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AOL/TW Merger Inching Towards Resolution

The Federal Trade Commission and officials from Time Warner-America Online, Inc., may have brought the merger process one step closer to completion, it was reported Monday, with proposed open-access concessions.

But whether the concessions, reported by the Wall Street Journal in its electronic edition Monday, will appease the FTC's five-member approval board is another story. A tentative agreement, which could be reached as soon as this week, still requires the blessing of the board members.

According to sources close to the talks, FTC staffers have made progress in its efforts to get Time Warner to open up the cable network to rival Internet service providers, at least one in every city Time Warner cable Internet service is available, and more in bigger markets.

FTC officials aren't betting all their money on merger talks, and continue to draft a court order blocking the merger if talks fail. AOL/TW officials aren't required to continue talks with FTC staffers and can force the FTC commissioners to make a decision immediately. Regulators are using the court order as a bargaining chip with AOL/TW officials to keep them at the table.

Several issues, small but critical, stand between regulators and AOL/TW officials looking finalize the merger. Besides open cable access, government officials are looking at the proposed combined company's billing practices, in light of a proposed term agreement sheet sent to ISPs earlier this year.

Similar to its existing cable TV contract, the agreement requires ISPs to ante $50,000 up front and hand over 75 percent of its monthly cable access revenues to the cable operator. The term sheet raised a furor with ISPs and forced the FTC to look closer at Time Warner's contract process.

Still, Time Warner and AOL officials remain confident, maintaining the merger will still go through by the end of the year.

The merging companies are hoping for a quick resolution by the FTC. The presidential elections, being held Tuesday, could stall the merger process if the incoming president decides to name a new chairman.

Both candidates have been unspecific when pressed about open cable access or Internet regulation in general, calling open cable access necessary in principle but not siding on one side or the other.

In a speech to the International Telecommunications Union Oct. 13, Democratic hopeful Al Gore stated his administration has made open access a priority since the signing of the Telecommunications Act of 1996. The speech focused on telephone open access, not cable access, so it is unsure whether Gore would continue on in that vein.

Bush has made no policy guidance in regards to Internet regulation, outside the Internet tax moratorium.