FCC Approves AOL / Time Warner Merger

The five-member panel of communications regulators gave their nod to the $106 billion merger after a day of deadlocked negotiations over the conditions the FCC would attach to the deal.

Among those conditions is a requirement that the new company open up AOL’s popular instant messaging service to other providers over Time Warner’s cable lines.

The issue led to hours of debate today, but was not enough to derail the FCC’s expected approval.

FCC regulators also said the new company must not keep consumers from using an Internet service provider other than AOL, but said they would not impose conditions relating to interactive television. The FCC said it will instead open a broad inquiry into the future of interactive TV in the coming months.

“These conditions are designed to protect the open competitive nature of the Internet,” FCC Chairman William Kennard told reporters.

The FCC voted unanimously to approve the merger, although two commissioners voted against attaching conditions to the deal.

A multimedia powerhouse

Today’s decision came a year and a day after the companies announced their intention to merge.

The new business, to be called AOL Time Warner, will combine Time Warner’s vast holdings in movie, music, magazine and television production with AOL’s Internet resources. AOL, the nation’s largest Web provider, currently serves 26 million customers.

Among Time Warner’s other major possessions are cable networks HBO and CNN, the Warner Brothers movie and music operations, and Time magazine.

Although the new company will have an expansive media empire, government agencies have set several requirements they say will prevent the new company from monopolizing the market.

Approval from the Federal Trade Commission last month came after both companies pledged to “protect consumer choice” as they move forward with new technology — an attempt to quell fears that the new mega-company could stifle competition in entertainment and in burgeoning fields like the Web and interactive television.

“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 FTC Chairman Robert Pitofsky.

To comply with the FTC’s requirements, Time Warner made a deal last month to carry Internet service provider EarthLink, one of AOL’s main competitors, over its high-speed cable lines. Under its agreement with the FTC, the combined AOL Time Warner company must allow customers to choose from among three Internet service providers aside from AOL within three months of offering service in any particular market.

Gerald Levin, Time Warner’s chairman, will be the new company’s chief executive, while AOL head Steve Case will be its chairman. The merged AOL Time Warner will be based in New York, but will keep the AOL headquarters in Dulles, Va., as an operations center.

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