AT & T Case Summary

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This Washington Post article, published in January 2017, addresses the recent attempts by AT&T to acquire Time Warner’s ”massive libraries” of “lucrative franchises” through a mammoth AT&T/Time Warner acquisition deal that is currently under review by the Federal Communication Commission (FCC). Gunning for such inventory as the “Harry Potter” and “Batman” series and much of the “HBO” and “CNN” content currently owned by Time Warner, AT&T is arranging to assume control of these assets to further expand their market share holdings of the pay-TV market. Already “[the] nation's largest pay-TV provider”, AT&T’s acquisition would allow a massive transfer of market power in the zero-sum game oligopoly. Addressing the unsettling revelation that …show more content…

Due to the high barriers of entry present in oligopolies, the pay-TV firms operate in a zero-sum-game environment ―where the amount of market shares gained by one firm is proportional to the amount lost by another firm in the market. Due to the limited number and sheer size of the firms in an oligopoly, mergers and acquisitions tend to result in great shifts of market power and industry influence. The end goal of AT&T’s acquisition is to accrue a sufficient level of market power in order to dictate, to a higher degree than before, shifts in the demand, marginal revenue, marginal cost and average total cost curves of AT&T’s individual costs and revenue graph that would increase the firm’s …show more content…

AT&T will have the ability to shift both their marginal cost (MC) and average total cost (ATC) curves down through the utilization of Time Warner’s former factors of production, further increasing AT&T’s profit. As modeled on the second attached individual costs and revenues graph for AT&T, the downward shift of MC and ATC will have no effect on the quantity produced (Q1), but will reduce cost levels from P1 to P2. This reduction of MC and ATC will raise the profits earned by AT&T in both the long and short-run, allowing for AT&T to engage in future acquisitions, expand funding for research and development of products, or increase their advertising efforts in order to increase brand