Quick Merger Decision By FCC Likely

America Online, Inc., and Time Warner, Inc., officials Wednesday reiterated their belief the Federal Communications Commission will approve its merger by the early days of January.

Dave McClure, U.S. Internet Industry Association president, agrees, and said that despite the fact that there are only 10 days left in December and a commission in the transition, a quick merger decision is likely.

“There’s every indication from the sources we have at the FCC that a decision will be made by the end of the year,” McClure said.

The statement comes less than one week after the Federal Trade Commission gave its seal of approval to AOL’s $109 billion buyout bid. Approval came at a cost, however, with stringent concession strings attached to the merger.

Staffers are also waiting to see who President-elect George W. Bush selects as the new FCC chairman. The delayed voting process has pushed back the timetable on many of the appointments the president-elect needs to make.

Commissioner Michael Powell is the hands-on favorite for the post, and has already made his feelings clear when it comes to government intervention in the marketplace. Powell, son of Secretary of State-elect Gen. (Ret.) Colin Powell, met with Bush earlier this month to discuss the possibility of heading up the FCC.

At a speech recently to the Progress and Freedom Foundation, Powell said the FCC should not be in the business of making the regulations, but enforcing them. The focus, he said, should not be on making pricing competitive, but fostering innovation in the marketplace.

William Kennard, current FCC chairman, has come under increasing fire for his policy decisions that have led to a stagnant telecommunications market.

Research firm Dataquest, Inc., a unit of Gartner Group, Inc., agrees with that assessment and claimed the Bush presidency will spur a growth in deregulation.

Ron Cowles, Gartner Dataquest’s worldwide telecommunications principal, said the FCC in the past has bungled telecommunications policy and said the Bush presidency will likely push the commission in the right direction.

“Each time the FCC has attempted to seize state regulatory authority or to dabble in local exchange offerings, the result has been the same: a failed policy that has held back the development of the telecom industry and has engendered a contentious, polarized market,” Cowles said. “A Bush presidency is not likely to repeat the sins of the past, giving more weight to states rights in regulation and trusting market factors to stimulate industry.”

In the case of AOL and Time Warner, under fire by many consumer groups for its decidedly unfriendly stance towards open access, it is unlikely Powell would then require additional measures beyond what the FTC has already imposed.

The FTC has vowed to become a consumer watchdog in every town Time Warner offers its Internet services. Before AOL can set up cable Internet services on Time Warner’s cable, another ISP must already be signed up and another two competitor 90 days afterwards.

Another major concession wrung by the FTC prevents AOL and Time Warner from interfering with content passed down the cable pipe, and forces AOL to continue offering digital subscriber line service

According to McClure, Kennard and the FCC have already dropped the ball when it comes to regulating the cable industry. In 1999, it rubber-stamped the merger of AT&T and Media One, creating the largest cable operator in the U.S., McClure said, with little thought of the ramifications. Later concessions by the U.S. Department of Justice were imposed on the merger.

The Internet association president also thinks the FCC is unsuited to make a decision on the fate of AOL’s instant messaging, which competitors say should be opened up for everyone.

“There’s some real question as to how the government should regulate instant messaging,” McClure said. “Our organizatio

n feels the marketplace is capable of handling this on its own. I think what you’ll see in a Bush presidency is that the best the government can do is take a step back on regulation.”

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