Time Warner merger battles on two fronts

Rough seas for two prospective mergers

Fighting to finalize their merger, AOL and Time Warner will be on both sides of the Atlantic in the coming days to allay objections that the proposed mega-union will create a mega-monopoly.

Thursday and Friday, high-level execs from AOL and Time Warner will testify before the European Commission, which has oversight over mergers. Appearing for AOL will be Barry Schuler, VP of interactive services. Speaking for Time Warner will be president Richard Parsons.

Access issues

Reports from the EC suggest that AOL and Time Warner will have to agree to a range of open access requirements to win approval. The commission believes it’s possible the new company, combining AOL’s Internet subscriber base with TW content, could further strengthen AOL’s global lead in subscriber market share at the expense of its competitors.

Later this month, Rep. W. J. Tauzin (R-La.) will ask AOL chairman Steve Case and Time Warner CEO Gerald Levin to explain the merger’s impact on the future of interactive television to the House Commerce subcommittee on telecommunications, trade and consumer protection. Tauzin is chairman of the subcommittee.

Case and Levin have agreed to appear before Tauzin and other subcommittee members sometime this month. “The whole push to digital migration is with the idea that the home entertainment center will become the home information center in the 21st century,” a spokesman for Tauzin said. The proposed merger would bring together the country’s largest Internet provider and the world’s largest media company, as well as one of the top cable providers in the U.S.

Question of control

Those opposed to the merger, such as the Walt Disney Co., argue the resulting combination would allow AOL Time Warner to control all content delivered over valuable high-speed cable lines, thereby shutting out other providers of entertainment.

AOL and Time Warner continue to insist they will keep cable lines open to other competitors.

The European Commission is simultaneously weighing the merits of the Warner Music/EMI merger, due to be discussed today. Reports indicate that merger could receive a total veto.

The EC is increasingly worried Warner Music/EMI would lead to domination of the global recorded music market by just four giant companies and would give Warner Music/EMI a particular advantage in the market for the digital delivery of music, thanks to the parallel AOL merger.

In the U.S., both the FTC and the Federal Communications Commission must clear the merger. The EC will issue its final judgment on the AOL/Time Warner and Warner Music/EMI mergers in early October.

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