No Chokeholds Allowed

The $183-billion merger between Time Warner and AOL is shaping the future of the Information Age and testing the limits of laws on both sides of the Atlantic. The Federal Trade Commission, in a draft order leaked to the press this week, proposes to block the merger unless the companies assure regulators that their networks will stay open to competitors. European authorities, consumers and competitors express the same concerns. Time Warner stumbled in May when it briefly kicked competitor ABC off its cable systems, giving consumers a taste of the downside of market dominance. There is a lot at stake, and regulators are on the right track.

The two companies, in a recent filing with the Federal Communications Commission, another U.S. agency with a stake in the merger, promised to “commit to a policy of consumer choice” and make their networks open and their products available to competitors. Accordingly, the FTC, as part of the approval, should require them to maintain open access to their cable lines and give competing content providers fair and nondiscriminatory treatment.

The merger would bring together the country’s largest Internet service provider, AOL, and the second-largest cable company. Time Warner, through its entertainment affiliates, also controls major studios and half of the country’s most popular cable channels--HBO, TNT, TBS and CNN--plus music labels and two dozen magazines. Time Warner Entertainment, in turn, is 25%-owned by AT&T;, by far the largest cable operator. AOL wants to gather it all up and offer it to millions of subscribers in digitized, interactive, customized formats on PCs, TV sets and wireless gadgets. Add the online services that AOL already provides, such as instant messaging, travel booking and movie ticketing, and the combined company emerges as the undisputed emperor of the Internet.

Consumers could reap great benefits, but the door for abuse also opens wide. Public uproar sparked by the ABC blackout forced Time Warner to restore service after just one day, showing that the marketplace does exert pressure even on the biggest companies. But more will be needed to ensure that such incidents do not recur. As for the future, new technology offered to cable companies by Cisco Systems and others will allow the operators to create “walled gardens” that favor certain content providers. For instance, it could be made easier to download video from inside the “garden.”

The FTC should make fair and nondiscriminatory access to competing Internet services and content providers a binding condition of its approval. It should sever the ownership ties between AT&T; and Time Warner Entertainment to diminish AOL Time Warner’s stronghold on cable lines. The key to the Internet’s success is its openness. It should stay that way.