November 22nd, 2017
AT&T Goes Hollywood
A. Michael Noll
© Copyright 2017 AMN
AT&T wants to purchase Time Warner — the White House and the Justice Department correctly oppose the acquisition. The acquisition would create a huge vertical integration of content and conduit that would not benefit consumers, in my opinion. But the local telephone companies have a long history of lusting after content and Hollywood.
Today’s AT&T is really a former local Bell company: the past Southwestern Bell that then became SBC Communications which then acquired AT&T and then wrapped itself in the AT&T identity.
Over two decades ago, the local Bell companies chased after the entertainment industry. And now again one of the remaining of the two super Bells – AT&T – is again inflicted with Hollywood fever.
AT&T is a conduit company, providing the cables and wireless paths over which consumer access various services. In 2015, AT&T extended its control over conduit through its acquisition of DirecTV for nearly $50 billion, delivering video over satellite to homes. But throughout history, the old Bell operating companies have lusted after also providing the content that their customers want to access over the conduits.
The telecommunication conduit business in the United States has become mostly a duopoly. AT&T and Verizon dominate wireless. Either AT&T or Verizon and a CATV company dominate wired access. Duopolies inherently adjust “competition” so that markets are shared and profits maximized, without attracting government attention. In the late 1940s, the studios were forced to divest their vertical integration of movie theaters. So today If AT&T wants to become a content company, it should be required to divest its wireless and wireline conduit businesses.
AT&T knows little of Hollywood and the news and entertainment businesses. It should stick with its strengths in providing wired and wireless conduits, as I wrote in 1993.* One might argue that if AT&T wants to lose its shirt chasing Hollywood, then let it. However, like decades ago, now is still not the time for AT&T to go Hollywood.** “Hollywood” might well end up as “Follywood” for AT&T.
*“Baby Bells Should Stick With Strengths,” by A. Michael Noll, Los Angeles Times, October 22, 19933, p. B15.
**“The phone company has gone Hollywood,” by A. Michael Noll, Morris County Daily Record, January 7, 1994, p. A11.
November 22, 2017