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.“
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.
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.
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.
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.
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.