U.S. worried AT&T buying Time Warner would hike costs for media rivals: source

WASHINGTON (Reuters) - The U.S. Justice Department is concerned that AT&T Inc’s proposed $85.4 billion acquisition of Time Warner Inc (TWX.N) would raise costs for rival entertainment distributors, a source familiar with the matter told Reuters on Thursday.

If the firms merged, the antitrust regulator believes it would also inhibit the ability of “innovative new technologies to deliver content to consumers,” the source said.

The Justice Department has demanded AT&T divest its DirecTV unit or sell Time Warner’s Turner Broadcasting unit, which includes news company CNN, in order to approve the deal, sources told Reuters on Wednesday.