AOL-Time Warner, No Slam Dunk

According to reports coming from the Washington Post this weekend, loose
lips close to the America Online and Time
marriage say the Federal Trade Commission may
be prepared to block the proposed merger. The two sides are at an impasse
over language related to a guarantee to allow rivals access to Time
Warner’s fat pipes. Apparently, government trustbusters don’t want empty
promises – they want it in writing.

Things were starting to look up for the billion-dollar mega-merger, when
earlier this month, European Union antitrust officials finally agreed to
back the deal. EU regulators were previously prepared to throw up
roadblocks to an AOL-Time Warner merger because of the media giant’s
existing merger plans with British-owned EMI Group that would create one of
the largest music publishers on the planet. Time Warner and EMI made a
number of concessions to win approval, including the sale of EMI’s flagship
Virgin Records label.

In the U.S., the FTC has reservations over AOL-Time Warner’s consistent
foot-dragging when it comes to making a firm commitment to allow
competitors onto its high-speed cable infrastructure. Late last month, the
number two Internet service provider, Earthlink ,
complained about Time Warner’s hardball negotiating tactics. The ISP said
Time Warner demanded the ability to set prices for Earthlink’s service as
well as the lion’s share of its advertising revenues.

AOL and Time Warner have been long on promises, but both have begged
regulators not to make those same promises legally binding as a condition
of approving the merger. The reasoning behind AOL-Time Warner’s persistent
hedging is all-to clear according to Earthlink’s vice president of law and
public policy. “They’re taking with the other hand by trying to impose on
us financial terms that would make it difficult, if not impossible, for us
to offer Internet service. Unfortunately, what we’ve seen over the last
seven months since then, in negotiations with Time Warner to put these
words into action, we’ve found that in some respects they haven’t been
living up to their word.”

A spokesman for Time Warner wasted little time back-peddled saying,
“Nothing in our conversations should be taken as a final proposition. Time
Warner Cable is committed to working creatively with Earthlink and others
in the ISP community to provide consumers the choices they want in cable
Internet service.” And anyone who believes that double-speak, needs to
adjust those rose colored glasses. By the looks of it, the FTC is doing
just that.

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