Last week I gave an interview to NPR Marketplace and the conversation crystalized the question and answer of whether AT&T and Time Warner should merge. There is really only one answer. Yes. There are many different reasons. Let me explain a few of them with you.
First, the reason for this proposed merger is to help both AT&T and Time Warner prepare for the competition of tomorrow. Tomorrow looks much different than today. That means when considering this merger, we must look forward, not backward, at how the industry is changing. How technology is changing. How competitors are changing. How customer expectations are changing.
Companies that don’t prepare for tomorrow always struggle
Companies that don’t prepare for tomorrow, always struggle. Consider Motorola. They led the handset space for decades, until the 1990’s when they didn’t change quickly enough. That’s when they stumbled and are now at the bottom of the pack.
Nokia, Blackberry, and Palm took the lead for the next decade. They were strong companies, but they didn’t change quickly enough, so when the Apple iPhone and Google Android hit the marketplace, these three leaders fall to the bottom of the pack.
There is no such thing as standing still. Companies are either growing or shrinking. Companies face pressure to stay current and lead. If they don’t, they die. That’s right. Leaders die. That’s why so many leaders in the telecom space have been merging in recent years. That’s why AT&T and Time Warner want to merge. They want to continue to be strong. Continue to change and remain relevant.
If these companies were the first to make a move, that’s when regulators could look at them and decide whether to let this new path continue to unfold or block the transformation.
However, they are not the first. Or the second. There have been several major mergers in recent years setting up a completely different industry moving forward. Plus, new technology and new competitors are rapidly growing and threaten yesterday’s model. Plus, customers are already on board with this change. That’s why traditional cable TV and traditional telephone service is on the decline. That’s why this kind of change is necessary.
In changing industry, blocking one merger makes no sense
So, change is necessary for today’s competitors to continue to compete. Without change, the marketplace change wave will sweep over them, pass them by, and leave them behind in the dust. That’s one of many important why AT&T and Time Warner want to merge.
It would not be fair to block existing competitors who want to transform when others have been approved. It would not be fair to their investors, workers, partners, and customers. So, if a company that has been with us wants to continue to change and reflect the new marketplace trends to remain relevant and competitive, it makes absolutely no sense to block them.
Let’s take a closer look at how other mergers and new competitors are transforming the marketplace.
How the telecom industry is changing
Several years ago, AT&T acquired DirecTV. That was an important moment. AT&T expanded the company and began offering DirecTV NOW. This is an advanced TV service delivered over the Internet. This was very innovative and put significant pressure on their competitors in the pay-TV space.
Next, AT&T innovated and created a new category of service called wireless TV or mobile TV, which users love. This delivers pay TV to the smartphone or tablet, over the AT&T Mobility network, to any device, anywhere in the United States.
This innovation is very popular and is causing competitors to move in the same direction. Verizon says they will move in the same direction. T-Mobile USA recently announced they are moving in this same direction as well.
This is all good. This is the kind of innovation existing, creative competitors bring to the table. We want to continue to encourage more of this.
Public companies need to keep growing to keep shareholders
It’s important to remember that public companies need to continue to grow in order to keep their investors. Investors will move to another company if they cannot make money. That’s why the industry headed down this new growth path of iPhone and Android ten years ago. It created the next wave of growth for so many companies including the wireless carriers, app makers, new businesses like Uber and Lyft and so much more.
Also, suddenly telephone companies are now competing with cable television competitors. Today, customers can choose from all the competitors for all their services. That means AT&T, Verizon, Comcast, Charter, Altice and more. All these companies are rapidly growing in the same direction. So, while AT&T’s first-mover advantage was good for them, that is quickly evolving into an industry-wide shift.
Also, all of these competitors are now facing new competition from players they never competed with before. Companies like Amazon.com, Facebook, Google, Netflix, Hulu and more. These are companies that are offering new ways for users to get TV services.
This is an expansive opportunity for new players and a real threat to existing leaders and competitors.
Yesterday’s competitors face threat and opportunity
This threat needs to be met if yesterday’s leaders will be able to compete going forward.
There have been several other major mergers have also been approved over the last several years which threaten the entire industry. Every threat is also an opportunity for growth as long as the competitors are not tied down.
Comcast merged with NBC Universal. That means they offer cable TV, IPTV, pay TV, they own and offer NBC channels, they offer VoIP telephone and now they also offer Xfinity Mobile. This has put Comcast in an enviable position. They are one of the key leaders.
Verizon has merged with AOL and Yahoo. That means they have wireless, telephone, pay TV and content.
This is the direction the entire industry is heading. Networks have been acquiring content players. The next step, already underway is networks and content players are coming together and competing with each other.
The reason AT&T and Time Warner want to merge
That’s all AT&T and Time Warner want to do. They won’t be the first. Actually, they will be the third, with more to come. Other networks and content companies will continue to come together over the next several years. In fact, that’s why Comcast wants to merge with FOX.
The time to stop this next wave would have been years ago before it started. Now that this industry wide transformation is unfolding, it is only fair to let existing players merge and stay competitive with their new and old competitors.
They must be able to compete with existing competitors who have merged and change. They must be able to compete with new competitors who are quickly entering and changing the space.
If not, then we are punching these competitors in the gut and saying they should not be allowed to compete. That would not be good for employment or innovation. And no one has that right.
The industry continues to change and transform. That’s a good thing. Change and transformation as created not only new industry segments but also created new companies, new competition and more. This has benefited the marketplace, workers, investors, competitors and more.
Think about all the positive change and growth we have seen in the last decade thanks to Apple iPhone and Google Android creating this new smartphone segment. Before them, Blackberry lead the smartphone sector. At that point, they were only a business service and there were only a few hundred apps.
Today there are more than two million apps. That means countless companies have created unlimited opportunity for growth. That means it helps the economy in general, workers, investors, partners and more.
We don’t want to block transformation and growth. If we did, we’d still be driving the Ford Model T. Or worse, we’d still be riding on the horse and carriage. We would have no Internet or wireless phone service. That’s not who we are. We want growth and innovation.
What’s at stake with AT&T, Time Warner merger
This is what is at stake. We must embrace ground shaking, world-changing innovation. We must welcome not only new competitors like Amazon.com, Google, Netflix and more. At the same time, we must let existing leaders compete in this new marketplace going forward.
That’s not only fair to them, but we will all benefit from what this kind of competition brings to the marketplace. Remember, how AT&T acquired DirecTV, created DirecTV NOW and started the wireless TV wave.
This is what we can expect more of if we don’t tie their legs and keep them from competing. The choice is ours. That’s why we must approve the AT&T, Time Warner merger, and in fact every other similar merger that is coming.
Tomorrow is coming on fast. We must let every competitor continue to merge and to innovate. If we do, we will all benefit whether we be users, workers, investors, partners and more. If we stop mergers, we will be shortcutting our own future.
The post Kagan: Why AT&T and Time Warner should merge appeared first on RCR Wireless News.