America Online and Time Warner announced yesterday that they have
completed their merger to create AOL Time Warner Inc., a company
which will have a market capitalisation of around £140 billion.
They describe it as the world's first internet-powered media and
communications company.
The deal comes a year and a day after it was first announced.
Its completion follows approval from the Federal Communications
Commission subject to conditions to protect competition on the
internet, the last of several regulatory hurdles cleared by the
companies. The FCC's conditions are detailed below.
AOL has 26 million subscribers and a 40% share of the US ISP
market. According to WSJ.com, Time Warner owns two major film
studios, cable TV channels, has 20 million cable subscribers, seven
record labels and 36 magazines.
The new company said in a statement:
“AOL Time Warner now becomes the premier
global company delivering the world's most highly respected and
valuable entertainment, news and internet brands across rapidly
converging media platforms. The company's unique combination of
businesses, consumer relationships and growth opportunities
transcend traditional categories, spanning interactive services,
cable systems, publishing, music, cable networks and filmed
entertainment.“
The FCC’s conditions
Internet services
Choice of ISPs: AOL Time Warner must open its
cable systems to competitor ISPs.
AOL Time Warner must allow customers to select a participating
ISP by a method that does not discriminate in favor of AOL
affiliates on the basis of affiliation.
First Screen: AOL Time Warner must allow all
unaffiliated ISPs to control the content of their customers’ first
screen. AOL Time Warner may not require an unaffiliated ISP’s
customer to go through an affiliated ISP to reach the unaffiliated
ISP.
Billing: Participating ISPs must be allowed to
directly bill the subscribers to whom they have sold their
high-speed Internet access services, if they choose to do so.
Technical Performance: AOL Time Warner must
offer the technical performance standards that it provides to its
affiliated ISPs in a non-discriminatory manner to unaffiliated
ISPs.
Rights to Disclose Contracts to the FCC: AOL
Time Warner may not enter into any contract with any ISP for
connection with AOL Time Warner’s cable systems that prevents that
ISP from disclosing the terms of the contract to the FCC under the
FCC’s confidentiality procedures.
Enforcement Procedures: With respect to any
dispute concerning AOL Time Warner’s compliance with these
conditions, the FCC outlined a number of procedures. These
procedures are designed to resolve any disputes within 60 days of
the filing of a complaint and to have them resolved by the Chief of
the Cable Services Bureau by either sustaining or dismissing the
complaint.
Instant messaging (IM)
Given AOL Time Warner’s likely domination of the potentially
competitive business of new, IM-based services, especially
advanced, IM-based high-speed services (“AIHS”) applications, the
FCC ruled that AOL Time Warner may not offer any AIHS steaming
video applications that uses a Names and Presence Directory (“NPD”)
over the Internet via AOL Time Warner broadband facilities until
the company demonstrates that it has satisfied one of three
pro-competitive options outlined by the FCC.
AOL Time Warner must file a progress report with the FCC, 180
days from the release date of the order and every 180 days
thereafter, describing in technical depth the actions it has taken
to achieve interoperability of its IM offerings and other
offerings. These reports will be placed on public notice for
comment.
The IM condition will sunset five years after the release of the
Order.
Contractual relationships with AT&T
AOL Time Warner may not enter an agreement with AT&T that
gives any AOL Time Warner ISP exclusive access to any AT&T
cable system.
AOL Time Warner may not enter an agreement with AT&T that
affects AT&T’s ability to offer any rates, terms or conditions
of access to ISPs that are not affiliated with AOL Time Warner.
Ownership interest in General Motors and Hughes
Electronics
To address concerns over AOL Time Warner’s indirect ownership
interest in DirecTV and potential harms from cable/DBS (direct
broadcast satellite) cross-ownership, the FCC ordered AOL Time
Warner to notify the Chiefs of the Cable Services Bureau and
International Bureau, in writing, of any transactions that increase
the merged company's ownership interest in General Motors
Corporation and/or Hughes Electronics Corporation, no later than 30
days after the transaction.
Miscellaneous provisions
Compliance with all conditions imposed in the order is a
non-severable condition of the grant of the Application.
The FCC denied a Petition to Deny filed by the Consumers Union,
Consumer Federation of America, and Media Access Project, a
Petition to Deny of Thomas Lewis Bonge, Petitions to Condition
filed by RCN Telecom Services and Gemstar, and all similar
petitions except as otherwise provided in its other conditions.
The FCC denied the motion to consolidate filed by the Consumers
Union, Consumer Federation of America, and Media Access
Project.
