U.S. v. AT&T: Dish Exec Grilled Over Merger Concerns, Past Comments

AT&T's lawyer uses past comments from Dish chairman Charlie Ergen to undercut a key premise on why the merger needs to be blocked.
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At Dish Network, founder Charlie Ergen has a reputation for being ruthless and getting under the skin of others in the television business. His satellite company is often in court with content owners, and Ergen is the type who attempts to stop programmers from streaming one day only to launch his company's own streaming product (Sling) the next. Given that Dish is pretty vocal when it comes to regulatory matters, often opposing mergers, it's no surprise to find one of his company's top executives is an important witness for the U.S. government in the bid to block the merger between AT&T and Time Warner. On Tuesday, though, it sometimes felt as if it was Ergen who was this case's defendant.

Now in its second week, the merger trial picked up with Dish programming executive Warren Schlichting on the witness stand.

On Monday, Schlichting testified how the merger would put Dish in a poor position in the negotiating room and lead to higher prices and less innovation like "skinny bundles" of channels being streamed to consumers. That's because Schlichting supported the government's position that Turner channels (TBS, TNT and CNN) are "must-haves," and while the current state of licensing negotiations holds pain for anyone in the business who can't get a deal done and channels go dark, "all the incentives change" post-merger as a defecting Dish customer potentially becomes one for DirecTV, a subsidiary of AT&T and Dish's biggest rival.

Schlichting had to defend his positions on cross-examination from Daniel Petrocelli, the attorney for the merging parties.

Petrocelli began by attacking the premise that Turner channels were really "must-haves," starting out with live sports, which is ironic given this is the very day that Turner launched a live sports streaming service.

Yes, Turner holds rights to broadcast NCAA basketball March Madness, but Petrocelli made Schlichting confirm that such game rights are shared with CBS. One of the networks not on Dish's Sling service at the moment is CBS, which means that despite Schlichting's testimony a day earlier that one can't be in the television distribution business without live sports, Sling customers not only miss out on certain March Madness games, but also in certain years, the Super Bowl.

Schlichting attempted to explain that Dish encourages people to subscribe to CBS All Access, but Petrocelli made sure to later note how programmers like Time Warner's HBO had over-the-top products for consumers, too. Schlichting said only consumers with the internet could access such content, but Petrocelli retorted that one needed to be online to get Sling.

Petrocelli also asked Schlichting how many Top 500 shows are on Turner channels.

Schlichting didn't know, as Petrocelli followed this up by asking, "Would you agree that NBC has as more of an audience than all the Turner networks combined?"

As for CNN, and Schlichting's testimony a day earlier that it's unimaginable to go through an election without the cable news giant, Petrocelli made Schlichting confirm that CNN went dark on Dish right as results were coming in for the 2014 midterm elections.

Petrocelli then brought up a comment that Ergen had made at the time that losing CNN was a non-event.

"I call that negotiating in the press," said Schlichting.

"He was talking to analysts," responded Petrocelli. "You're not telling me he was misleading them, are you?"

"He was being truthful," Schlicting eventually answered.

Petrocelli also brought up how Dish was currently in litigation with Turner for allegedly paying too much for CNN and how Ergen had commented that Turner networks were "one of the easier ones to take down."

In fact, Petrocelli kept hammering with past Ergen comments and got Schlichting to confirm that part of the company's strategy is to take down channels in order to up the pressure on programmers to come to a deal on better terms. And referring to Schlichting's comment that going dark is like a heart attack, Petrocelli asked, "You've had a lot of heart attacks, right? More than other distributors, right?"

When it came to Ergen, Schlichting agreed that his boss was a "wildcat" who said stuff like there's not a single channel so valuable he wouldn't take down.

"You would agree with me after the merger, Charlie will still be a wildcat?" asked Petrocelli.

"Charlie is Charlie," said Schlichting before attempting to discuss how Ergen is also rational and that everything changes the day after the merger.

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