- The Washington Times - Wednesday, April 26, 2000

Four consumer groups today will ask the Federal Communications Commission to reject America Online Inc.’s proposed acquisition of Time Warner Inc. unless the two companies change the terms of the deal.

The Consumers Union, Consumer Federation of America, Center for Media Education and Media Access Project will file the petition today seeking changes to preserve competition and ensure Internet-service providers’ access to broadband cable lines.

Sterling, Va.-based AOL said Jan. 10 it would pay $166 billion in stock and assume $17.8 billion in debt to buy Time Warner, and today is the last day the FCC will allow public comments to be filed about the merger.

“The concern is the combined company will create a choke hold on new video and broadband Internet services, which will significantly harm the development of consumer choice,” Consumers Union co-director Gene Kimmelman said.

AOL said it expects the deal to benefit consumers.

“This merger will deliver tremendous benefits to consumers by bringing people around the world more choice and convenience and accelerating the rollout of broadband services,” AOL said in a statement issued yesterday.

Among the chief concerns of the consumer groups is that AT&T Corp., if its merger with MediaOne Group is approved, would own an estimated 10 percent of AOL Time Warner, according to the consumer groups.

That would reduce competition in the cable industry by aligning the two largest cable companies, Mr. Kimmelman said.

Under an agreement announced last May, AT&T would acquire MediaOne, the nation’s fourth-largest cable television company, and its 5 million cable customers. AT&T also would acquire MediaOne’s 25 percent stake in cable systems owned by Time Warner, the nation’s largest cable company.

With its purchase of Time Warner, AOL will have access to 13 million cable subscribers.

The consumer groups will ask that the FCC force the companies to sever links uniting AOL Time Warner and AT&T, through its MediaOne investment, before approving the purchase.

The consumer groups also will outline in their FCC petition concerns over access to AOL Time Warner’s cable lines that competing Internet-service providers (ISPs) will have.

AOL said in February it would open Time Warner’s cable lines to competing ISPs once the acquisition is complete.

In an age when Internet users are downloading more video and voice data than ever, high-speed broadband lines are increasingly viewed as a competitive necessity, and broadband moves more data more quickly than telephone lines can move information.

Open-access advocates applauded AOL’s intent to open cable lines to competing ISPs, saying it could speed up deployment of Internet service over high-speed cable television lines, but others argue the decision doesn’t eliminate the need for government regulations mandating that cable companies open their networks.

But the consumer groups want to urge the FCC to develop a policy forcing companies that own cable lines to open them to all ISPs, modeling the broadband network after the current network, open to all Internet-service providers.

Morton A. Pierce, chairman of the mergers and acquisitions practice at Dewey Ballantine, a New York law firm, said AOL and Time Warner likely are confident the FCC will approve the merger.

“I wouldn’t put my company through something like this unless I thought there was a decent chance of approval,” Mr. Pierce said.

The FCC hasn’t scheduled a hearing on the merger yet. The companies said when they announced the merger they expected to complete the union before the end of the year.

AOL shareholders would own 55 percent of the combined company, which will be called AOL Time Warner Inc. Time Warner shareholders will own the rest.

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