FCC Gives AOL Time Warner A-OK

Exactly 366 days after America Online announced its intent to acquire old media, federal regulators unanimously agreed to let the deal stand—with a few conditions and a watchful eye toward the future.

by ISP-Planet Staff [January 12, 2001]

Internet service giant America Online Inc. late Thursday leapt over the final regulatory hurdle to acquire Time Warner Inc. by receiving conditional approval of the deal from the Federal Communications Commission. Officially dubbed AOL Time Warner Inc., the merged firm possesses combined revenues totaling more than $30 billion a year.

However, the commissioners voted 3-2 to place restrictions on the merged company's instant messaging (IM) system when it operates over Time Warner's cable lines and that rival ISPs must have access to the firms cable pipeline.

In a statement, FCC Chairman William Kennard said "These conditions are designed to protect the open competitive nature of the Internet."

After months of internal discussion at the federal agency, the commissioners agreed to approve the AOL's $106.2 billion purchase of the media and cable conglomerate, which creates an unparalleled company spanning television, film , print and Internet mediums.

Time Warner operates the second-largest cable system in the U.S. and publishes magazines like Sports Illustrated, People, and Time. AOL has nearly 29 million Internet subscribers worldwide, including 2.6 million CompuServe members.

The two companies won antitrust approval from the Federal Trade Commission on Dec. 14 last year only after agreeing to share cable delivery systems with ISP rivals before AOL could launch its own services over the same network.

Under the conditions adopted by the FCC, the companies are still required to allow consumers to have their choice of ISPs that are carried on Time Warner's cable lines without being pressured to subscribe to AOL's service. Additionally, if AOL Time Warner launches instant messaging services across its high-speed cable pipeline, it will have to make it interoperable with rival instant messaging services.

FCC Commissioner Harold Furchtgott-Roth said he opposed the regulatory conditions applied to the merger approval.

"The commission has speculated about as yet undeveloped facts that are only tangentially related," Furchtgott-Roth said.

But the transfer of cable broadcast licenses from Time Warner to the merged AOL Time Warner is going to receive a detailed review by the FCC, even thought it will not impose conditions on interactive television at this time. Instead, the Commission plans to hold a broad inquiry into the convergence of emerging technology.

Naturally, AOL chiefs were quick to celebrate the moment. Steve Case, AOL Time Warner chief executive officer, said this is an historic moment in which new media has truly come of age.

"We've always said that America Online’s mission is to make the Internet as central to people's lives as the telephone and television, and even more valuable, and this is a once-in-a-lifetime opportunity to turn this promise into reality," Case said "We're kicking off the new century with a unique new company that has unparalleled assets and the ability to have a profoundly positive impact on society.

"By joining forces with Time Warner, we will fundamentally change the way people get information, communicate with others, buy products and are entertained—providing far-reaching benefits to our customers and shareholders," Case added.

Gerald Levin, second in command of the merged firm, said the strategic combination with AOL accelerates the digital transformation of Time Warner by giving its creative and content businesses the widest possible canvas.

"The digital revolution has already begun to create unprecedented and instantaneous access to every form of media and to unleash immense possibilities for economic growth, human understanding and creative expression," Levin said. "AOL Time Warner will lead this transformation, improving the lives of consumers worldwide."

But not everyone else is cheering the deal forward. MessageVine, Inc., IM solutions provider quickly condemned the FCC decision approving the merger without imposing conditions forcing AOL to immediately open its instant message service all rival services.

Eli Efrat, MessageVine chief executive officer, said the decision does little to advance the course of progress and innovation.

"The decision continues to block the free flow of information among consumers in the United States and around the world,'' Efrat said. "We are committed to challenging the decision through our work with IMUnified and with the IETF in an orderly and professional manner to achieve interoperability.''

IMUnified, a recently formed coalition of leading technology and instant messaging companies, was created to promote wholly functional interoperability standards for Internet users. Members include AT&T, Excite@Home, MSN, Odigo, Phone.com, Prodigy, and Yahoo!.

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	[Dec. 14, 2000]	FTC Approves AOL, Time Warner Merger with Hefty Restrictions
	[Oct. 2, 2000]	Did Time Warner Lie?
	[July 27, 2000]	AOL, Time Warner Make Merger Case Before FCC