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FTC mutes AOL/Time Warner wedding bells

Uncle Sam to demand a prenup on broadband

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US Federal Trade Commission (FTC) lawyers are prepared to challenge the proposed merger between AOL and Time-Warner unless the betrothed assent to liberal policies governing access to their broadband networks by competitors. Otherwise, consumers located in regions where Time-Warner dominates cable lines could find themselves inundated by AOL/Time-Warner TV programming and Web content, the Commission fears.

The FTC had originally been more supportive of the merger, but Time-Warner's big hissy fit enacted back in May, in which the company briefly blocked ABC programming to more than three million subscribers over a contract dispute with ABC parent company Disney, betrayed an inclination to hold consumers hostage to corporate interests, and is the likely red flag inspiring the Commission's apparent distrust.

FTC officials declined to comment on their negotiations with the two companies, which, if they were merged, would possess 40 per cent of the ISP market and 20 per cent of cable subscriptions.

To be fair, Time-Warner recently opened its cable lines to New-York ISP Juno Online Services, America's third largest Internet service provider after AOL and EarthLink, and AOL has trumpeted the agreement as an example of the benevolent goodwill and commitment to open access which the two companies espouse.

"AOL and Time-Warner are fully committed to open access and just recently announced the first ever open-access agreement with independent ISP Juno," AOL spokeswoman Kathy McKiernan is quoted as saying by the Washington Post.

But FTC lawyers remain to be convinced that this accomplishment is more than a hollow public relations gesture. They want assurance that similar deals will be offered after the merger is approved, and the federal legal team can be expected to recommend tough language in some form of consent decree. The companies, predictably, are dead set against locking themselves into terms and can be expected to use every tactic at their disposal to discourage the Feds from pre-empting their ability to cut lucrative deals in future.

It will be tricky to craft a decree which will preserve the merged behemoth's God-given right to negotiate the most profitable third-party access deals it can cut, while at the same time preventing it from discouraging competitors by selectively pricing itself out of the reach of those it wishes not to accommodate.

An over-zealous inclination towards consumer protection could discourage the companies from merging at all, so the FTC will have to guess the maximum regulatory burden under which the companies will still regard the merger as worthwhile, press hard for it, and then give in a little and finally accept some sort of compromise engineered to enable both sides to claim a moral victory on behalf of grateful consumers everywhere. ®

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