The new Internet frontier will merge with an old-school entertainment conglomerate as America Online and Time Warner already giants in the fields of communications and entertainment gained government approval for their $106 billion deal.
Pablo Martinez Monsivais/AP
|Thursday: FCC Chairman William Kennard announces approval of the AOL-Time Warner merger.
But the Federal Communications Commission said the new AOL Time Warner must use its vast resources to give consumers more choices for Internet access, entertainment and communications. It set strict limits on the merger the largest in U.S. history to keep the behemoth from squashing its competition.
Conditions include the mandate that AOL make future generations of its popular Instant Messenger compatible with competing services offered by Microsoft, ExciteAtHome and AT&T.;
With the FCC nod, AOL and Time Warner crossed their last regulatory hurdle and swiftly moved to close the deal late Thursday a year and a day after announcing the unprecedented combination of old and new media.
AOL Time Warner wasted no time in touting the benefits
consumers could expect from the fusion of the nation's largest
Internet provider and a media titan. Executives said the company
would break new ground in emerging technologies such as digital
music, high-speed Internet access and interactive television.
"Our brands, services and technologies already touch hundreds
of millions of people," said Chairman Steve Case, whose former company
AOL serves 26 million Internet subscribers. "We will embed the AOL
Time Warner experience more deeply into their everyday lives."
Time Warner brings to Internet powerhouse AOL the cable networks CNN, HBO and the Cartoon Network; magazine titles such as Time, People and Sports
Illustrated; and offers movies and other programming under its
Warner Bros. labels. It has a vast system of cable lines, second
only to AT&T; Corp.
New Chief Executive Officer Gerald Levin said the range of of media and entertainment that falls under the company's umbrella will "empower consumers in new and exciting ways."
But FCC Chairman William Kennard said the agency wasn't willing to rely on the
companies' good intentions. Instead, the government set in place a series of conditions designed to define the company's role in offering growing services, while at the same time avoiding heavy-handed regulation of modern technology.
"It's all about preserving the open culture of the Internet," Kennard said at a press conference Friday. Kennard, a Democrat, also said he would resign from the agency now that the merger review is over. Republican Commissioner Michael Powell, son of Secretary of State-designate Colin Powell, is the leading contender to be nominated by President-elect Bush as the next FCC chairman.
Public interest groups cheered the merger decision. Gene
Kimmelman of Consumers Union said the government had "transformed
a merger that threatened competition into one that could actually
expand consumers' choices for high-speed Internet and interactive
Opening Services to Competitors
The combined company will be required to make AOL's popular
instant messaging service communicate with services offered by
rivals. But that won't happen until instant messaging evolves to
next-generation services offered over Time Warner cable lines. That
could include two-way video teleconferencing or the sharing of
music clips and other files between users.
Before AOL Time Warner can offer such advanced services, it must
either implement an industrywide standard to make different
services communicate with each other or enter contracts to show its
system can operate with at least three rivals within six months.
Microsoft, ExciteAtHome and AT&T; had sought a broader
condition forcing AOL to open its existing messaging service the
short, real-time text messages millions of consumers now use to
The commission also fine-tuned requirements that antitrust
regulators had put in place to protect consumer choice for
high-speed Internet services. The Federal Trade Commission already
had ordered AOL Time Warner to offer on its high-speed cable lines
Internet providers other than AOL, such as EarthLink or Juno Online
On Thursday, the FCC determined that consumers should be allowed
to see their selected Internet provider as the first screen when
they log on to their computers. That prohibits AOL from making its
service the first screen and requiring consumers to open another
link to get to their preferred provider.
The agency also required that AOL rivals carried on Time
Warner's high-speed lines be allowed to directly bill their
In yet another evolving market, that for interactive television,
the commission did not impose any conditions on the companies
directly. But it pledged to take a broader look at the whether to
set rules for how interactive content is distributed. Interactive
signals enable consumers to do things like look up information on a
team while watching a sports game or click on a commercial to make
The cable industry argues that the service is too new for the
government to get involved.
European regulators cleared the deal in October, but not before
pressuring Time Warner to withdraw a separate joint venture
proposal with EMI Group of Britain, which would have reduced the
number of major record companies in the world from five to four.
The Associated Press contributed to this report