AT&T CEO Hopeful for Regulation Under Trump, Touts Strong Demand for DirecTV Now

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AT&T chairman and CEO Randall Stephenson

Randall Stephenson tells the UBS Global Media and Communications Conference that the new streaming service hit its undisclosed December subscriber forecast on its first day.

AT&T chairman and CEO Randall Stephenson said Tuesday that he expects the Trump administration will take more of a hands-off approach to regulation as regulators mull the telecom giant's $85.4 billion acquisition of Time Warner.

Stephenson, speaking at the UBS Global Media and Communications Conference in New York, said he was "hopeful that perhaps a more moderate approach” to some of the regulatory issues is afoot. Using a different phrase, he at one point also expressed hope for "a more rational level of regulation."

He emphasized that it was a classic "vertical merger," adding this should mean a "fairly straightforward" process, with possible conditions. Stephenson said getting the deal approved and closed is his top priority.

Stephenson said Tuesday that "our industry is already seeing the by-product" of Trump's transition team, saying a whole list of issues keyed up at the Federal Communications Commission, including privacy, have been set aside. “That is probably a foreboding of what we’ll see under a Trump administration and a Trump FCC,” he said. Stephenson said the three members of Trump's FCC transition team have all been open about their views, including net neutrality. 

Further, Stephenson said that the first few days of the new DirecTV Now streaming service, which launched Nov. 30 starting at $35 per month, have gone well. The executive said the firm reached its subscriber forecast for all of December on the first day. He didn't provide figures or give details of the forecast. “The early demand has been rather dramatic,” exceeding expectations, he said. And he added that HBO and Cinemax attach rates for $5 a month have been strong. DirecTV Now has content deals with all major entertainment companies except for CBS Corp. 

Stephenson made his comments at the UBS conference a day before he, Time Warner chairman and CEO Jeff Bewkes and others will testify about the proposed Time Warner deal in front of the Senate Judiciary Subcommittee on Antitrust in Washington, D.C. Members of President-elect Trump's transition team have assured the companies that the deal would be reviewed without any prejudice.

AT&T and Time Warner will have to woo the Department of Justice and the FCC. The FCC would also weigh in if the deal involves the transfer of broadcast licenses, but some have predicted the companies will likely avoid that by having Time Warner sell its lone TV station in Atlanta. Stephenson said Tuesday that the companies are continuing to work through the licenses issues.

Stephenson earlier this fall had described criticism of the deal by Trump as "uninformed comments." Before the election, Trump and Bernie Sanders both urged regulators to reject the deal, but analysts have since expressed hope of more of a laissez-faire approach to regulation.

Comcast's purchase of NBCUniversal is seen as similar and therefore as a potential blueprint for conditions of approval. Comcast made promises not to discriminate against channels competing with its own content, accepted prohibitions on excluding its own services from mobile internet data caps and also pledged to bolster independent minority-owned channels. In the years since, each of these topics — discrimination, zero-rating of streamed content and diversity — has triggered complaints that Comcast hasn't lived up to its promises.

Mid-day, Stephenson appeared at another New York conference, Business Insider's Ignition: Future of Digital event where he was interviewed by Henry Blodget.

Asked about Trump’s pre-election comment that he was against the Time Warner deal, Stephenson said “you have to pay attention” to such “serious” comments. He also said that “I heard rumors that he’s not happy with CNN,” in reference to Trump's recent criticism of the Time Warner news network on Twitter, but said AT&T was comfortable with the deal being a vertical merger, which typically get approved with conditions.

Reiterating and adding to comments made at the UBS event earlier, he said overall the Trump election win could turn out to be a "positive development" for the industry.

Discussing the Time Warner deal, he said he felt owning content was key for the future as "owning content will complete the strategy." He called Time Warner the top content company, "the peach of them all" and Warner Bros. "the best content library on the planet." He said the combined company would be "the global leader in telecom, media and technology."  

Asked about regulatory concern about DirecTV Now's zero-rating approach, meaning that consumers who are AT&T subscribers can use unlimited video data for DirecTV Now, Stephenson said preventing zero-rating would amount to regulating prices. He argued that if the company's zero-rating offer violates net neutrality rules, "we've been violating it for a long time," arguing it was a common industry practice.

Stephenson said he was in favor of the basic idea of avoiding paid prioritization and other ways of treating some partners better than others. But the way the FCC has interpreted and implemented net neutrality means that it overreached, he suggested.

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