RealTime IT News

It's Official: Time Warner Hitched to AOL

AOL Time Warner Inc. Friday began officially trading on the New York Stock Exchange under the AOL ticker symbol following the Federal Communications Commission's Thursday evening decision to conditionally approve the merger and create the largest media juggernaut in history.

In a 3-2 vote, the FCC approved the $106.2 billion deal, though it placed restrictions on what it called "advanced instant messaging-based high-speed services" (AIHS) -- IM-based videoconferencing for instance -- and also required the company to allow consumers to have their choice of ISPs carried on Time Warner's cable lines without being pressured to subscribe to AOL's service.

Specifically, before AOL Time Warner can offer AIHS using its broadband facilities, it must either file a petition demonstrating that it has implemented a standard for server-to-server interoperability of names and presence directory (NPD)-based services, or it must file a petition demonstrating that it has entered into written contracts providing for server-to-server interoperability with significant, unaffiliated, actual or potential competing providers of NPD-based services. Finally, the company has the option of seeking relief from the condition by filing a petition demonstrating the condition no longer serves the public interest.

In addition to requiring AOL Time Warner to allow customers a choice of ISPs, the commission's conditions required the company to permit each ISP using its lines to determine the content of its subscribers' first screens and that it cannot require ISPs to include specified content or links on those screens. It also prohibited the company from entering into any agreement with AT&T -- the largest cable company in the U.S. -- that gives AOL Time Warner exclusive access to any AT&T cable system in order to offer high-speed Internet access service. It also prevents the company from entering into any agreement with AT&T which affects AT&T's ability to offer any rates, terms or conditions of access to ISPs not affiliated with AOL Time Warner.

"The conditions we impose today are forward-looking and fair," FCC Chairman William E. Kennard said Thursday. "They preserve the openness of the Internet. They protect consumers and avoid heavy-handed regulation by using a narrowly-tailored market opening approach. And they ensure that neither AOL Time Warner nor a government agency will pick winners and losers in this dynamic marketplace."

Kennard said the commission's decision was very much focused on the two companies at hand, and should not be seen as a blueprint for further mergers.

"This decision is confined to its unique facts," he said.

Not all of the commissioners were pleased with the FCC's ruling. Commissioner Harold Furchtgott-Roth supported the grant of the license transfer applications the companies needed to complete the merger, but said he could not support any other aspects of the order -- including the FCC's conditions -- because the commission's role is not to pass on mergers.

"Unfortunately, the commission in this order continues to engage in just this sort of "merger" review," Furchtgott-Roth said. "The overwhelming bulk of this document has little, if anything, to do with the proposed transferee's use of the CARS licenses that are the jurisdictional object of this proceeding. Instead, the order focuses on the transferee's various lines of Internet business, including instant messaging and interactive television. And it analyzes those business activities to see whether the entities' future conduct might "impair or frustrate the objectives" of the act. At the end of the day, the commission has speculated about as yet undeveloped facts that are only tangentially related to license usage, and then applied to that conjecture a standard of review that is virtually unknowable ex ante. As I have said before, this approach is funda