Sorry for the length of this one :}
Expecting a Fight, AOL and Time Flex
Lobbying Muscle...
By John Mintz and John Schwartz
Washington Post Staff Writers
Saturday, January 22, 2000; Page E01
America Online Inc. and Time Warner Inc., facing scrutiny of their
proposed $183 billion merger by congressional committees, federal
regulators and antitrust enforcers, have been signing up teams of lobbyists
to minimize any political damage that might complicate their plans.
While AOL's acquisition of the giant media company is expected to
eventually pass antitrust muster, executives from both companies have
been alarmed by the pointed questions being raised by some members of
Congress, industry officials said, including concerns poised by two
powerful Senate committee chairmen running for president. The firms fear
a rocky reception on Capitol Hill could further erode their stock prices and
damage their bargaining position on other complex regulatory matters.
AOL, which is based in Dulles and is the nation's largest provider of
Internet services, is retaining, among other people, attorney Ivan Schlager,
who recently joined the firm of Skadden Arps after leaving his job as chief
minority counsel for the Senate Commerce, Science and Transportation
Committee. Time Warner is getting help from attorney Louis Dupart, who
just joined the firm of Fleischman & Walsh, leaving his position as staff
director of the Senate Judiciary Committee's antitrust subcommittee.
It so happens the AOL-Time Warner transaction is expected to face tough
questions before both those full Senate committees.
Sen. Orrin G. Hatch (R-Utah), who is running for president, was asked
about the deal the very night it was announced, by one of his opponents,
Sen. John McCain (R-Ariz.), at a GOP presidential debate. "I'm very
concerned about this latest merger," Hatch replied. "These are two of the
largest telecommunications companies in the world, if not the largest. . . . It
has to be looked at very carefully."
Days later McCain, who is the Commerce committee's chairman, used
almost identical language on NBC's "Meet the Press" in announcing
hearings of his own. "I'm very concerned about these continued mergers,"
he said. "It's got to be carefully scrutinized. . . . You reach a point at some
time where it's not good for the consumer and it stifles competition."
The industry officials said AOL and Time Warner fear a repetition of the
criticism that greeted executives from two other merging media companies,
CBS Corp. and Viacom Inc., in a Senate Judiciary hearing last October.
Sen. Mike DeWine (R-Ohio), who chairs Judiciary's antitrust panel, said
then that the $36 billion CBS-Viacom combination "seems somehow a
little bit ominous. . . . We need to be especially careful when we are
dealing with companies that provide information. . . . We must have
competition in the marketplace of ideas, and excessive concentration will
hinder that."
DeWine and other members of Congress express doubts about the
wisdom of allowing the creation of ever-larger media companies because
such action decreases the number of independent voices supplying news
and entertainment. He and Sen. Herb Kohl (D-Wis.) released a statement
that said the AOL deal could be "the beginning of the end of the Internet as
an effective counterweight to traditional media outlets."
Timothy Boggs, who heads Time Warner's Washington office,
acknowledged the two firms have their work cut out for them.
"We realize people have a lot of questions, and we're struggling to answer
them fast," Boggs said. "This is a great story, and we look forward to
telling it. . . . We need to reassure people about the independence of our
journalists, something we've always had a tradition of in Time Warner."
"There are going to be a lot of questions," said George Vradenburg III,
AOL's senior vice president for strategic policy. "But we look forward to
answering them and don't foresee any obstacles."
Still, top executives from both AOL and Time Warner have spent a lot of
time on Capitol Hill in the last two weeks addressing the early concerns of
legislators and their staffs.
Immediately following the merger announcement on Jan. 10, AOL chief
executive Steve Case and Time Warner chief executive Gerald Levin
placed a battery of calls to senators and representatives, including McCain
and Hatch. Next month, the two executives plan to brief congressional
Democrats about the pending merger during a caucus retreat.
Time Warner or its predecessor companies have had a potent lobbying
presence in Washington for almost 20 years. AOL, repeating the practice
of others in the high-technology industry, was skeptical for years about
political involvement but threw itself into Washington lobbying in the last
two years. AOL now has about eight people in its in-house lobby shop, as
well as numerous outside firms--and now it's retaining several more.
Besides Schlager, AOL also is retaining other lawyer-lobbyists from the
same firm, including Antoinette Cook Bush, who also used to work for
Sen. Ernest F. Hollings (D-S.C.) on the Commerce committee; and
Robert Lighthizer, who was a top trade official in the Reagan
administration. Moreover, the company is retaining Jonathan Yarowsky of
Patton Boggs & Blow, who used to work for the House Judiciary
Committee.
Dick Wiley of Wiley Rein will represent AOL before the Federal
Communications Commission, as will the Fleischman firm. Longtime
representatives include the law firm Akin Gump.
Time Warner also retains Cravath, Swain & Moore, and Akin Gump, as
well as lobby firms including the Duberstein Group, Williams & Jensen, R.
Duffy Wall & Associates, and former congressman Tom Downey, a close
friend of Vice President Gore.
"They've hired some talented people who have relations with people on the
Hill," a Senate Judiciary panel staff member said. The two firms "want to
ensure things go smoothly, to create the right atmosphere" for their deal.
One matter that the companies' representatives acknowledge they need to
explain to political leaders involves an arcane area of communications
policy, called "open access"--an area where both firms virtually reversed
their previously held position following the deal's announcement.
The issue centers on the next generation of Internet service, the high-speed
connections offered by cable television companies. AOL had lobbied the
federal government and city officials throughout the country to get them to
require cable operators--such as AT&T Corp., which is buying up cable
companies nationwide so that it can offer high-speed service--to guarantee
that other Internet service providers like AOL will get unfettered access to
the customers served by their cable systems.
Now that AOL is buying Time Warner, which owns the country's
second-biggest cable network, AOL says it never savored forcing AT&T
to do anything--but AOL says it will voluntarily open its new cable lines to
competitors.
Time Warner previously had stood with AT&T on this bitter issue, but on
Jan. 10, when the deal with AOL was announced, it changed its stance,
saying it is in accord with AOL's plans to open its cable lines to any and all
Internet providers.
Many Internet service firms and consumer groups express doubts that
AOL will actually open up its cable systems to competitors, as AOL
claims it will--and this issue is certain to be fiercely debated in Congress
and at the FCC.
"Time Warner has made a major shift in its business plan" on open access,
said Boggs of Time Warner. "We'll have to show that our commitment to
open access is not just a pledge at a press conference," but is real.
AOL is continuing to pay its $100,000-a-year dues to a lobbying coalition
devoted to demanding AT&T open its cable network, but it likely will no
longer join in the fight in the same aggressive fashion, industry officials said.
It is dropping representation by some Washington firms at the same time it
hires new ones.
Time Warner will face many tough questions about the deal as it asks the
permission of the 3,400 communities where it owns cable franchises to
transfer contracts to the new merged company. Time Warner officials
expect that skeptics of all stripes will use these proceedings to try to wring
concessions from it--yet another front in the political war for the merging
companies.
Staff writer Ariana Eunjung Cha and staff researcher Richard Drezen
contributed to this report.
© Copyright 2000 The Washington Post Company
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