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Sun, Mar 04, 2001 EST
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Merger Between Giants Paves Way
For Communications Revolution

By Michael Y. Park and Shailaja Neelakantan   Fox Market Wire
NEW YORK — The stunning deal between Time Warner and America Online, the first major merger of the 21st century, could spur a new age in communications, analysts said Monday.

Stuart Ramson/AP
America Online's Chairman and Chief Executive, Steve Case, left, and Time Warner's chairman and Chief Executive, Gerald Levin, shake hands before a news conference.

"We'll take the most respected collection of stories, content and news collection and the phenomenal reach of the Internet, and we'll put it in the ears, eyes and hands of consumers around the world anywhere and anyhow they want to receive it," Time Warner president Richard Parsons said at a Monday morning press conference. "This is the first merger, the defining merger, of the 21st century."

The ultimate benefit will go to consumers, Time Warner and AOL officials said. For one, Time Warner Chairman and CEO Gerald Levin said, his company's extensive cable network was primed to carry AOL's digital material, pushing forward millions of subscribers into the age of high-speed Internet access.

So far, cutting-edge Internet media, such as the much-touted broadband technology, have not caught on quickly, at least partially because AT&T; has resisted allowing competitors to use its phone lines. With the AOL-Time Warner merger, AOL can essentially bypass that roadblock without depending upon the convoy of lawsuits against AT&T.;

"We're going to take the open-access issue out of Washington, out of City Hall, and put it into the marketplace," Levin said.

And in the marketplace, the rivalry between AOL and AT&T; to control the next stage in new media will heat up, analysts said.

"Until now AOL�s broadband efforts have been with some regional telephone companies. But they haven�t been too successful in getting meaningful broadband subscribers," said Ken Kiarash, an analyst at the Buckingham Research. "This deal just increases the whole level of competition in the entire broadband access area."

Levin said that of all Time Warner's holdings, its music companies would be among the most affected. In a matter of months, the Internet has become a major avenue for distributing music. With the switch from a record-based to the Web, what the music industry will look like in the future has been anyone's guess.

James Waggoner, an Internet analyst at Sands Brothers, took a step further and said all of Time Warner's media, including video and print, would be transformed.

"We�re talking music clips, video clips, enhanced imagery," he said. "As for publishing, its potential over the Internet has long been ignored. We haven�t seen good ways of delivering, say, a magazine on the Net. For that you need high speed delivery so photos and data can transmit efficiently."

The new company also has a wide open entrance into the burgeoning online merchandising field, he said.

"In terms of e-commerce opportunities, they just go through the roof now with this deal," Waggoner said. "AOL can offer music, video books, magazines. This deal will change the whole world. In the Internet world distribution is everything. With the number of eyeballs between the two of them, this could be huge."

Levin and AOL Chairman Steve Case said they didn't expect antitrust legislation to scotch the deal. There is little overlap in the companies' spheres, they said.

Changing Society

To some, the merger just means fewer choices for the consumer and, ultimately, a weaker society.

"We now have AOL controlling CNN. What's that going to mean?" sociologist Candace Leonard said. "There are too few people having too many sources of information. There are no longer separate sources and that's just a narrowing of opinions and perspectives."

Just as troubling to Leonard was the idea that with the new corporation's focus on the Internet, the vast majority of people who don�t have Web access will be simply be left behind.

"There are only small percentage of the public online," she said. "We are really a minority, and the changes in our language and habits that seem to be emanating from that are all coming from an elite. It really is another way in which the gap between haves and the have-nots is widening."

At the press conference, Levin insisted that, if anything, the merger would bring society closer.

"One of the things we will stand for, is that this company will hold to the idea the idea of closing this digital divide, putting (the Internet) in the hands of all people of the world," he said.

Could the Mega-Merger Backfire?

Meanwhile, at least one academic believes the merger may actually back fire, leading to a downfall of media megacorporations.

University of New Hampshire communication professor Joshua Meyrowitz, who is married to Leonard, believes media mergers severely limit the public's choices, which could draw more people to that alternative news and entertainment that now thrives on the Internet.

"You have this Wild West Internet area where you can be on the East Timor action network or on the School of the Americas watch list," he said. I think ultimately this AOL and Time Warner merger suggests the rise of this alternative-information order.

"The AOL-Time Warner merger is kind of a funny thing because it's sowing the seeds of the very corporate news entity that's being created with it," he added. "It's simultaneously feeding this mega-merger and also eating away at the foundations of the merger by giving the people the option to use the Internet to go around the dominant media."

From the Bigwigs to the Cogs

In the upper echelons, the merger means a lot of executives will penciling in "co" and "vice" onto their business cards. In the trenches, an alliance of this sort often means it's time to dust off the resume.

Levin insisted that none of Time Warner's 82,000 employees have anything to fear.

"Opportunity will be created, not reduced," he said. "We won't be streamlining employees and reducing costs. This will enable each of the employees to have richer, more rewarding work lives."

Turner raised a few eyebrows when he, with his typical candor, said the merger would surely entail some "friction." Levin downplayed that idea.

Most of the negotiations before the announcement dealt with what Levin called "social issues," but he insisted that both companies were more alike than not. Both, he noted, were essentially conglomerates of many smaller companies and had long gotten used to assimilating.

A Time Warner spokesman, speaking on condition of anonymity, said the atmosphere at the corporation's Manhattan headquarters was enthusiastic.

"I think it's general mood is surprise and excitement," he said.

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