• PC World
• » Tech Industry

The Federal Communications Commission has approved America Online's $103 billion merger with Time Warner, giving the companies the final clearance they need to close the deal and create a new- and old-media giant.

The FCC approval, occurring late on Thursday, includes some conditions on the merged company's instant-messaging and high-speed Internet services. But the conditions will have little immediate effect beyond limits already imposed by the U.S. Federal Trade Commission when it approved the deal in December.

AOL will be allowed to continue blocking users of competing instant-messaging services from communicating with users of its market-leading instant-messaging services known as AIM and ICQ.

Only if AOL extends its instant-messaging services to include multimedia features like videoconferencing would the company be required to allow communications between its users and users of competing services.

Democrats Force Conditions

While all five FCC commissioners voted to approve the deal, only the three Democrats voted in favor of the conditions.

"We had to make sure that this historic marriage of companies would benefit consumers," FCC Chair William Kennard says.

Republicans Harold Furchtgott-Roth and Michael Powell, expected to succeed Kennard as chair when George W. Bush becomes president, dissented from imposing the conditions.

The FCC did not impose any conditions on AOL's new interactive television service, but said it would start an inquiry to determine whether industrywide regulations are needed. Some independent entertainment producers fear that cable companies would prevent subscribers from receiving interactive content for programming not owned by cable operators.

With the merger approvals out of the way, the new AOL-Time Warner is in an unmatched position to meld old and new media. None of Time Warner's old media rivals, such as Walt Disney and Viacom, will have such easy access to a mass online audience. AOL and Time Warner have already used AOL's online system to sell hundreds of thousands of subscriptions to Time Warner magazines.

The companies plan to move quickly to exploit synergies between AOL's online audience of more than 26 million subscribers and Time Warner's millions of cable television, magazine, and movie customers. A top priority will be to reengineer Time Warner's cable systems to allow AOL to offer high-speed Internet service. Under limits imposed by the FCC and by an earlier ruling from the Federal Trade Commission, the merged company would have to allow at least three competing Internet service providers to also offer high-speed service over Time Warner's cable wires.

Yearlong Process

Approval by the FCC was held up for weeks as the agency struggled to decide what to do about AOL's instant-messaging service. AOL is the leading provider of instant messaging, and it blocks users of other companies' services from communicating with its subscribers.

FCC officials were concerned that AOL's blocking would help maintain the company's huge lead in signing up customers for instant messaging. Once primarily used by teenagers for fun chats, instant messaging is increasingly used by adults and even in businesses as a tool for rapid communication.

It also has become an important gateway to lure subscribers to new offerings such as interactive television.

At least one FCC member, Democrat Gloria Tristani, wanted to force AOL to stop blocking competing services. But a majority of the commission determined that such a requirement was outside of their merger-review jurisdiction.

The FTC's approval forced the companies to share high-speed cable Internet lines with competitors, prohibited the companies from discriminating against competing interactive-television services, and appointed a trustee to monitor their behavior for the next five years.

• See more like this:
• America Online,
• AOL,
• Time Warner,
• merger