Personal Finance

AT&T Thinks You Want More Targeted Advertising

Promotional image for Last Week Tonight with John Oliver

AT&T (NYSE: T) is looking to circumvent a review from the Federal Communications Commission regarding its pending merger with Time Warner (NYSE: TWX) , hoping to eliminate one of the many regulatory hoops it will need to jump through. The Department of Justice will definitely be reviewing the merger, but Ma Bell hopes to sidestep the FCC since there aren't expected to be any FCC license transfers and Time Warner does not offer any FCC-regulated services to consumers.

Last month, Senator Al Franken asked AT&T to justify the purported benefits to consumers to assess if an FCC review was necessary. AT&T and Time Warner responded (link opens PDF) last week, outlining a slew of ways that American consumers may benefit, including through more targeted advertising.

Promotional image for Last Week Tonight with John Oliver

HBO is one of Time Warner's most valuable assets. Image source: HBO.

"Giving consumers what they want"

I may be wrong, but I'm pretty sure more targeted advertising is at the top of nobody's wish list, unless you're an advertiser or an advertising company. AT&T and Time Warner state: "Put simply, this merger is about giving consumers what they want." That primarily refers to a wider range of bundles that include telecommunications services combined with content, noting that vertical integration facilitates greater innovation. The pair then proceeds to provide a few examples of what that innovation might look like (emphasis added):

short-form programming optimized for presentation on mobile devices;interactive and personalized methods of viewing sports and other live events;more relevant advertising in ad-supported video services;integration of professionally produced content with virtual reality or augmented reality services;services that encourage consumers to combine professionally produced content with their own creative content and share the results on social media; andgreater choice, convenience, and value in programming bundles.

The thing is that most of these examples can be pursued without an $85 billion merger, so they don't help justify the acquisition. Fortunately, Franken isn't buying what the pair are selling, saying the response "does little to address" his concerns.

While AT&T says it will be better able to compete with larger cable companies, which should theoretically result in reduced prices, it fails to acknowledge the anti-competitive implications of its "zero-rating" policies, which it has already in place for its new DIRECTV Now service, itself a result of AT&T's 2014 acquisition of DIRECTV. Specifically, owning the content gives AT&T a powerful differentiating factor, and even if it didn't increase prices -- a pretty big if -- competing service providers would likely be forced to increase their prices out of economic necessity if they wanted to compete with a zero-rated HBO Now, for instance.

Just because AT&T and Time Warner don't compete directly doesn't mean that a merger is good for consumers.

10 stocks we like better than AT and T

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and AT and T wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 6, 2017

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More