FTC approves AOL/Time Warner merger

The AOL/Time Warner mega-merger cleared its most daunting regulatory hurdle Thursday, when the Federal Trade Commission (FTC) gave its approval to the $109 billion union. The FTC was able to obtain key concessions from the combined companies, which the FTC feels answers its antitrust concerns about the merger. So the companies now face what is expected to be a short stop at the Federal Communications Commission (FCC), which is expected to give its own approval by the end of the year. AOL and Time Warner hope to become a broadband superpower, merging the power of the Internet with television.

"Our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology," said Robert Pitofsky, the chairman of the FTC. "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 signed a consent decree, which specifies how the combined companies will open their networks to competitors. Specifically, AOL/Time Warner will:

  • make available to its subscribers at least one outside ISP on Time Warner's cable service before AOL is allowed to offer service. After AOL joins up, two other outside ISPs will be added within 90 days.

  • be prohibited from interfering with content from outside ISPs that is transmitted over AOL/Time Warner's bandwidth. AOL/Time Warner cannot discriminate against content that it does not own, whether it's delivered over cable TV, Interactive TV, or the Internet.

  • must market AOL's broadband Internet services in areas that are not served by Time Warner cable, and it must not be priced higher than it is in regions where Time Warner has a presence.
The terms of the agreement are in effect for five years. The combined company is indeed a multimedia superpower: AOL has over 26 million Internet subscribers, while Time Warner reaches 20 percent of the homes in the United States that are wired for cable. Time Warner also owns HBO, CNN, and various other cable, TV, film, and music properties, along with Time and People magazine. The companies hope the synergy between their product offerings and delivery mechanisms will open new markets and increase revenues
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