Report: FCC Staff Backs AOL-Time Warner Deal

Antitrust enforcers at the U.S. Federal Communications Commission (FCC) are ready to give a conditional green light to the merger between America Online Inc. and Time Warner Inc., according to a report published Thursday in the Washington Post newspaper.

According to the report, the FCC has completed a draft approval of the merger, provided the companies make high-speed Internet access over their cable television systems available to other providers. The FCC is looking for legally binding comments, the Washington Post said.

The FCC had no immediate comment on the report.

The "open access" rule would assuage the concerns U.S. Federal Trade Commission (FTC) officials have, that in markets where Time Warner operates cable systems, consumers could be forced to accept exclusively AOL-Time Warner-controlled content in order to get high-speed Internet access. [See "FTC Set to Block AOL, Time Warner Merger," Sept. 4.]The FCC is also concerned that Time Warner and AT&T Corp. -- the two largest providers of cable service in the U.S. -- could join into a partnership to create a monopoly. Furthermore, by adding the world's largest ISP (Internet service provider) to the mix, high-speed Internet access could face further market constraints.

Linking those three players "would create a powerful duopoly through which AOL/Time Warner and AT&T would have the ability and incentive to coordinate their cable deployment strategies," the Washington Post quoted the Sept. 8 staff FCC draft as warning.

In June, when the FCC approved AT&T's acquisition of cable company MediaOne Group Inc. for US$44 billion, the company also got MediaOne's 25.5 percent stake in Time Warner. [See "AT&T Closes MediaOne Deal," June 15.]AOL and Time Warner announced plans in January for a stock-swap merger valued at the time at $350 billion. Various media reports now value the deal at $183 billion. The combined company, to be called AOL Time Warner Inc., would be expected have revenue of about $40 billion a year and a global subscriber base of more than 100 million.

At an FTC hearing in late July, executives of the two companies assured regulators the merger would be good for consumers and would not harm competition. "We are confident that together AOL and Time Warner will build a company to help take the Internet to the next level, connecting, informing and entertaining people around the world as never before," AOL Chairman and Chief Executive Officer Steve Case said at the time.

The European Commission (EC) has also expressed doubts that the merger would be compatible with fostering open competition in the European Union. The Commission's deadline for a ruling on the merger is late October.

The FCC's deadline for issuing its recommendation concerning the merger to Chairman William E. Kennard is Oct. 12.

AOL, in Dulles, Virginia, can be reached at +1-703-448-8700 or at http://www.aol.com/. Time Warner can be reached in New York at +1-212-484-8000 or at http://www.timewarner.com.

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