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AT&T’s Randall Stephenson: We’ll Offer Concessions, Not Asset Sales, to DOJ Over Time Warner Merger

WASHINGTON — AT&T CEO Randall Stephenson said the company is willing to make concessions, but not sell assets, as a way to resolve its legal dispute with the Justice Department over the $85 billion proposed merger with Time Warner.

Speaking to the Economic Club of New York on Wednesday, Stephenson noted that Time Warner’s Turner networks sent a letter to distributors on Monday saying that if the merger closes, they would agree not to block out channels during carriage disputes and would agree to independent arbitration as a way to resolve a pricing impasse.

The conditions, which would last for seven years, were included in an AT&T court filing in a federal court on Monday responding to the Justice Department’s lawsuit to block the transaction.

The concession was included as a way to address concerns that AT&T would withhold prized Turner cable channels from rivals, or drive up prices for such content, and the costs would be passed on to consumers.

“We have taken that off the table. I think we have demonstrated a willingness to make reasonable concessions,” Stephenson said,

But he again said AT&T would not be willing to sell assets, adding that if it agreed to do so, it begins to “hint that you are doing so to address concerns about CNN.” In the lead up to the DOJ lawsuit, there were reports that the Justice Department said AT&T would have to sell its Turner division, which includes CNN, or DirecTV, in order to get the green light from the government. He said such a sale “hints at First Amendment issues,” and AT&T is not going to sell.

That has raised questions of whether Makan Delrahim, the chief of the antitrust division, was influenced in any way by President Donald Trump’s frequent bashing of CNN, and that the AT&T-Time Warner merger would be retaliation for its news coverage. Delrahim has denied that there was White House interference in the decision to litigate.

Stephenson, though, said a “logical question to ask” is why Delrahim seemed to switch his thinking on the transaction. Around the time it was announced in October of 2016, and well before he was named to the Justice Department post, Delrahim said he didn’t see antitrust issues with the transaction. He has since said the remarks had been taken out of context.

AT&T and the Justice Department are seeking very different trial dates. The company wants it to start on Feb. 20, while government lawyers are arguing for a date in May. The latter timeframe would be after the April 22 expiration date on the merger agreement.

Noting that the deal was first announced 14 months ago, Stephenson said the government “should be ready for a trial, it seems to us. We are ready to litigate. We think it is time for this case to be drawn to a close one way or another.”

He also argued that the issues involved in the transaction are less complicated than those involved in the Comcast-NBC Universal merger in 2011, which was approved by the government with conditions.

“We believe the issue here is just basic rule of law,” Stephenson said, adding that vertical mergers have been “evaluated a particular way” for the last 50 years, but the DOJ was taking a “meat ax approach” to the way it is viewing this transaction.

That said, Stephenson did praise the Trump administration’s easing of regulations, and said the tax reform proposal pending before Congress would be a “capital freeing event.” AT&T said it would invest $1 billion in infrastructure if the corporate tax rate was dropped to 20%, from 35%, and that the money would go to such things as upgrades in 5G technology.

The legislation, though, has raised concerns that it would end up meaning tax increases for low- and middle-income individuals. Both the Senate and House versions call for rolling back the ability of individuals to deduct state and local income taxes.

Asked what he thought of the criticisms of the tax reform proposals for individual filers, Stephenson said, “I think that the economic driver behind business tax reform is so powerful that I don’t get overly concerned about the personal side of things.” He said he thought his own taxes would go up.

He also dismissed concerns about what will happen if the FCC rolls back many of the existing net neutrality rules. The commission will vote on Dec. 14 on Chairman Ajit Pai’s proposal that would repeal rules that ban ISPs from blocking or throttling content, or from selling “fast lanes” so companies could get speedier access to consumers.

Stephenson said in the debate over net neutrality, “there is a lot of emotion, a lot of rhetoric, over nothing.” He said AT&T would be “regulated by our terms of service,” which prohibit blocking or throttling of content.

If the rules are repealed, he said, “We are not going to notice any difference.”

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