WASHINGTON — Don’t pop the cork on that Time Warner-America Online merger champagne just yet.
Leaks in the Washington press over the weekend indicate that the Federal Trade Commission is going to insist on stringent conditions before giving the greenlight to the media mega-marriage.
The FTC’s concerns, which were confirmed Monday, focus on markets in which Time Warner operates cable systems and there is no other way for competing companies to get high-speed Internet access. FTC attorneys may want the parties to endorse a prenuptial agreement promising to keep open to competitors’ high-speed cable lines.
For months, consumer groups and other entertainment companies, most vocally the Walt Disney Co., have pressed Washington officials to intervene and impose restrictions on the merger, which would bind the country’s largest consumer Internet provider with the world’s largest media company — and one of the largest cable operators in the U.S. Antitrust attorneys on staff at the FTC also are apparently concerned that AOL/Time Warner could use its cable system to control content.
The two firms and the FTC are ultimately expected to hammer out compromises, but the leak casts some doubts on what was seen by many as a slam-dunk approval for the deal.
A Time Warner spokesman reiterated Monday that AOL and Time Warner are “fully committed to open access.” As evidence of this commitment, the spokesman pointed to a first-ever, open-access agreement reached recently between Time Warner and Juno Online Services Inc., an independent Internet service provider.
FTC attorneys studying the merger have made no formal recommendations to the full commission.
The Time Warner spokesman said there is no indication that the FTC will block the union.
“Our ongoing conversations with regulatory agencies are proceeding well and we are on track to close our merger in the fall,” the spokesman said. “We continue to believe there are no competitive problems.”
The merger, announced in January, also has to be cleared by the FCC. Earlier this summer, FCC Chairman William Kennard led a contentious public hearing on the matter.
Preston Padden, Disney executive VP for governmental relations, testified at the FCC hearing that the AOL/Time Warner marriage could effectively shut content providers using high-speed cable lines. In papers filed with the FCC, Disney predicted that high-speed, interactive TV will reach 24 million households in the U.S. by 2005, generating $25 billion in revenues.
Like Disney, General Electric’s NBC has formally objected to the merger in a filing with the FCC.
At their hearing, FCC commissioners indicated their reluctance to intervene in the private sector and block the merger.