AOL Cites Costs in Pushing for Merger OK
America Online Inc. has asked federal regulators to approve its $103-billion merger with Time Warner Inc. by year’s end, citing “the burden and expense” of additional regulatory filings if the deal is delayed until 2001.
The online giant would have to file more than 10,000 partial-year state and local income tax returns, additional documents with the Securities and Exchange Commission and duplicative accounting reviews if the deal isn’t completed until next year, AOL said in a letter released Wednesday by the Federal Communications Commission.
The request comes as Microsoft Corp. Chairman Bill Gates, Sen. Conrad R. Burns (R-Mont.), and other critics are pressing the FCC to more closely examine the blockbuster media deal, including opening up AOL’s popular instant-messaging online chat service to Microsoft and other rivals.
AOL is hoping to avert the kind of protracted regulatory proceeding it faced before the Federal Trade Commission. That agency spent nearly 10 months conducting an antitrust review before approving the deal, with conditions, Dec. 14.
The five-member FCC is reviewing the AOL-Time Warner merger to determine if the deal is in the “public interest.” The agency is said to be looking at a complex staff proposal aimed at forcing AOL to open up its instant-messaging services.
The proposal includes options ranging from monitoring the instant-messaging market to requiring AOL to open up advanced instant-messaging services to at least one other rival if AOL provides advanced instant-messaging services over Time Warner’s cable television network.
Embracing the first option, AOL suggested that “to the extent the commission might deem it appropriate to monitor future developments in IM [instant messaging]--the FCC could rely on any number of potential marketplace developments that will serve to confirm that a merged AOL-Time Warner will hold no irreversible position in any ‘market’ that encompasses ‘advanced IM’ services.”
Experts say AOL’s cost concerns probably will not prompt the FCC to speed up its examination.
AOL’s protests “will not have a huge impact,” said To-Quyen Truong, a Washington lawyer who oversaw the initial FCC review of the AOL-Time Warner deal while serving as associate chief of the FCC’s Cable Services Bureau. “The costs associated with delay don’t rise to that level.”
The battle at the FCC intensified last week when Microsoft’s Gates called FCC Chairman William E. Kennard and two other commissioners to urge them to force AOL to open up its ICQ and instant-messenger services, which together boast more than 138 million registered users.
“AOL’s documented resistance to interoperability, coupled with its extraordinary position in the IM field, requires commission action,” Microsoft said in a Dec. 15 letter released by the FCC. One Microsoft official termed the staff proposal “very disappointing” and said the company would continue to lobby to change it.
Burns, chairman of the Senate communications subcommittee, also weighed in. Comparing instant messaging to telephone service, he urged the FCC to require AOL’s services to be compatible with those of rivals such as Microsoft and Yahoo Inc.
“We cannot allow the balkanization of this new service and all its potential,” Burns said.
Microsoft’s push for federal intervention is an ironic departure from its position in its antitrust dispute with the Justice Department. In that case, the software giant has insisted that the government should not interfere with software innovation.
The FCC is under pressure to act on the AOL-Time Warner deal before President-elect George W. Bush takes office and replaces FCC Chairman Kennard--a Democrat.
The agency’s review already has exceeded an informal 180-day limit it imposed on merger reviews after several lawmakers on Capitol Hill complained that the FCC was taking too long to review transactions.
