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Mousey on merger

Disney afraid to contest AOL/TW, Hollings says

WASHINGTON — The Walt Disney Co.’s quiet but energetic effort to raise serious concerns about the Time Warner/America Online merger burst into the open Thursday when a member of the Senate Commerce Committee said Mouse House execs are afraid to testify in public about the deal.

Sen. Ernest Hollings (D-S.C.) told Time Warner CEO Gerald Levin and AOL chairman Steve Case, who were testifying about their merger, that the “Disney people are afraid to come testify.”

Hollings said Disney is concerned that Time Warner will retaliate against the company by relegating its cable webs to inferior positions on systems’ channel lineups or remove them from the systems completely.

Disney officials refused to address Hollings’ statement directly. “We are studying the complex issues posed by the merger,” said Preston Padden, Disney’s top Washington lobbyist.

Coincidentally, the ABC television network and Time Warner are currently battling over channel positions on cable systems in Houston. As a result of the dispute, Time Warner systems may lose ABC signals in other markets as well.

Thursday’s Commerce Committee hearing repped a second appearance on Capitol Hill for Case and Levin this week. On Tuesday the corporate couple appeared in front of the Senate Judiciary Committee.

Disney is concerned that a Timer Warner/AOL merger will create an Internet powerhouse that will steer Web surfers to its own content at the expense of other companies. In addition, it could make its content easier and quicker to access via Time Warner’s high speed Internet network. Disney has had trouble drumming up support for its effort from other studios and content owners.

Case and Levin have spent the last week — indeed, the last six weeks since the $160 billion deal was first announced — insisting that the company will not become an Internet bottleneck. At Thursday’s hearing, Levin declared firmly that America Online would enjoy no preferential treatment on Time Warner cable systems.

As they did earlier in the week, Levin and Case touted a “Memorandum of Understanding” between the two companies that pledges that Time Warner’s high speed Internet network would be open to rival Internet service providers such as Earthlink and Prodigy.

But like their colleagues on the Judiciary Committee, several senators expressed skepticism about the agreement between Time Warner and AOL. Congress does not have the power to block the deal, which must be approved by the Federal Trade Commission and the Federal Communications Commission. Either the FTC or the FCC could impose conditions on the deal as part of their approval. More than one senator has suggested that the agencies use the Time Warner/AOL “Memorandum of Understanding” as a foundation for such a condition.

Several members of the Commerce Committee noted that Case, prior to the announcement of AOL’s planned merger with Time Warner, had urged Congress to write laws requiring cable systems to open up their networks to all Internet service providers.

Case replied that in the year since he began advocating this position, the marketplace has solved the problem. The best example of the marketplace solution, said Case, is the “Memorandum of Understanding” between his company and Time Warner.

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