AT&T Inc. went on the offensive to defeat the U.S. lawsuit against the company’s proposed takeover of Time Warner Inc., making its economic case that pay-TV prices for consumers will actually fall after the merger.
University of Chicago economist Dennis Carlton testified Thursday in Washington that AT&T’s acquisition of Time Warner will benefit pay-TV subscribers. He said the analysis done by the Justice Department’s expert, Professor Carl Shapiro from the University of California at Berkeley, is riddled with errors.
“How much confidence should this court have in Professor Shapiro’s
“None,” said Carlton.
Carlton is the first witness called by the companies to
Carlton took the stand and outlined a series of flaws he said undermined Shapiro’s findings, which he called “theoretically unsound.”
He said Shapiro was wrong to ignore price effects in the pay-TV market at times when companies combined both distribution and programming, such as Time Warner and Time Warner Cable, which were once part of the same company, or when Comcast Corp. bought NBCUniversal. Carlton said he looked at those effects and found no support for the claim that combining pay-TV distribution and programming leads to higher prices.
Carlton also criticized key inputs that Shapiro fed into his model, such as how many subscribers would leave a DirecTV competitor if it loses access to Time Warner programming. That estimate is important because the government claims some would go to DirecTV, allowing AT&T to make up lost revenue. That possibility gives AT&T additional leverage in negotiations with programmers that will allow it to raise prices, according to the government.
Carlton said Shapiro overestimated how many would leave the rival company and underestimated how many would become so-called cord-cutters by ditching cable and satellite-TV altogether. Carlton also said Shapiro used outdated data to estimate the profit AT&T would earn from subscribers who switch to DirecTV.