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RealTime IT News

AOL Acquisition Stalled by Regulatory Check Ups

Ruination rumors surround the America Online Inc. and Time Warner, Inc. mega-merger as regulators on both sides of the Atlantic wrestle with the gargantuan deal.

Yesterday, the The Washington Post reported that U.S. antitrust officials may ask America Online to sell its $1.5 billion stake in satellite giant Hughes Electronics Corp. before they would approve its takeover of Time Warner .

Both AOL and Federal Trade Commission attorneys remain mum about the unnamed sources murmuring that the Internet-media marriage may be nixed by the FTC.

The Commission's lawyers reportedly contend that the issue of "open access," which plagues the merger review at the Federal Communications Commission, should not be limited to coax-bound Internet services.

AOL's wired and wireless broadband initiatives remain at the mercy of continued regulatory scrutiny, even though the online service provider is continues to recruit Independent Internet services providers to join them in sharing coax-based broadband services.

At risk is AOL's $1.5 billion investment in the satellite subsidiary General Motors Corp. . America Online and Hughes began beta-testing the satellite-based high-speed Internet access in June. The two firms originally expected to offer Hughes' satellite service to AOL's 26 million global online subscribers this fall.

The broadband service in the sky beats at the heart of America Online's duly dubbed AOL TV and AOL-Plus high-speed Internet services rescheduled for launch in 2002, as well as AOL's recent litany of Latin American investments.

The top Internet access provider in the U.S. is in a high-stakes race to beat chief rival Microsoft Corp. to market in satellite-based services. Microsoft is experiencing manufacturing delays in delivering the set-top boxes that would feed bandwidth-hungry consumers with downloads speeds more than 14 times faster standard computer modems.

Microsoft invested $50 million in a joint venture with No. 2 satellite broadcaster EchoStar Communications Corp. and Gilat Satellite Networks Ltd. to provide Internet access and TV programming under its WebTV brand.

As if FTC and FCC regulatory examinations were deficient, the European Union plans to hear what AOL and Time Warner chief executives have to say about the merger Thursday in a formal hearing on the deal.

It's no European holiday for Time Warner, whose joint venture between music subsidiary Warner Music Group and EMI Group is set for EU review on Wednesday.

The European Commission is in the process of conducting an extended antitrust probe of the planned mergers, but refused to comment as to whether it may block or restrict linkage of Time Warner with EMI and AOL.

In an earlier statement, the European Commission said they were concerned about the impact AOL's vertical integration of Time Warner companies could have on competitors in the region.

Back on this side of the "Big Pond," a U.S. House Commerce subcommittee announced Friday that it would hold a hearing next month to review interactive television products being rolled out by America Online.

Rep. Billy Tauzin