- The Washington Times - Friday, January 12, 2001

America Online Inc. completed its $106 billion purchase of Time Warner Inc. last night, a union that joins the world's largest Internet and media companies.
The two companies signed off on the deal just hours after it passed its final regulatory hurdle. The Federal Communications Commission approved Sterling, Va.-based AOL's purchase one year and one day after the companies made the surprising announcement that they would join.
"This is a historic moment for consumers everywhere and a tremendous step toward our goal of becoming the world's most respected and valued company," AOL Time Warner Chairman Steve Case said. Time Warner Chief Executive Gerald M. Levin will be the new company's CEO.
The union likely will change the face of the Internet. The marriage will give AOL's 26 million subscribers access to Time Warner's trove of information, movies and music on the Internet and lead to development of interactive television, which blends broadcast programming with Internet services.
AOL's purchase of Time Warner also aligns some of the world's most recognizable brand names Time Warner's CNN, HBO, Cartoon Network, Warner Bros., Looney Tunes, Warner Music Group, and magazines such as Time, People, Sports Illustrated, Fortune and Entertainment Weekly with AOL's extensive Internet reach.
The new company is expected to aggressively market their brands Time Warner products on AOL's home page and AOL products on Time Warner's networks and in its magazines.
The companies closed the deal late last night, giving birth to AOL Time Warner.
FCC Chairman William Kennard said AOL's purchase of Time Warner, which has roots to 1923, raised concerns, but the conditions the agency placed on the merger should prevent the corporate giant from trampling competitors.
"When I look at this merger, the potential benefits I see are the ability to roll out technologies faster and farther, the potential for significant innovation in new services and technologies," he said after the commission's decision.
The five-member panel unanimously approved the combination.
But the agency said AOL Time Warner must open its popular instant messaging service to rivals and give users access to alternative Internet service providers. Commissioners voted 3-2 to place restrictions on the firm's instant messaging system.
The agency had been expected to approve the deal. But instant messaging e-mail that pops up instantly on the recipient's computer screen and which is particularly popular among young people slowed FCC approval.
The agency told AOL it must make its next generation of instant messaging services offered over Time Warner's cable lines work with competitors'. Critics complained that instant messaging software should work on all ISPs.
That condition helped convince FCC Commissioner Gloria Tristani, who had opposed the corporate union until yesterday, to support the deal.
But Commissioner Michael Powell, the son of Secretary of State-nominee Colin Powell and who is widely expected to take over as FCC chairman, was critical of the conditions.
"Fascinating though the issues are and as serious as they are, I believe the majority has given in too much to their collective imaginations, rather than sound reasoning based on the record, in reaching some of the conditions on the merger," he said.
The FCC also said the company must allow consumers to have their pick of Internet service providers carried on Time Warner's 12.6 million cable lines and allow rival ISPs on the system to choose the content of their opening page.
AOL Time Warner also must negotiate in good faith to carry small Internet providers on its cable system, the FCC said.
Consumer groups hailed the FCC's conditions.
"The FTC came through for consumers by insisting on [an open access] requirement, which means that the merged company has to keep Time Warner cable lines open to Internet service providers other than AOL," said Gene Kimmelman, co-director of the Consumers Union.
The new company will be based in New York, with an operations center in Sterling.
The Federal Trade Commission, which also demanded the companies open Time Warner's cable network, approved the union Dec. 14.
The deal has lost about one-third of its value since it was announced. Shares of AOL have fallen 35 percent, while Time Warner shares have dropped 23 percent.
The new company will trade under the ticker symbol AOL on the New York Stock Exchange beginning today.


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