More screens will mean more video.
It’s not as crazy as it sounds: The number of hours people watch video will soar from five to nine hours daily as Americans enter a world where screens are everywhere, high-speed 5G networks take off, and the cost of computing power plummets.
This is the view of AT&T CEO Randall Stephenson, at least, who is very much interested in making it a reality. For Stephenson, more video means more data streaming, and that means more profit for AT&T, which he can use to invest in improving AT&T network and buying more video rights—and, well, you get the picture.
“We’ll be living in a world where video is pervasively in front of you,” the telecom CEO predicted on Tuesday at Business Insider’s Ignition conference in New York, where Stephenson also forecast that 5G networks—a faster standard that will replace today’s networks—will power yet more screen time in the form of autonomous car and virtual reality technology.
It’s perhaps no surprise Stephenson is feeling so bullish. It a common sentiment in the telecom industry these days, as share prices soar on the belief that the incoming Trump administration will appoint regulators sympathetic to the industry’s technology and merger aspirations.
Despite Trump’s campaign promise to block AT&T’s T planned $85 billion merger with Time Warner, Stephenson is now confident the deal will go through—albeit with certain concessions. He also relished the prospect of a changing of the guard at the FCC, crowing that “five or six regulations have just been stopped.”
He pointed, in particular, to the FCC’s net neutrality regulations, which forbid Internet distributors from favoring some websites over others, and of recent rules that bar telecom companies from collecting customer data for advertising purposes. Both rules are likely to bite the dust under a Trump presidency.
That sentiment was echoed by Time Warner CEO Jeff Bewkes, who spoke at the event earlier in the day. According to Bewkes, a change in the rules for collecting customer data will level the playing field with the industry “beyond the mountains” — a shot at Silicon Valley, which the telecom industry believes received favorable treatment under Obama.
Why the merger makes sense
But even if the regulatory client becomes as favorable as they hope, it remains to be seen if Stephenson and Bewkes can make the business case for their proposed merger. Many are skeptical the deal makes sense, especially in light of the disastrous tie-up of AOL and Time Warner — an earlier marriage of content and distribution companies that is widely regarded as the biggest merger failure in history.
Bewkes, though, doesn’t believe the comparison is fair.
“We should talk about today not 15 years ago,” he said, rejecting a suggestion the earlier merger failed because of a clash in corporate cultures.
Bewkes said the failure stemmed from the decline of web portal-based business models, and a failure of scale since Time Warner TWX at the time only offered Internet access to 12% of the country.
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He predicted it would be different this time because of AT&T emerging power in mobile video, and because the hoped-for change in regulatory rules will allow AT&T to take advantage of targeted advertising.
Stephenson, meanwhile, boasted that it made sense to buy rather than license TV content in part because Time Warner is “the peach of them all” with its properties like HBO and CNN.
He also claimed that AT&T’s early experience with DirecTV, which it acquired this year, has been a roaring success with a 40% month-over-month increase in mobile viewing.
“We acquired DirecTV for mobile. We’re not in love with satellite technology,” he said, adding that the values for consumers is that they can pay for the content and watch it any time on any device on they choose. He cited, in particular, consumers’ ability to stream DirecTV from their mobile device to bigger screens via tools like Amazon Fire Stick or Apple TV.
Not everyone is convinced, however, with the bigger-is-better view of Bewkes and Stephenson. The consumer advocacy group Public Knowledge remains opposed to the merger, partly because it would allow the combined company to raise prices and exercise powerful leverage over other content companies.
“AT&T can already harm its video distribution competitors by making it more difficult to reach customers on its networks; acquiring Time Warner programming would increase AT&T’s incentive to harm rivals in this way,” Gene Kimmelman, the group’s president, said in a statement.