January 04, 2001, 4:14 PM — THE U.S. FEDERAL Trade Commission unanimously accepted merger terms offered by America Online and Time Warner Thursday.
In the consent order proposed by AOL and Time Warner, and approved 5-0 by the FTC, the merged company would be required to open its cable system to competing Internet service providers, would be prohibited from interfering with content passed along its cable bandwidth by non-affiliated ISPs, and prevented from entering into exclusive arrangements with other cable companies with respect to Internet services or interactive TV services, according to a statement on the FTC Web site.
"In the broad sense, our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology," said Robert Pitofsky, chairman of the FTC, in the statement. "This order is intended to ensure that this new medium, characterized by openness, diversity, and freedom, will not be closed down as a result of this merger."
AOL and Time Warner said in a joint statement that they are pleased with the FTC's approval, and that they "expect that their commitment to consumer choice embodied in the FTC agreement will become a model for other cable systems throughout the country."
The accord requires at least one AOL competitor to offer cable Internet service on a Time Warner-owned network before AOL can offer services on the same network. In most cases, New York-based Time Warner must open its networks to two or more competitors after Dulles, Va.-based AOL starts offering services. If technology allows it, as many as three other ISPs must be added after that. ISP Earthlink and Time Warner Cable signed an open-access agreement in November.
The FTC consent order specifically promotes development of DSL technology and access, requiring AOL-Time Warner to market and offer AOL's DSL services to subscribers at uniform prices, regardless of whether or not Time Warner cable Internet access is available in the same areas.
The consent order is in effect for five years. Terms of the deal between the FTC, AOL, and Time Warner appear complex, according to industry observers.
"It's good that it's finally happening after a year, but it's making it look extremely complex all of a sudden," said Mark Snowden, a senior research analyst for media and entertainment at market research firm Gartner, based in Stamford, Conn.
Details of the deal -- who gets access, where, when, and for how much -- are the key to the two companies' bargain, and should allay the fears of competitors and interest groups opposed to the merger, he said.