FTC Likely to OK AOL Deal, Sources Say
A majority on the Federal Trade Commission is now prepared to vote to approve the America Online Inc. takeover of Time Warner Inc., according to sources familiar with the matter.
The formal vote is expected Thursday on the $183-billion combination, which would create a vast media and Internet company that will touch nearly all consumers, whether they watch CNN, send friends instant messages over the Internet or read Time magazine. The deal still has strong opponents among competitors and consumer groups who fear the resulting behemoth will dominate the Internet and limit consumer choice. Some opponents have meetings scheduled with FTC commissioners this week in hopes of persuading them to block the deal in court.
But after months of wrenching negotiations with Dulles, Va.-based AOL and Time Warner of New York, three--and possibly four--members of the five-member FTC now believe the settlement agreement on the table is the best deal they can get from the parties, sources said.
FTC approval is the last significant obstacle for AOL and Time Warner to create the world’s largest media company. The vote could be postponed, however, as it has been in the past.
European regulators have given their blessing to the deal, which was announced in January. The Federal Communications Commission still needs to complete its review and might attach conditions to the deal.
The new company, to be called AOL Time Warner Inc., is a crowning achievement of the “New Economy,” even as it begins to fray with Internet firms going bust and other technology companies experiencing a slump in demand. AOL, a once-struggling upstart founded 15 years ago, may soon be the proud owner of one of the best-known companies in America whose flagship magazine, Time, was founded in 1923. With AOL’s 28 million online subscribers around the world, the deal brings together the world’s dominant Internet service provider with the venerable Time Warner brands, including CNN, HBO, Warner Bros. and the nation’s No. 2 cable network.
FTC spokesman Eric London said, “Speculation over how the commission is going to vote is a ridiculous parlor game. Until the commission votes, the tea-leaf reading is just that.” AOL and Time Warner officials declined to comment.
To have the deal approved, AOL and Time Warner agreed to allow Internet service providers that compete with AOL to have access to Time Warner’s high-speed cable lines at competitive terms. The FTC wants to maintain consumer choice and fair prices among service providers by ensuring AOL’s rivals have nondiscriminatory access to Time Warner’s cable system.
The FTC pushed the companies to sign such a deal with an AOL rival before it would approve their merger and last month Time Warner produced a deal with Atlanta-based EarthLink Inc., the nation’s second-largest ISP after AOL.
Commissioner Orson Swindle, a former Reagan administration official, solidly favors the deal, sources said. He declined to comment.
FTC Chairman Robert Pitofsky, an antitrust scholar, has expressed reservations about the deal but wants to reach a settlement, sources said. And he believes it is important to preserve the conditions the FTC has extracted from the companies, sources said. He declined to comment.
Commissioner Thomas B. Leary, also an antitrust authority, has been among the most vocal in his concerns about Time Warner’s domination of media content. However, he also is not convinced the commission could win in court on antitrust grounds, and he values the EarthLink open-access agreement, sources said.
It is less clear where Commissioner Sheila F. Anthony stands. Some parties who have met with her said she has been less receptive to the opponents’ arguments.
Commissioner Mozelle W. Thompson, a former Treasury Department official, has been the most outspoken in his concerns, sources said. He is concerned the combined companies would wield too much power and does not see an easy way of fixing the problem through the regulatory process, sources said. Thompson could not be reached for comment.
