Pay TV Executive Argues Against AT&T, Time Warner Merger in Antitrust Trial

WASHINGTON (CN) – A top executive at Charter Communications expressed concern on the witness stand Tuesday during the AT&T-Time Warner antitrust trial that the merger could spike prices and bolster the merged company’s leverage over content packages.

The testimony from Tom Montemagno, Charter’s executive vice president of programming acquisition, echoed arguments made by the Department of Justice to block the proposed merger.

Montemagno, along with other pay-TV executives from competitors of AT&T and Time Warner, have testified during the trial that the merger could embolden Turner Broadcasting System, a division of Time Warner, to impose onerous terms on companies like Charter and Dish Networks to carry popular Turner networks like TNT, TBS and CNN.

Montemagno handles Charter’s negotiations with programmers like Turner to determine what networks the company will provide its subscribers.

In preparation for negotiations with Time Warner in 2016, Charter commissioned a $700,000 study from Altman Vilandrie & Co. that determined Charter would lose 9 percent of its subscribers if it lost the Turner network channels.

Montemagno said on the witness stand late Tuesday afternoon that he was mostly unaware of the study’s contents, and had only skimmed it.

Defense attorneys placed a spotlight on the study Tuesday, raising questions about late changes made to its methodology that lead attorney Daniel Petrocelli intimated were made to portray a more ominous situation for Charter.

Stefan Bewley, lead author of the report, conceded that its figures were changed after he presented the findings to Charter on April 26, 2017, but said “no” when asked if he had been instructed to change the study’s findings.

Petrocelli noted that Charter lodged its opposition to the merger with the Justice Department that same day, when it handed over a copy of the study to agency attorneys.

“You do know that they turned over your materials to the Department of Justice, correct?” Petrocelli asked Bewley.

Bewley said he only became aware that the agency had the study in August, but said he did not know the department had asked for it when Charter complained about the merger.

The final report, before Bewley changed it, showed that on the low end, Charter would lose 5 percent of its subscribers if it lost Turner networks.

Bewley said the figures were changed because the data for Turner was an outlier from the other programmers the study analyzed, and that the 5 percent figure was too low of an estimate. According to Bewley, the study used an internet survey with 10,000 participants who were asked to rank which networks they considered “must-haves,” along with cable box data to garner subscriber viewing habits. The third method was a hybrid of the two, he said. Turner Networks was the only one with a significant gap between the methods, Bewley said.

Petrocelli said the study’s results are important because one of the Justice Department’s key expert witnesses – economist Carl Shapiro – used the 9 percent estimated subscriber loss figure to determine that the merger would lead to a 45 percent price increase for pay-TV subscribers.

Defense attorney Rob Walters pressed Montemagno to say whether he had any empirical evidence or data to support the claim that a Turner blackout would lead to a 9 percent departure rate among subscribers.

Montemagno cited only real-world experience.

“It’s tough to pinpoint what the exact outcome is going to be,” he said.

Tuesday’s proceedings concluded with Walters confronting Montemango with talking points he used to show that popular Turner programs can be found elsewhere on more affordable networks or online.

Montemango conceded this was true for shows like Seinfeld and Friends, but said that does not apply to Turner’s sports and live-news programming.

Montemango will take the witness stand again Wednesday morning.

 

 

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