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Technology Stocks : America On-Line (AOL) -- Ignore unavailable to you. Want to Upgrade?

To: Annette who wrote (40152)	9/21/2000 11:42:19 PM
From: puborectalis	Read Replies (1) \| Respond to of 41369

FCC Close To AOL-Time Warner Merger Approval (09/21/00, 8:27 p.m. ET) By Mary Mosquera, TechWeb News The Federal Communications Commission tried to play down stories Thursday that its staff had preliminarily recommended it approve the AOL-Time Warner merger. A report in The Washington Post said a draft order recommended the FCC approve the mega-merger if the combined company makes its commitment to open access legally binding. However, the report cautioned the FCC could still block the merger of the Internet and entertainment giants, originally valued at $183 billion when it was announced in January. The FCC staff is engaged in ongoing analysis and review of the proposed merger between American Online Inc. (stock: AOL), Dulles, Va., and Time Warner Inc. (stock: TWX), New York, and has made no recommendations yet to the full commission on the matter, an FCC spokeswoman said. "Any media stories about potential staff recommendations or draft reports can only be based on incomplete and speculative analysis and do not accurately reflect the decision-making process at the FCC," she said. The FCC staff will make its recommendations to the commission upon completion of the review, which is expected to be sometime in mid-October. AOL chairman and CEO Steve Case and Time Warner chairman and CEO Gerald Levin have pledged to open their cable network to high-speed Internet access providers other than their affiliated RoadRunner cable modem service. In July, they announced a commitment to let Juno Online Services Inc. (stock: JWEB) offer Internet access once RoadRunner's exclusive contract expires at the end of 2001. Making open access a condition of approval will assure competition only if it is properly structured and monitored closely, said Stephen Mahinka, manager of the antitrust practice group at Morgan Lewis & Bockius, Washington. Open access is a common feature of most networked industries, such as automated teller machines, and deregulated industries, such as local telephone service. It is crucial to have competition in access when the channels for transmission are few, Mahinka said. Consumer and public interest groups fear AOL-Time Warner will exert a chokehold on Internet content and distribution. A duopoly will essentially exist post-merger, with AOL-Time Warner and AT&T Corp. (stock: T) owning more than 50 percent of U.S. cable subscribers, said Gene Kimmelman, director of Consumers Union's Washington office. The two giants will be affiliated through AT&T's stake in Time Warner Entertainment. They will also control nearly half of the most-watched channels on cable TV, more than half of the narrowband, and three-quarters of the broadband Internet customers, he said. The FCC has refrained from setting a cable network open access policy, preferring to let the market lead. However, the regulator is set to open an inquiry into open access, reexamining its stance. Major local telephone carriers, which deliver DSL technology for high-speed Internet access, must provide open access. Conditioning the AOL-Time Warner merger on open access is a good compromise for the FCC, Mahinka said. It takes a long time to formulate a formal policy, and the market can't wait for that, he said. "It's a good compromise mechanism to let the merger go forward with open access," he said. "The FCC would come out with the principles of open access without tying [the regulator] to that in the future, but enabling them to have a sense that they have set the fundamentals down. An agreement to open access doesn't mean much by itself. It's all in the details." Details, such as how to decide what is defined as open access, how to certify it, and what kind of reciprocal access and payments are appropriate, must be structured into the agreement, Mahinka said. Open access needs constant regulatory review, he said. "You will not see the end of the controversy with a signing of the agreement," Mahinka said. "You will see constant complaining by content providers." That's the nature of these arrangements. It's easy for a controlling company to manipulate an open-access policy, he said. The U.S. Federal Trade Commission and the European Commission, the executive arm of the European Union, are also reviewing the merger. AOL and Time Warner have until Sunday to make merger concessions to the Europeans.