U.S. government denies AOL-Time Warner approval close

The U.S. Federal Communications Commission (FCC) felt compelled to release a statement claiming it has not made a firm decision regarding the merger between America Online Inc. and Time Warner Inc., after published media reports on Thursday stated antitrust enforcers at the FCC were ready to give a conditional green light to the massive media and Internet merger.

“The FCC staff is engaged in ongoing analysis and review of the proposed AOL/Time Warner merger transaction and has made no recommendations to the full Commission on the matter,” the FCC said in a statement released late Thursday.

The Washington Post newspaper reported Thursday that the FCC had completed a draft approval of the merger, provided the companies make high-speed Internet access over their cable television systems available to other providers. The FCC is looking for legally binding comments, the Washington Post said.

The “open access” rule – a rule requiring that Time Warner’s cable customers be allowed to freely choose their Internet provider – would assuage the concerns U.S. Federal Trade Commission (FTC) officials have, that in markets where Time Warner operates cable systems, consumers could be forced to accept exclusively AOL-Time Warner-controlled content in order to get high-speed Internet access.

“Any media stories about potential staff recommendations or draft reports can only be based on incomplete and speculative analysis and do not accurately reflect the decision-making process at the FCC,” the FCC statement said.

AOL and Time Warner announced plans in January for a stock-swap merger valued at the time at $350 billion. Various media reports now value the deal at $183 billion. The combined company, to be called AOL Time Warner Inc., is expected have revenue of about $40 billion a year and a global subscriber base of more than 100 million.

In its statement, the FCC said it is “continuing its analysis of the record in this transaction and will make its recommendations to the Commission upon completion of this review.”

The FCC’s deadline for issuing its recommendation concerning the merger to Chairman William E. Kennard is Oct. 12.

The European Commission (EC) has also expressed doubts that the merger would be compatible with fostering open competition in the European Union. The Commission’s deadline for a ruling on the merger is late October.

According to media reports, the FCC is also concerned that Time Warner and AT&T Corp. – the two largest providers of cable service in the United States – could join into a partnership to create a monopoly. Furthermore, by adding the world’s largest ISP (Internet service provider), AOL, to the mix, high-speed Internet access could face further market constraints.

Linking those three players “would create a powerful duopoly through which AOL/Time Warner and AT&T would have the ability and incentive to coordinate their cable deployment strategies,” the Washington Post quoted the Sept. 8 staff FCC draft as warning.

In June, when the FCC approved AT&T’s acquisition of cable company MediaOne Group Inc. for US$44 billion, the company also got MediaOne’s 25.5 per cent stake in Time Warner.

Officials at the EU declined to comment on the FCC report or its own continuing inquiries into the AOL/Time Warner merger.

The FCC, in Washington D.C., can be reached at http://www.fcc.gov/. AOL, in Dulles, Virginia, can be reached at http://www.aol.com/. Time Warner can be reached in New York at http://www.timewarner.com.

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