AT&T Says Dish's Own Tough Talk Weakens U.S. Antitrust Case

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(Bloomberg) -- AT&T Inc.’s lawyer pointed to past comments by Dish Network Corp.’s chairman on his willingness to ditch overpriced programming when contract talks fail as evidence that AT&T’s takeover of Time Warner Inc. won’t have the destructive impact the U.S. claims in its antitrust suit.

The lawyer raised the 2014 comments by Charlie Ergen to rebut testimony from Warren Schlichting, president of Dish’s online TV service, Sling TV. Schlichting testified this week for the government that the merger would make it more likely that Time Warner content goes “dark” on Dish and Sling, costing them subscribers as a result because the programming is so valuable. For example, he said he “couldn’t imagine” an election year without CNN.

But AT&T attorney Daniel Petrocelli confronted Schlichting Tuesday during his cross-examination with numerous statements to investors in which Ergen previously downplayed concerns about going dark because of the high costs of programming. The lawyer characterized the public comments as evidence that Dish is overplaying the danger it faces from the threat of expensive programming, using the company’s decision to drop Time Warner’s CNN four years ago as an example.

“In the midst of an election back in 2014, one of the reasons you went dark on CNN is because you thought they were asking for too much money,” Petrocelli said. “Mr. Ergen publicly stated it was a non-event” and that losing CNN would “save a big, big, big check from a cash-flow perspective.”

Ergen said Time Warner’s Turner Broadcasting in 2014 was “one of the easy ones to take down” and that losing the channel wasn’t a big deal. Ergen also said there isn’t a channel Dish won’t take down if the price is too high because doing otherwise will raise subscriber costs.

AT&T is pushing back on the government’s case that the $85 billion takeover will increase costs for pay-TV customers across the country and undermine emerging competition from services like Sling, which Schlichting says is “fighting for survival.” The chief executive officers of AT&T and Time Warner are expected to testify at the trial, scheduled to last six to eight weeks. The outcome of the case is likely to affect the way TV is watched in the future and influence how the U.S. reviews future media deals.

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Petrocelli, who focused on Ergen’s 2014 comments on Tuesday, asked why his philosophy on going dark would “suddenly change” as a result of the Time Warner deal. When Schlichting sought to portray those remarks as merely “negotiating in the press,” Petrocelli interrupted.

“You’re saying Mr. Ergen made these statements even though they were not truthful, just to get an advantage in negotiations?” Petrocelli asked.

“The statements are absolutely truthful,” Schlichting said. “Personally, I would have to disagree.” He also said that taking Ergen’s theory too far wasn’t realistic.

“You can save your way all the way to zero subscribers,” he said. “At some point you get to a tipping point, right?”

Dish eventually reached an agreement with Turner that resolved the blackout.

“We needed them at the end of the day,” Schlichting said. “Hopefully they needed us, but we sure needed them.”

The case is U.S. v. AT&T Inc., 17-cv-2511, U.S. District Court, District of Columbia (Washington).

©2018 Bloomberg L.P.

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