Shadow on merger

Cutoff jeopardizes Time Warner-AOL union

WASHINGTON — In less than two days, Time Warner caused itself more harm on Capitol Hill than any of its opponents inflicted during months of lobbying.

“Any time one company has a stranglehold on program distribution, it sets off alarm bells in Congress,” said Ken Johnson, aide to House Telecommunications Subcommittee chairman Billy Tauzin (R-La.). That “stranglehold” suddenly seemed very clear to many in Washington when Time Warner cut off ABC’s signals to 3.5 million of the cabler’s subscribers.

Congressional interest in the power play between two media titans may have harmed Disney as well, but unlike Time Warner, the Mouse House is not waiting for approval on a $160 billion merger with America Online.

In the wake of the Time Warner/Disney fiasco, Tauzin has stepped up his plans to hold hearings on the proposed Time Warner/AOL union. “Obviously, (Tauzin) has concerns about the rapid consolidation in the media industries,” Johnson said.

Bad buzz

One media insider said the perception in Washington is clearly working against Time Warner, which has had difficulty convincing some that it had no choice but to cut off the ABC stations in seven markets.

“This is a game where whoever wears the black hat last loses. I think Time Warner had the black hat last,” said the insider.

By reaching the settlement with ABC, Time Warner was able to head off hearings proposed just Tuesday morning by Senate Commerce Committee chairman John McCain (R-Ariz.). The hearings were supposed to explore the circumstances that led to millions of Time Warner households losing their ABC programming. After the settlement was announced, McCain decided to delay the hearings until summer.

Consumer advocates were quick to pounce on Time Warner’s decision to cut off the ABC stations in seven markets. The advocates claim that TW’s move accurately reflects how it will behave once it merges with AOL to become not only the second-largest cable operator in the U.S., but also its largest Internet service provider.

Public-interest concern

“If Time Warner has the power right now to block the top-rated TV network in the country, one can only imagine what the new AOL/Time Warner will be able to do in the broadband Internet arena,” said Jeff Chester of the Center for Media Education. Chester’s group is one of seven public interest orgs that have officially asked the Federal Communications Commission to deny the merger.

In the end, Congress may not be much concerned as to what the debate over Time Warner’s actions means for the future of the Internet. “The last thing Congress wants in an election year is a couple of million p.o.’d consumers,” Johnson said.

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