The Department of Justice’s antitrust case against AT&T reached a crescendo Wednesday as government lawyers asked an expert economist to explain how the telecom giant’s proposed $85 billion merger with Time Warner would lead to higher cable bills for consumers.
By 2021, consumers could be paying an extra $571 million a year in TV fees — the result of AT&T-Time Warner charging cable companies higher prices to carry channels such as CNN, TBS and TNT, said Carl Shapiro, a professor at the University of California, Berkeley who analyzed the deal on the government’s behalf.
“I’ve concluded the merger will harm consumers,” Shapiro told the court. “The harm is significant.”
Shapiro’s testimony serves as the linchpin of the government’s case because antitrust suits frequently turn on demonstrated impacts to consumer prices.
Although economic testimony can be abstract and complex, Shapiro took pains to walk Judge Richard Leon through every step of his analysis.
The effort earned Shapiro an early rapport with Leon. As the two traded jokes, Shapiro deftly explained key business concepts that the Justice Department had trouble getting across using previous witnesses whose arguments Leon had dismissed as merely opinion.
For example, Shapiro conveyed the significance of possible changes in bargaining leverage between AT&T and other cable companies, should the merger be approved.
“Why will they have more leverage? What’s new is that AT&T and DirecTV will benefit if Charter doesn’t have Turner’s content,” said Shapiro, referring to popular programming owned by Time Warner.
“Charter is going to be a weaker competitor. You go through the logic, this is the fundamental.”
Shapiro was expected to undergo questioning by AT&T and Time Warner lawyers Wednesday afternoon.