Amid sky-high cable bills, many TV viewers have sought to cut costs by firing their TV providers and switching to a relatively new crop of online alternatives offering fewer channels at a lower price. These “skinny bundles” are often streamed live over the Internet and on mobile devices, creating new experiences for TV fans.
But that video revolution could be threatened if the government allows AT&T to buy Time Warner, according to one of America's first providers of live-streaming skinny bundles.
Under AT&T's ownership, Time Warner could force those new TV providers to take on more channels than customers want or need, Warren Schlichting, the head of Dish Network's Sling TV, told a federal judge Monday in AT&T's landmark antitrust trial at the U.S. District Court for the District of Columbia.
“They will jam as many networks as possible into the base package, and you'll have that bloated bundle again,” Schlichting said. “We fight like crazy to keep the network numbers low.”
Schlichting also predicted higher prices and more TV blackouts stemming from contract disputes between AT&T-Time Warner and its rivals and business customers.
Schlichting's testimony could be key to the Justice Department's case. Antitrust regulators are trying to show that the AT&T-Time Warner merger would harm competition. Last week, the Justice Department called a witness from Cox Communications to testify to the deal's implications for the traditional cable industry; now, the agency aims to persuade Judge Richard Leon that similar harms could befall the emerging market for live-streaming TV.
Introduced in 2015, Sling has 2.2 million subscribers to its Internet-based service, which offers a selection of small basic packages and a handful of optional add-ons that allow viewers to customize their bundle.
A skinny-bundle business such as Sling's depends on limiting the number of channels that customers are required to buy as part of a base package. Stuff that package full of additional channels, and it defeats the purpose of the company, Schlichting said.
Sling has caved to pressure in the past to accommodate more channels. In negotiations with Comcast-NBCUniversal, said Schlichting, Sling pushed to carry only four of NBCUniversal's cable networks. In the end, it wound up agreeing to carry three more types of programming: NBC's broadcast network, regional sports networks and Olympics coverage.
That same type of pressure is likely to intensify after AT&T buys Time Warner, Schlichting said, because AT&T will benefit from Sling's pain. Sling could be forced to accept more channels and perhaps pay more for content, he said.
“Once that happens, that breaks the model,” he said. “You have consumers voting with their checkbooks.”
In the face of bigger bundles or higher prices at Sling, some consumers would probably switch to a competing service such as DirecTV Now, the AT&T-owned alternative, Schlichting said.
Even though DirecTV Now has half the customers that Sling does, Schlichting said, those numbers could rapidly change.
“We have got to keep the prices down, or we're not going to be in business,” he said. “It doesn't take much of a shift to change Sling's future.”
Attorneys for AT&T and Time Warner were unable to cross-examine Schlichting on Monday because of delays stemming from a violation in court procedure by an outside lawyer representing Sling. Over the weekend, the attorney had inappropriately shown Schlichting a purchased transcript of last week's trial proceedings, said Leon, who said it posed an issue because witnesses are not supposed to know the content of other witnesses' testimony.
“Just because they purchase them doesn't mean they can just show them to anybody,” Leon said of the transcripts. “Should this happen again — hopefully, it will not — the witness will be struck.”