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Consumer Groups Target AOL Time Warner

Petition to FCC says mega-merger would limit choice and raise prices.

By Linda Rosencrance, Computerworld   

The groups--led by Consumers Union of the United States, the publisher of Consumer Reports magazine--say that consumers will suffer if the deal goes through.

"The merger would allow AOL Time Warner to so dominate the market for Internet service and cable television that consumers could be left with higher prices and fewer choices and limited competition," says Consumers Union spokesperson David Butler.

The other consumer groups joining the petition are the Center for Media Education, the Consumer Federation of America, and the Media Access Project.

The $350 billion, all-stock deal--which must be approved by the FCC--would give AOL, the world's largest online access company, a new broadband distribution platform for its services, as well as new subscribers through access to Time Warner's media outlets.

Too Much Control?

Butler says the consumer groups are concerned about the relationship between AT&T and AOL Time Warner. He said that if the FCC approves AT&T's pending acquisition of cable company MediaOne Group--which owns a 25.5 percent stake in Time Warner Entertainment--then AT&T and AOL Time Warner would control more than half the cable lines in the country. Butler says that would violate FCC rules.

Last year the FCC ruled that one company couldn't serve more than 30 percent of all the cable and satellite television households in the United States. Published reports on Tuesday suggested that the FCC plans to approve AT&T's acquisition of MediaOne if MediaOne sells off some of its assets, including its stake in Time Warner. The FCC could not be reached for comment.

Butler says the consumer groups are also concerned that AOL, once an advocate for open access to the broadband Internet, has shifted its position since the merger was announced. Butler says AOL previously claimed that the only way to guarantee open access was through government regulation. But since the news of the merger, Butler says, AOL has stopped supporting government regulation.

"Given this shift in position, we [feel] we need a public policy [on this issue]," Butler says.

The FCC's deadline for public comments on the merger is Wednesday.

The consumer groups will hold an 11 a.m. press conference on Wednesday at Consumers Union's Washington, D.C., office and release their petition to the FCC.

AOL did not return a telephone call seeking comment.

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