The Federal Trade Commission has cleared the proposed merger of
the largest ISP in the world, America Online, and one of the
largest media conglomerates, Time Warner. The deal is subject to a
number of conditions which the FTC has imposed in its attempts to
ensure that the merged company will not be anti-competitive.
Time Warner comprises a cable television system servicing about 20% of US cable households, and various cable-programming networks, publishing and recording interests, and film libraries. AOL has a 40% share of the ISP market in the US.
Under the terms of the order, AOL Time Warner would be:
- Required to open its cable system to competitor ISPs;
- Prohibited from interfering with content passed along the bandwidth contracted for by non-affiliated ISPs and from interfering with the ability of non-affiliated providers of interactive TV services to interact with interactive signals, triggers or content that AOL Time Warner has agreed to carry;
- Prevented from discriminating on the basis of affiliation in the transmission of content, or from entering into exclusive arrangements with other cable companies with respect to ISP services or interactive TV services; and
- Required to market and offer AOL's digital subscriber line ("DSL") services to subscribers in Time Warner cable areas where affiliated cable broadband service is available in the same manner and at the same retail pricing as they do in those areas where affiliated cable broadband ISP service is not available.
"In the broad sense, our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology," said Robert Pitofsky, Chairman of the FTC. "This order is intended to ensure that this new medium, characterised by openness, diversity and freedom, will not be closed down as a result of this merger."
The FTC had been concerned that the proposed transaction would illegally lessen competition in the residential broadband internet access market; undermine AOL's incentive to promote DSL (digital subscriber line) broadband services as an emerging alternative to cable broadband; and restrain competition in the market for interactive television.
The deal is still subject to the approval of the US Federal Communications Commission, but the FTC was considered the most significant hurdle for the companies to clear. The European Commission gave conditional approval to the merger in October. The FCC has indicated that it expects to give its decision by the year’s end. AOL and Time Warner hope to complete the deal by January.
