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RealTime IT News

Like Gore And Bush, AOL Awaits Its Fate

The focus of the nation and world may be on Thursday's Florida vote recount, but there's another high-stakes drama being dragged out in the city where our next president will reside.

Federal regulators planned to meet Thursday afternoon to vote on the merger of access provider America Online and entertainment industry giant Time Warner. Now it looks like last-minute disputes over settlement terms will cause the Federal Trade Commission to postpone its decision on the deal, which was announced 10 months ago.

FTC action on the proposed merger already had been pushed back from the original Oct. 27 deadline as talks continued.

The reason for the foot-dragging is simple: The feds keep raising the bar on AOL and Time Warner.

Regulators want AOL, the world's largest Internet service provider, and Time Warner, the nation's second-largest cable operator, to guarantee rival ISPs access to Time Warner's cable lines. A fair enough request, given the competitive advantages each company brings to the table.

But in trying to ensure that AOL and Time Warner comply, the FTC seems to be going beyond mandating an "open access" policy to dictating specific terms. For example, regulators reportedly are demanding that AOL treat competing access providers equally, rather than allow the company to negotiate agreements based on considerations such as traffic and bandwidth.

Further, some FTC members reportedly are insisting that at least one competitor be signed to an access deal even before AOL would be allowed to use the cable lines of its merger partner, thus prohibiting AOL from having first-mover advantage.

There's more. According the sources cited by the Wall Street Journal, some commissioners insist that once AOL launches cable-based service in any city, it sign access agreements with at least two other ISPs in the same market within 90 days.

In other words, every time AOL wants to do anything, it has to cut deals with at least three competitors, all on equal terms.

AOL officials rightly have argued that such requirements would put them at a heavy negotiating disadvantage, since competitors would be fully aware of the regulatory sword hanging over the company's head.

At some point you have to wonder if AOL and Time Warner can do anything to satisfy the FTC, short of offering some of their profits to competitors. And even if the FTC signs off, the Federal Communications Commission must next grant its approval.

I still think the merger will go through, despite the federal government's best efforts to jeopardize it. Until it does, however, AOL shares will remain under a cloud of anxiety and doubt. Not the best ingredients for a run-up.



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