FTC Okays AOL-Time Warner Merger, With Caveats
The U.S. Federal Trade Commission has unanimously accepted merger terms
"In the broad sense, our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology," says Robert Pitofsky, FTC chair, in a statement. "This order is intended to ensure that this new medium, characterized by openness, diversity, and freedom, will not be closed down as a result of this merger."
AOL and Time Warner say in a joint statement that they are pleased with the FTC's approval, and expect the "commitment to consumer choice embodied in the FTC agreement will become a model for other cable systems throughout the country."
The accord requires at least one AOL competitor to offer cable Internet
service on a Time Warner-owned network before AOL uses the same network. In
most cases, Time Warner must open its networks to two or more competitors after
AOL starts offering services. If technology allows it, as many as three other
ISPs must then be added. EarthLink and Time Warner Cable
The FTC consent order specifically promotes development of digital subscriber line technology and access. AOL-Time Warner must offer AOL's DSL services at uniform prices, even if Time Warner cable is also available.
The consent order is in effect for five years. Its details--who gets access, where, when, and for how much--are the key, and should allay fears of competitors and interest groups, says Mark Snowden, a senior research analyst for Gartner Group.
"It looks like some fairly rigorous terms given to AOL and Time Warner," Snowden says. "They're going to have to sign a certain number of agreements, so there's only going to be so much 'weaseling' at first."
Walt Disney, which has opposed elements of the merger, typifies the corporate response.
"The unprecedented open access and nondiscrimination conditions imposed by the FTC today represent a huge victory for consumers and for competition," says Preston Padden, Disney's executive vice president for government relations.
Small ISPs had a more mixed reaction.
"Anything that happens to advance entertainment and services over IP is good," says Jay Cox, Internet director for NTELOS. "In spite of all the concessions they have made, I'm very skeptical whether small ISPs, like us, will be able to compete."
Cox's position echoes those of smaller businesses and consumer groups, says Steven Harris, an IDC senior research analyst.
"I think most people in the ISP industry would be very displeased to find AOL only has to have five ISPs [accessing its network]. That could be a major problem for a lot of ISPs," Harris says. "From a government perspective, it may seem like enough, but I don't think it is. From an industry perspective, it's definitely not enough."
One representative of ISPs is cautious. "In general, we are appreciative that open access is part of this," says Kristan Van Hook, codirector of the Opennet Coalition, which represents about 990 U.S. ISPs. "Our members will be calling on the [Federal Communication Commission] to make open access nationwide."
The FCC can still block the merger, although analysts say the FTC deal imposes most of the likely restrictions. The European Commission approved the deal in October.
"I think it's a done deal now," says Larry Perlstein, Gartner vice president and research director. Elements of the FTC deal provide for recourse if there are problems in the future, he says. "I certainly think AOL and Time Warner won. They got everything they asked for. Opening up the cable systems doesn't detract from the value of the deal."