO executive Simon Sutton will continue testifying in the afternoon.

AT&T Says Tweaked Charter Study Gave U.S. Merger Suit Boost

Leon has said very little during the trial, and his remarks indicate he might consider changes to the arbitration proposal that would allow the Time Warner takeover to go ahead. Leon approved a settlement resolving Comcast Corp.’s purchase of NBCUniversal in 2011 that included a similar provision.

Leon noted in his discussion with Montemagno that Charter has benefited from an arbitration clause with NBC. Montemagno had testified that amid negotiations with NBC, Charter invoked the clause, which helped lead to a deal between the two.

"It’s a risky tool to exercise in my opinion," he said about arbitration. "It’s sort of last resort."

Typically, either side can walk away when negotiations reach a deadlock, leaving subscribers without some channels. But the offer from Time Warner would prevent Turner channels such as CNN and TNT from "going dark" during arbitration.

The Justice Department has dismissed the proposal as a flawed remedy that has no oversight and expires after seven years. The offer also doesn’t apply to HBO.

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