America Online is on deck in more ways than one.
For starters, the company is fresh off the rumor-mill that has U.S.
trustbusters giving the Internet service provider’s Time Warner
takeover rubber glove scrutiny. FTC regulators are
wrestling over whether to force the pair to put in writing their promises
to allow rivals open access to Time Warner’s cable pipes.
From a consumer standpoint, the potential for rampant abuse is almost a
given. Time Warner has already shown itself to be a corporate bully in more
than a handful of recent examples. In May, Time Warner blatantly showcased
its thug tactics when the media giant yanked Disney’s ABC television network off the air in a half dozen major markets
for nearly a day and a half.
The impasse stemmed from stalled negotiations between the two companies,
with Disney demanding that Time Warner carry its Disney Channel as part of
the basic cable programming package. In addition, the Mouse lobbied for
broader coverage for its sports channels that include ESPN2 and ESPN
Classic. Time Warner initially played hardball, blacking out ABC
programming to more than 3.5 million cable subscribers. Only after the
stunt blew up in its face and escalated into a public relations nightmare
did Time Warner relent.
The fallout from that fiasco had lawmakers and consumers alike giving more
scrutiny to a deal between Time Warner and America Online. And with AOL
far-and-away the largest on-ramp to the information superhighway, and Time
Warner the number one media conglomerate in the world, the Federal Trade
Commission has more than enough justification for pause over the mega-merger.
AOL and Time Warner have been scrambling to make concessions to appease
concerns by both regulators and rivals. In response to Disney’s
highly-publicized opposition to the merger, Time Warner last week bought
and paid for its most vocal heckler’s support of the deal, curiously
agreeing to almost all of Disney’s original demands that caused such a stir
only five months earlier. Not coincidentally, almost overnight, Disney has
softened its position over the AOL-Time Warner marriage.
Earlier this month, AOL-Time Warner also gained the European Commission’s
blessing, after agreeing to back out of Time Warner’s pending merger deal
with EMI Music. Despite successfully navigating regulator’s best
efforts to dampen enthusiasm over the deal, AOL-Time Warner still faces its
toughest test in the U.S., where things are looking cloudier than ever.
On a bright note, investors can look forward to rosy earnings from both
companies this Wednesday. In the battered-down tech sector, America Online
should provide a much-needed boost to investor confidence when it delivers
its Q3 results. Consensus forecasts are calling for the ISP to report $0.13
per share, but savvy armchair investors know to expect AOL to weigh in
ahead of estimates by at least a penny.
Any questions or comments, love letters or hate mail? As always, feel
free to forward them to kblack@internet.com.
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