Smaller Cable Operators Propose Remedy for AT&T-Time Warner Merger

WASHINGTON — The American Cable Association, representing smaller multichannel video providers, is proposing a remedy to address what it sees as competitive harms from AT&T’s proposed merger with Time Warner.

In a filing with U.S. District Court in D.C., ACA and one of its members, RCN Telecom, outlined a plan in which carriage disputes over Time Warner content can be settled in arbitration, with similarities to the conditions imposed on Comcast’s combination with NBC Universal in 2011.

U.S. District Judge Richard Leon said he will announce his decision on the merger on June 12, following a six-week trial.

The Justice Department sued to block the transaction in November, claiming that AT&T will gain increased leverage to extract price increases from distribution rivals for networks like CNN, TBS and TNT. After the lawsuit was filed, Time Warner’s Turner networks offered to go into binding “baseball-style” arbitration with AT&T’s rivals in carriage disputes. It prohibits Turner’s networks from being pulled off the air during the arbitration process.

In the filing, ACA and the other cable operators said that the arbitration offer was “completely insufficient to address the harms.”

Instead, they want a remedy in which arbitration would cover all programming managed by a combined AT&T-Time Warner, instead of just Turner networks. They also outline a series of other provisions, including allowing smaller distributors to use a bargaining agent in arbitration; requiring greater information sharing before final offers are made; prohibiting retaliation against broadband subscribers of AT&T rivals; and providing a chance to the arbitration remedy after a few years for modification and even extension.

At one point in the trial, Leon asked whether a modified arbitration would be a more palatable merger remedy.

In their filing, ACA and RCN say that they are “concerned that the remedies proffered in this case by the parties present an all-or-nothing choice, with no middle ground, and the parties overstate their claims that the Court has limited authority and discretion to impose another solution.”

The Justice Department said that if Leon finds that the merger violates antitrust law, he should propose only structural remedies, in which AT&T-Time Warner have to exclude assets from the transition, like the Turner networks, or divest others, like DirecTV.

AT&T-Time Warner say that their arbitration offer is not a remedy but a “commitment,” and that it should be considered by Leon as he assesses the impact of the merger.

Update: AT&T-Time Warner, in its own filing, oppose the filing.

“RCN’s participation as amicus is especially unwarranted because, as the motion acknowledges, RCN’s Chief Executive Officer James Holanda already testified at trial,” the companies said in a brief filed on Tuesday.

They said that the brief presents opinions Holanda already expressed, but “to the extent the brief asserts additional views, it is an impermissible effort to expand the factual record, while shielding its newly-stated opinions and criticisms from the clarifying scrutiny of cross-examination.”

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