Disney Seeks Restrictions on AOL-Time Warner Deal

Walt Disney Co., owner of the No. 1-rated ABC television network, asked U.S. regulators to impose significant conditions on America Online Inc.’s proposed $139-billion purchase of Time Warner Inc.

Disney told the Federal Communications Commission in a filing late Thursday that AOL-Time Warner should be “unequivocally” prohibited from discriminating against any unaffiliated content or Internet service providers. The FCC “must impose meaningful and enforceable conditions prior to any possible approval of the merger,” Disney said.

Disney’s filing is the latest action in its battle with Time Warner, the No. 1 U.S. cable-TV company. Last week, Time Warner blocked ABC TV stations in 11 cities for a day and a half after failing to agree with Disney on terms for carrying the stations.

Consumer groups said the cable dispute raised concerns over Time Warner’s control over the so-called broadband connection into millions of homes, which allows consumers to get telephone, video and Internet services over cable TV lines. Disney repeated those fears in its FCC filing.

Disney said AOL-Time Warner would control the broadband link, as well as the “vast and crucial content” distributed over the network, such as AOL’s service and Time Warner’s cable channels, including HBO and CNN.

“Such an amalgamation of assets gives the merged entity the incentive and ability to act as a ‘gatekeeper’--to favor its own content and disfavor the content of unaffiliated content providers,” Disney said.

On the New York Stock Exchange, shares of Dulles, Va.-based AOL fell 25 cents to $53.75, New York-based Time Warner fell 25 cents to $80 and Burbank-based Disney shares rose 6 cents to $41.13.

“As we made clear on the day our merger was announced, the commitment of AOL and Time Warner to open access and content diversity couldn’t be stronger,” said Kathy McKiernan, an AOL spokeswoman.

CMGI Inc.’s ICast Corp., which provides instant messaging technology, told the FCC last month that AOL-Time Warner would hurt the market for such services, which lets users “chat” real-time. It has become popular because it alerts users when friends are online.

ICast said AOL continues to block messages from consumers using rival instant messaging technology. It asked the agency to require the new company to open its instant messaging service and require compatibility with products from other companies.

ICast and Tribal Voice sent about 2,000 consumer petitions to the FCC reiterating demands.

Sens. Mike DeWine (R-Ohio) and Herbert Kohl (D-Wis.) wrote to FCC Chairman William Kennard and Federal Trade Commission Chairman Robert Pitofsky this week asking the agencies to examine AOL-Time Warner’s use of technology.