AT&T CEO Randall Stephenson brought up the new offering, called AT&T Watch, during testimony in an antitrust trial, according to CNN. Stephenson was on the witness stand to defend AT&T's proposed acquisition of CNN parent Time Warner, a merger the US Justice Department .
The Justice Department's main argument against the merger is that it will lead to higher prices for consumers and hurt competition in the pay-TV market. AT&T argues the opposite will occur, with Stephenson citing Watch as evidence that the company doesn't want to stifle innovation.
Watch, a so-called skinny bundle, offers consumers fewer channels, thus costing less than a traditional cable package. Because Watch won't include sports channels, AT&T will be able to offer the service for $15 a month, compared with the $35 a month for AT&T's DirecTV Now streaming video service.
Stephenson's revelation apparently stunned observers and sent reporters scrambling. AT&T spokespeople were also surprised by the timing of the announcement, CNN reported.
AT&T didn't immediately respond to a request for comment, but a spokesman told CNN that the service is expected to launch in the "next several weeks" and be "available to anyone regardless of who they get wireless or broadband service from." The service will be free customers of AT&T's unlimited wireless service.
The trial is one of the. The fate of the deal could have ripple effects on future agreements between internet service providers and media companies, as well as affect what streaming services look like in the future.
Antitrust experts say a win for the government could have a chilling effect on other so-called "vertical mergers," in which the companies merging don't directly compete against each other, but combined could exert market power over competitors.
The case will also play a role in how the streaming video market will shake out. A win for the government will likely mean more over-the-top streaming services, whereas a win for AT&T could result in streaming content being more tightly controlled by big pay-TV distributors, said one expert.
CNET's Marguerite Reardon contributed to this report.
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