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Kennard gives AOL-TW marriage his blessing

Case: 'Every company is going to need to become an Internet company'

Time Warner and America Online have not yet filed their merger with the FCC, but the deal seems to have already won over FCC chairman William Kennard who said he was encouraged and optimistic about the merger.

“I think it is encouraging,” Kennard said during a press conference on the FCC’s upcoming agenda.

The FCC chairman said he still has confidence in the marketplace to make sure that large cable companies will not be in a position to monopolize access to a high-speed Internet.

“I still believe that the marketplace can and should and will ultimately,” resolve the issue in favor of consumers, he said. Kennard’s words may have been music to the ears of Internet and cable execs, but broadcast network honchos were disappointed by the agency head’s outlook on 2000. Kennard suggested broadcasters have not demonstrated that the growth of the Internet industries should force the government to dismantle the existing regulatory regime for traditional mass media outlets. “We shouldn’t over-react and sweep everything away in one fell swoop.”

America Online said Wednesday net income for its fiscal second quarter soared to $224 million from $86 million, excluding one-time items. On a per-share basis the 9¢ number beat Wall Street’s consensus by a penny.

Operating income rose 155% to $319 million and revenue climbed 41% to about $1.6 billion for the quarter ended Dec. 31. Revenue from advertising and commerce was up 79% from the year before to $437 million. Subscription revenue gained 36% to $1.1 billion — the first time that figure has passed the $1 billion mark.

AOL added 1.8 million members worldwide to wind up the year with 20.5 million subscribers. Bundling in CompuServe and Gateway, the company’s total subscriber base was 23.8 million.

AOL Europe services reached 3.1 million members.

AOL shares closed higher, up 6% at $67.87, after dipping early in the day. The shares have been on a steady downward spiral since the Internet provider unveiled its landmark merger with Time Warner last week — a massive, all-stock transaction worth about $160 billion.

During a conference call with Wall Streeters, AOL topper Steve Case reiterated his promise to grow the combined AOL Time Warner rapidly and said he expects it to become “the most valuable, most respected company on earth.”

He said investors were surprised, “a bit wowed,” by the merger, which had successfully been kept top secret until the deal was done. As they assess it, examine its benefits, he said, the stock performance is likely to improve. Looking forward, “Every company is going to need to become an Internet company,” Case said.

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