Lawyers for AT&T Inc. (T - Get Report) and Time Warner Inc. (TWX) grappled with the lead economic expert for the Department of Justice lawsuit to block their merger, in the U.S. District Court in Washington on Wednesday.

University of California Berkeley economist Carl Shapiro testified that AT&T would use the threat of a blackout of Time Warner networks such as CNN, TBS and TNT to extort higher content fees from pay-TV companies. Shapiro's economic model provides the teeth for the Department of Justice lawsuit, and lawyers for the defense attacked his assumptions about AT&T's leverage in hard-ball content negotiations with Comcast Corp. (CMCSA - Get Report) , Charter Communications Inc. (CHTR - Get Report) , Dish Network Inc. (DISH - Get Report) , Alphabet Inc.'s (GOOGL - Get Report) YouTube TV and others.

"They would be leaving money on the table," Shapiro testified, if AT&T and Time Warner didn't use their economic clout against pay-TV companies.

Defense counsel Dan Petrocelli of O'Melveny & Myers LLP, asked whether Dish Chairman Charlie Ergen, a notoriously tough negotiator, would pay even "a nickel more" more for Turner networks just because AT&T owned Time Warner. Shapiro's model suggests that a three-year deal for Turner content would cost Dish $270 million more after a merger, Petrocelli said.

"I am not trying to get inside the head of Mr. Ergen," Shapiro said, suggesting it would be "an uncomfortable place to be." His model reflects the incentives that AT&T would have to use its leverage and the benefits that the telecom's DirecTV satellite TV unit could reap during a blackout of a rival pay-TV company, the economist testified.

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