How AT&T and Time Warner plan to take on FANG

AT&T's wireless network was central to the arguments that ultimately convinced Judge Richard Leon to rule in favor of AT&T and Time Warner.  AT&T told the court that the future of video is wireless and the future of wireless is video.

The carrier said that by teaming up with Time Warner it can successfully compete with companies like Facebook, Amazon, Netflix and Google, collectively known as FANG. 

"Facebook and Google's dominant digital advertising platforms have surpassed television advertising in revenue," Judge Leon wrote in his opinion. "Watching vertically integrated, data-informed entities thrive as television subscriptions and advertising revenues declined, AT&T and Time Warner concluded that each had a problem that the other could solve. Time Warner could provide AT&T with the ability to experiment with and develop innovative video content and advertising for AT&T's many video and wireless customers, and AT&T could afford Time Warner access to customer relationships and valuable data about its programming. Together, AT&T and Time Warner concluded that both companies could stop 'chasing taillights' and catch up with the competition."

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The Justice Department argued that AT&T and Time Warner could achieve their goals through a partnership, but the companies said a merger was necessary to overcome the "bargaining friction," that is now part of content acquisition. In short, AT&T wants to own the content and the carrier says this will lead to more traffic on its wireless network.

AT&T's wireless and pay TV customers add immense value to Time Warner's business model, the companies said. Right now the content creator is selling into a black hole because it does not capture data about the people who view its movies and TV shows. AT&T does capture some customer data, and together the two companies could use this data to create more targeted advertising around Time Warner's content.

Targeted advertising is the primary business of Google and Facebook, and as Judge Leon pointed out, these companies are now outselling traditional TV providers. These companies have enormous amounts of data, and acquire much of their content for free because it's created by users.

As a competitor, the new AT&T will bring high-end content and the network that delivers it to the customer. In the end, the network may be the most valuable piece because the so-called FANG companies cannot reach customers without the networks. That's why some industry observers have speculated that one of these over-the-top success stories will ultimately invest in a wireless network.