WASHINGTON (CN) – AT&T flipped the script on a Dish Network executive in the courtroom Tuesday, using statements from Dish chairman Charlie Ergen to undercut a key claim by Dish that AT&T's merger with Time Warner will hurt it.
Warren Schlichting, president of Dish's online TV service Sling TV, testified Monday that the $85 billion merger would make it tougher for Dish to reach deals with Turner to offer their programming, creating a risk Time Warner content could "go dark" for Dish subscribers.
When that happens, Dish loses the rights to broadcast the networks, and subscribers can no longer view the content. On Monday, Schlichting described going dark as bad for the company. He compared it to having a heart attack, saying that the company can recover but is never quite as good.
During cross-examination Tuesday morning, AT&T attorney Daniel Petrocelli barked back at that assertion.
"Your company's had a lot of heart attacks, right" he said, noting that Dish takes down programmers like Turner "left and right."
Turner offers the channels TBS, TNT and CNN, which Schlichting described as "must-haves” and noted negotiations with programmers like Turner are often a struggle but that both sides are motivated to reach deals. The merger, he testified, could change that by enabling programmers like Turner to impose onerous terms on Dish, or force the company to raise its prices.
The consequence for Dish, Schlichting said, could result in subscribers fed up with content going dark fleeing to DirecTV, Dish's biggest competitor and a subsidiary of AT&T.
But Petrocelli cited numerous statements by Dish chairman Charlie Ergen that conflict with Schlichting's testimony. During several hours of brusque cross-examination, Petrocelli noted Dish has gone dark – at times of its own volition – numerous times in the past.
During talks with Turner, Ergen said the network is "one of the easy ones to take down," and called losing CNN a "non-event." Although Schlichting called CNN a must-have channel on Monday – saying it was hard to imagine going through an election cycle without the channel – Petrocelli noted Ergen had told investors that it's been 20 years since CNN was a must-have channel. He also prompted Schlichting to acknowledge that CNN went dark on Dish during the 2014 midterm elections, though the witness blamed it on the two sides being far apart in negotiations.
According to Petrocelli, Ergen had also said losing CNN would "save a big, big, big check from a cash-flow perspective," but Schlichting chalked the comments up to Ergen "negotiating in the press."
Petrocelli balked at the notion that Ergen would mislead investors just to gain an advantage in negotiations.
"Was he being truthful or was he lying," Petrocelli asked.
"He was being truthful," Schlichting eventually conceded.
Ergen has also said Dish would go dark on any channel if the price was too high to avoid rate hikes on Dish customers.
Schlichting acknowledged the truth of the comments but brushed them off again as a negotiating tactic.
"These are true statements, and you can make true statements in the middle of negotiations and still send a message," he said.
Petrocelli pressed Schlichting to say whether Ergen would pay more than he thinks something is worth given his public track record.
“He’ll continue to be the same Charlie Ergen the day after the merger, correct?” Petrocelli asked.
Schlichting responded that Ergen is rational.
“The day after the merger everything will be different,” he said.
Attorneys for AT&T and Time Warner are defending antitrust claims brought by the Justice Department to stop the merger, which the feds say could raise prices on other pay-TV distributors who would then pass that cost on to consumers to the tune of $400 million annually.
AT&T denies the allegations and says the merger would benefit consumers by allowing the newly formed company to offer innovative products to compete with Netflix and Amazon.
The government called John Martin, the CEO of Turner, to the witness stand late in the day Tuesday. His testimony will continue Wednesday morning.
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