I'm saving this Wall Street Journal article about AT&T here because it's interesting and because I own several AT&T shares.

AT&T’s ‘South Park’ Argument. While cartoons mock Netflix as a content spigot, a Time Warner merger is no threat.

By Andy Kessler

March 18, 2018

The biggest antitrust trial since U.S. v. Microsoft begins Monday in a federal court in Washington. The Justice Department seeks to block the $108 billion merger between AT&T and Time Warner. But the government doesn’t stand a chance—like Wile E. Coyote chasing Road Runner off a cliff and ending up suspended in midair.

What may have started as a Trumpian jab at #FakeNewsCNN has tragically turned into a serious antitrust action. The Justice Department’s case stands on such modern foundations as Section 7 of the Clayton Antitrust Act of 1914, which can block mergers whose effect “may be substantially to lessen competition.”

The crux of the case is that AT&T’s subsidiary DirecTV, with its 21 million U.S. subscribers (about a fifth of the cable and satellite market), should not be combined with Time Warner’s HBO, with its 54 million U.S. subscribers. The result would be a “vertically integrated programmer” with the alleged ability to raise prices at will on other cable operators. It could even (horrors) withhold HBO’s “Game of Thrones” from DirecTV’s competitors.

I’ve got to admit, even four or five years ago, I might have agreed. The cable industry has abused geographic monopolies to raise prices almost since the first coaxial cables were strung on telephone poles. Comcast’s 2011 merger with NBCUniversal was potentially anticompetitive, which is why the government imposed 150 different conditions on it. But the landscape has changed since then. A lot.

If I were AT&T’s attorney, I’d introduce as evidence a clip from the “Franchise Prequel” episode of “South Park,” which makes fun of Netflix for funding so many new TV series. A Netflix employee answers the phone saying: “Netflix, you’re greenlit. Who am I speaking with? . . . Would you like a pilot or just go straight to an order of six episodes?”

Since “House of Cards” took off in 2013, Netflix has run amok, releasing an estimated 126 original series and films in 2016, and maybe 200 last year. That’s something on the order of 1,000 hours, or 40 full days, of binge watching. Some of these efforts are great, some are good, and most are just filler, like “ Bill Nye Saves the World.” But so what? The point is they are distributed on the internet, via cable modems or mobile phones. AT&T and Time Warner have little influence, and nobody—from ABC to HBO—has a lock on entertainment these days.

Netflix has 55 million American subscribers and, gulp, raised its prices in November. Netflix doesn’t license its shows to anyone else in the U.S.! Should the government break it up? By the way, that “South Park” episode is available on Viacom ’s Comedy Central, though Hulu’s 17 million subscribers can also watch it online.

Amazon Prime has something like 80 million subscribers in the U.S., and 26 million of them watch the company’s original content. Google’s YouTube is now offering streaming TV, basically a $40-a-month substitute for cable. Similarly, Hulu has Live TV and Sony has PlayStation Vue. All March Madness games can be streamed online. Consumers have choices.

And we’re just getting started. Worried about cord-cutting, Disneyhas paid $2.5 billion for a 75% stake in BAMTech, Major League Baseball’s streaming company. RBC analyst Steven Cahall suggests Disney could spend $15 billion a year on streaming shows. That partially explains why Mickey Mouse is chasing 21st Century Fox .

Or look at the raw figures. Programming is a $90-billion-a-year business. Both Fox and Time Warner spend around $8 billion on nonsports content. Netflix spent $6 billion last year and hopes to hit $8 billion in 2018. Amazon spends $5 billion. Where is the market dominance?

Apple has sold more than a billion iPhones and is spending $1 billion this year getting its feet wet with original programming. The company recently put up millions for two seasons of a show about, ugh, a TV morning show, produced and starring Reese Witherspoon and Jennifer Aniston. If anything, extreme competition has shifted the balance of power to actors—or, as some in Silicon Valley call them, meat puppets.

The AT&T antitrust case smells quite similar to the arguments for net neutrality, which also ignore real competition and emerging technologies. The feds are chasing ghosts. As they should be well aware, vertically structured companies tend to fall ill or die from natural causes—see General Motors , IBM and, well, AT&T. No one pays 25 cents a minute for long-distance calls anymore.

Still, I’m not sure why AT&T needs to get in bed with Hollywood, which year after year degrades the meaning of “Best Picture.” AT&T should instead return to a focus on technical excellence. I’d rather that it run fiber on every highway and byway in America than peddle mediocre sitcoms.

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I'm saving this very long Wall Street Journal article about the AT&T trial. Here it is:

https://www.wsj.com/livecoverage/att-time-warner-antitrust-case