March 27, 2018 / 11:12 PM / 4 months ago

At Time Warner trial, Dish executive says AT&T arbitration offer not sufficient

(Reuters) - A proposal AT&T (T.N) made to the U.S. government last year to avoid going to trial over its $85 billion deal to buy Time Warner Inc TWX.N would not sufficiently protect competitors, a Dish executive testified on Tuesday.

An AT&T logo is pictured in Pasadena, California, U.S., January 24, 2018. REUTERS/Mario Anzuoni

The U.S. government is seeking to stop the $85 billion deal, arguing that it would hurt consumers because AT&T, which owns pay TV service DirecTV, would have more leverage to raise prices by owning Time Warner’s Turner networks, which include CNN, TBS and TNT.

Tuesday’s testimony was the third day of the trial in U.S. District Court in Washington, D.C. that is due to last six to eight weeks.

AT&T proposed that for seven years it would submit to third-party arbitration any disagreement with distributors over the pricing for Time Warner’s networks and promise not to black out programming during arbitration.

A screen shows the current price of Time Warner shares, above the floor of the New York Stock Exchange, shortly after the opening bell in New York, U.S., November 15, 2017. REUTERS/Lucas Jackson

However, such concessions would not address the risks to companies like Dish because the language is vague and it is unclear who would have the expertise to arbitrate, said Warren Schlichting, group president of Dish’s Sling TV, in his second day of testimony.

“It’s a high-risk proposition to put your business in the hands of an arbitrator who may or may not understand your business,”

Also, HBO was not part of that proposal, which is a huge issue given that one in five of Dish’s customers subscribe to HBO, Schlichting said.

On cross examination, AT&T lawyer Daniel Petrocelli pointed out that Dish had asked the Justice Department to impose the arbitration arrangement as part of the Time Warner deal.

Under the proposal, the arbitrator would look at comparable services and what they pay for programming at “fair market value,” which Schlichting said was too vague.

“My reading is there is nothing preventing them from pushing more networks on us,” he said, meaning forcing distributors to carry networks they do not want. He noted that Dish’s Sling online streaming service tries to keep costs low by offering fewer networks.

U.S. District Judge Richard Leon asked Schlichting if Dish has data to prove that certain networks are not popular with viewers. When Schlichting said Dish does have that data but it does not affect negotiations, Judge Leon showed surprise.

Before the trial on Tuesday, the judge held closed talks with attorneys about what testimony Schlichting could give

in open court.

The U.S. Department of Justice called Turner CEO John Martin as a witness late in the day, and his testimony will continue Wednesday.

Reporting by Jessica Toonkel; Editing by Cynthia Osterman

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