With Net Neutrality and Antitrust Moves, a Mixed Message From Washington

In each development, there are signs that the Trump administration is trying to reckon with a media and telecommunications industry that has become intensely concentrated in recent years; most Americans now get their internet and phone services from one of a few providers, and most TV shows and movies are produced by a handful of big companies.

But there is so far no clear view about how Washington will navigate this constantly shifting terrain in the future.

“We have one government, but two separate agencies with opposing views,” said Spencer Kurn, an analyst at New Street Research. “You’ve got one agency saying that marrying content and distribution results in too much market power, and another agency saying there’s no problem with a distributor favoring their content over someone else’s.”

At the intersection of both debates is AT&T. A global powerhouse offering access to the internet through mobile phones and landlines, and satellite television service through DirecTV, AT&T has a long history of battling regulators. In 1982, it agreed to break itself up and end a nearly century-old monopoly. In 2011, regulators scuttled its proposed deal to acquire T-Mobile. Randall L. Stephenson, the AT&T chief executive, has vowed to fight the Justice Department in court to save the Time Warner deal.

AT&T stands to gain from the rollback of net neutrality rules. It could charge companies and consumers more for high-speed internet access, and use its market influence to hinder content providers it competes against.

“It’s an ‘open the champagne bottles’ moment for AT&T,” said Tim Wu, a professor at Columbia University who coined the term net neutrality — the concept of providing equal access to the internet. “They can just tell people to pony up.”

But AT&T’s long-term aspirations could be dealt a severe blow if the Justice Department succeeds in blocking its takeover of Time Warner.

On Tuesday, President Trump signaled his approval of the lawsuit. “Personally, I’ve always felt that that was a deal that’s not good for the country,” he said in response to a question from reporters. If the merger was approved, he suggested, “I think your pricing is going to go up.”

For all the good a rollback of net neutrality rules would do AT&T, the company is looking to diversify. Its core businesses of delivering phone, internet and satellite television services are maturing. A big move into the content business would expand the company’s sources of revenue, and give it new opportunities for cost savings.

One of AT&T’s biggest competitors, Comcast, has already married content and distribution with the acquisition of NBCUniversal. If the government succeeds in preventing the Time Warner deal, it will raise sharp questions about the future of AT&T, and its competitors.

“This could be a watershed event for future business combinations in media,” said Rich Greenfield, an analyst with BTIG. “Does this mean Comcast will be broken up?”

There is no evidence that the decisions by the Justice Department and the F.C.C. were coordinated.

“I do not think it is a well-thought-out, cohesive policy that is coming from the executive office,” said Christopher L. Sagers, an antitrust professor at Cleveland-Marshall College of Law.

Instead, the diverging decisions reflect an effort by different agencies trying to come to grips with a radically transformed media and telecommunications landscape, one where Silicon Valley companies are suddenly powerhouses in content creation, and traditional media companies exert vast influence over how information flows across the internet.

“We’re definitely getting mixed messages from the administration,” said Larry Downes, project director for the Center for Business and Public Policy at Georgetown University.

The Justice Department’s decision to intervene in the AT&T deal was the more surprising of the two developments this week. Many antitrust experts believe that the government’s case against the deal is weak, because it is a so-called vertical merger, bringing together two businesses that do not compete directly with each other.

But the lawsuit is a sign that the Justice Department is beginning to think about antitrust enforcement in fundamentally new ways.

The decision by the F.C.C. to roll back net neutrality rules was less surprising, but has equally far-reaching implications. With less regulation, big internet providers will be able to charge more for their services, extract new fees from websites and block content.

“The F.C.C. is saying that they’re going to give up any legal authority over regulating high-speed internet,” said Susan Crawford, a professor at Harvard Law School. “They’re handing the power to choose winners and losers online to about five companies.”

Despite the seeming irreconcilability of the moves by the Justice Department and the F.C.C., some see a common narrative in the two decisions.

“They’re both defense strategies against Silicon Valley,” Mr. Wu said.

By rolling back net neutrality, the government is giving old-school media companies like AT&T and Comcast more leverage over companies like of Netflix, Google and Facebook that are increasingly becoming their competitors. And by challenging the AT&T merger with Time Warner, the Justice Department could be laying the groundwork for a new approach to antitrust enforcement that could be used to go after big technology firms.

Barry Diller, the media mogul and chairman of IAC, which owns a host of websites including Match.com and Vimeo, cited the power of tech companies in expressing exasperation at the Justice Department suit.

“If you think AT&T has too much market power because of distribution, tell me what happens if you are Facebook and Google, which have unbelievable concentration in distribution,” Mr. Diller said. “How would you ever be able to get a content addition to Google?”

And there is another school of thought suggesting that more vigorous antitrust enforcement might have obviated the need for net neutrality rules in the first place.

If regulators had been stricter about ensuring robust competition among internet service providers over the years, the theory goes, big firms like AT&T would not be able to operate in ways that harm competition.

“Net neutrality was a distant-second-best remedy,” Mr. Sagers said. “If we could have competition in internet service provision, that would have been way better than relying on the F.C.C.”

Even if the Justice Department succeeds in blocking AT&T’s deal for Time Warner, the opportunity to use antitrust enforcement as a means to give consumers more choice among internet providers has likely passed. And now, by unwinding net neutrality rules, Mr. Sagers said, the Trump administration will make it easier for big companies like AT&T to maintain the already enormous power it has amassed through earlier consolidation.

“If you want to have a monopoly,” he said, “the government can be your best friend.”

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