Robert, and Thread......From upcoming Monday's (12-7-98) Investors Business Daily, article on AOL...Fed approval is not going to be easy...ISP companies doing business w/NSCP are complaining to Feds...Ralph Naders group is complaining to Feds...Even SUNW's rivals are complaining....Why?---Because if approved AOL is destined to become a virtual POWERHOUSE (My comments).
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AOL MUST STEP CAUTIOUSLY AMID TODAY'S MERGER MANIA
Date: 12/7/98
Author: Doug Tsuruoka
America Online Inc. says it wasn't counting its Netscapes before the deal was hatched.
AOL stunned the computer world last month when it said it will buy Netscape Communications Corp. in a $4 billion deal that also involves Sun Microsystems Inc.
Antitrust lawyers don't see any big regulatory hurdle for the deal. Though it combines two of the largest Internet companies and transforms the face of online services, it also creates a fierce rival for Microsoft Corp.
''It's reasonable to assume it will be allowed to happen,'' said Bob Skitol, an antitrust lawyer with Drinker, Biddle & Reath in Washington, D.C.
Even with Netscape, AOL doesn't have a monopoly on the Net. It must compete against companies such as Yahoo Inc. and Microsoft.
Not that the deal necessarily will have clear sailing. Some critics and issues have emerged.
AOL is on guard. Observers say Dulles, Va.-based AOL has started a strong, behind-the-scenes effort to educate the public about what the deal means for the future of the Web and electronic commerce.
AOL-Netscape is drawing even more attention than normal because it comes amid a series of mega-mergers. Last week, Exxon Corp. said it would buy Mobil Corp. for about $76 billion, the biggest merger ever. And on Nov. 30, Deutsche Bank AG said it would buy Bankers Trust Corp. for some $10 billion.
Moreover, the Justice Department is in a well-publicized antitrust trial against Microsoft.
In this climate, AOL says it'll be cautious. The company says it expects to complete the Netscape deal by March. Spokespersons say AOL and Chief Executive Steve Case won't say much about the deal until it's approved.
AOL is taking a low profile because the federal government must review the merger. Antitrust lawyers say that could take as long six to nine months, putting off completion until deep into the summer. There could be surprises.
''(The deal) won't necessarily sail through without serious scrutiny,'' Skitol said.
Critics are assailing the merger's potential impact on the Internet browser market. (See related story, this page.) Critics include small Internet service providers and consumer activists like the Washington-based Consumer Project on Technology. The public interest group is run by consumer advocate Ralph Nader.
It's unclear how ISPs and consumer activists will challenge AOL-Netscape. They're expected to at least urge the government to look carefully at competitive issues raised by the deal, analysts say.
Regulators might be receptive. ''You can never tell what the government will do,'' said James Love, director of the Consumer Project on Technology.
Love says AOL has contacted Nader's group to explain the deal. ''They're trying to reassure people about their intentions,'' Love said.
Love says he's irked by the competitive aspects of the AOL-Netscape pact. He expects the government to take a close look. ''This is going to be a serious review,'' he said. ''This is no slam-dunk, no-brainer kind of thing.''
Congress enacted the Hart-Scott-Rodino Antitrust Improvements Act in '76 to give it more oversight on big mergers. The act requires a cooling- off period in which the public is invited to comment on pending mergers.
With paperwork still coming in, Love says it will be a month before the public gets a clear idea of how Washington views the merger.
Love says one sign to look for is whether regulators make a second request for data. ''If the government does this, it shows the merger is in trouble,'' Love said.
Analysts say one issue in particular might interest regulators. Smaller ISPs currently distribute Netscape's well-known browser to subscribers. They get to do this by paying a licensing fee to Netscape for using its software.
If the AOL-Netscape deal goes through, small ISPs will be paying fees to their biggest rival in the Internet service market - AOL.
''I think ISPs would think litigation,'' said Norman Lehrman, vice president of sales for Cybernex Inc.
Cybernex is a Hackensack, N.J.-based ISP with less than 25,000 subscribers. AOL has over 14 million.
But Lehrman says the small ISPs might not sue, for a simple reason. ''The cost to go up against AOL and Netscape would be astronomical,'' he said.
The deal's biggest critics are counting on the feds finding possible antitrust issues. Lehrman says many smaller ISPs are counting on Washington to protect their interests by ensuring that AOL doesn't get out of hand.
ISPs fear bullying by AOL-Netscape. ''AOL didn't get where they are by sitting on their hands. . . . But I'm not sure they want to (run afoul of) the government, either,'' Lehrman said.
Another issue that might interest government lawyers, says attorney Skitol, is Sun's connection with AOL. Sun is the developer of the Java programming language that's geared largely to Internet applications. It aims to work on all types of computers.
Skitol says some Sun rivals might voice concerns.
Under the deal's terms, Sun will distribute Netscape's business server software, and AOL will use Java in its next-generation Net devices.
AOL also is expected to buy $500 million worth of Sun workstations, while Sun will pay $350 million to AOL for licensing and other fees.
Short of legal action, developing browsers to compete against AOL and Microsoft may be the best option for small Internet service providers.
''There's room for more than one browser on the Internet,'' Lehrman said. ''Five or six browsers are viable.''
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(C) Copyright 1998 Investors Business Daily, Inc.
Metadata: AOL NSCP SUNW MSFT YHOO XON MOB DBK BT I/3241 I/3572 I/3270 I/1314 I/6020 E/IBD E/SN1 E/TECH |
