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
July 19th, 2017
by A. Michael Noll
October 23, 2016
© 2016 AMN
One can only wonder in amazement over the Hollywood fever that seems to afflict communications business in the United States. The proposed acquisition of Time Warner by AT&T shows that the disease is still flourishing.
Time Warner creates and owns content. It is a media entertainment company, owning such content as CNN and Warner Brothers. The former Baby Bells had a strange fascination with Hollywood and the world of content. They did not seem content with their monopolistic control of the conduit, and today do not seem content with their duopolistic control of the conduit. AT&T – the former Baby Bell SBC – wants both: conduit and content, although these businesses are quite different in terms of such areas as technology, economics, and management. The proposed acquisition of Time Warner by AT&T simply does not make sense, other than as a manifestation of past weirdness.
A little over 30 years ago, AT&T broke apart the Bell System by divesting the regional Bell telephone companies. Then, in 1991 AT&T acquired NCR in an attempt to enter the computer business. AT&T knew nothing of computers, and about five years later spun off the computer operations. AT&T’s acquisitions had become a revolving door, and were clear evidence of nonsensical strategic planning.
Ultimately, AT&T itself became such a thin shell of its past grandeur that SBC Communications, which then cloaked itself in the AT&T identity, acquired it. There was hope that the nonsense that had plagued AT&T would be left behind in the acquisition. However, the proposed acquisition of Time-Warner by AT&T indicates that the weird behavior and nonsense is still there.
Back in the early videotex days of the 1980s, AT&T was content with providing terminals and the conduit, while Knight-Ridder provided the database and the content. It seems that the past history is yet again being ignored. AT&T recently expanded its conduit by acquiring the satellite TV business of DirecTV. AT&T did not have the broadband needed for the local delivery of TV and thus had to acquire it. Verizon’s FiOS has that bandwidth. With AT&T’s proposed foray into Hollywood, how will Verizon respond?
Perhaps government regulators will decide that the ownership of content and conduit by the duopolistic AT&T is not acceptable. If so, then AT&T will be saved from its own illness. If AT&T has such funds to waste in the pursuit of Hollywood, then perhaps instead it should decrease its rates and more truly compete in its duopolistic businesses – and invest in improving its infrastructure.