By: Brooks Boliek

Access To High-Speed Cable Lines At Issue

by Brooks Boliek

(The Hollywood Reporter) Federal antitrust authorities reportedly are
prepared to block the merger of America Online and Time Warner unless
the companies agree to keep their high-speed cable lines open to
competing companies.

Federal Trade Commission staff attorneys are concerned that in certain
markets where Time Warner operates cable systems, there is no viable
competition to provide high-speed access to the Internet through cable
television lines. As a result, consumers could be forced to accept
AOL-Time Warner television programming and Internet content exclusively,
sources close to the matter said.

While FTC attorneys are concerned about the ‘open access’ issue, it is
not the only problem identified by them, sources told The Hollywood
Reporter, but they would not elaborate. (The Hollywood Reporter is a
sister publication of E&P.) FTC attorneys also have expressed concerns
about instant messaging and the merged company’s ability to control
prices, for it would own both programming and a delivery system.

Discussions are under way between company officials and FTC attorneys
that are aimed at working out a compromise satisfying FTC concerns
about consumer choice and meeting the companies’ goal of preserving
their options.

FTC spokesman Eric London declined to discuss specifics of the
negotiations, saying they are in an ‘early preliminary point in the

Time Warner recently struck a deal to open its cable TV lines to Juno
Online Services. AOL has pointed to this agreement with an independent
Internet service provider as an example of the companies’ commitment
to open access.

FTC lawyers are concerned about the power of the combined companies.
Dulles, Va.-based AOL, the world’s largest Internet service provider,
and New York-based Time Warner, the nation’s No. 2 cable company,
would control 40% of the Internet access market and reach 20% of
cable-equipped homes.

Lawyers for the FTC’s Bureau of Competition have not forwarded a
recommendation to the commission and are in discussions with the
companies, sources said. FTC staff lawyers, who can be expected to
be the most aggressive of the officials involved in the merger review,
believe they have sufficient evidence to persuade courts that without
concessions, the merger would violate antitrust laws meant to prevent

Negotiations are expected to continue during the next two months and
are to include Bureau of Competition director Richard Parker before
the matter is referred to the five-member commission. The staff
attorneys’ conclusion is not binding, and Parker could overrule it.

The proposed merger would create a media conglomerate so big that
some of the world’s largest entertainment companies have publicly
criticized the deal. Walt Disney Co., NBC and USA Networks are worried
that AOL’s 26 million subscriber base, when combined with Time Warner’s
content portfolio, would create a company with the ability to steer

customers toward products owned by the combined company.

Disney, which owns ABC, is particularly concerned about AOL’s new AOLTV,
which would allow users to search through TV programming in the same
way they can surf for Web sites. The fears of Disney and other
entertainment companies were crystallized in May when Time Warner
temporarily blocked ABC programming for 3.5 million subscribers as a
result of a contract dispute with Disney.


(c) Copyright 2000, Editor & Publisher

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