WASHINGTON-Senate Judiciary Committee members last week voiced serious concerns about the proposed $160 billion America Online Inc.-Time Warner Inc. merger, a deal that takes on added significance in light of new strategic partnerships between AOL and several wireless firms.
“[T]he most significant danger to the promise of the Internet is the possibility that a single company or a handful of companies control who can access or develop applications and content for the Internet,” said Sen. Orrin Hatch (R-Utah), chairman of the Judiciary Committee, at last Tuesday’s hearing. “I believe that this danger exists whether the ownership is concentrated in the architecture, the hardware, the content or the operating systems needed to navigate broadband architecture.”
Hatch said he will hold more hearings to hear from consumer advocates and others. The Senate communications subcommittee held a separate hearing on the planned AOL-Time Warner merger.
Time Warner, the world’s top entertainment-multimedia firm, would give AOL high-speed broadband access to millions of American homes by way of Time Warner’s cable TV systems. AOL would give Time Warner a new, powerful medium-the Internet-over which to offer content.
Wireless technology, like that to be provided to AOL by Sprint PCS and Nokia Corp., will give consumers anytime-anywhere access to the Net. While the wireless industry’s foray into the world of the Internet offers carriers and vendors huge opportunities, it also gives rise to a new set of policy and business challenges.
In addition to privacy questions raised by the Net generally and mobile advertising specifically, the marriage of wireless and the Net is forcing executives to figure out how to leverage voice-based wireless networks to exploit wireless data opportunities.
At the same time, a potential fallout of Internet-based business models for wireless carriers is losing control of subscribers and becoming secondary players in the digital mix.
AOL Chairman Steve Case said the merger would benefit consumers by empowering them and giving them more digital choices.
“Consumers have been empowered, and they are exercising their power every day-seeking out the Internet service that meets their needs and the content that matches their interests: movies, books, stock quotes … even polling data,” said Case. “I believe that AOL-Time Warner will only accelerate this trend.”
Gerald Levin, chairman and chief executive officer of Time Warner, played the children card in promoting the deal.
“Nothing has been more crucial to the agreement we’ve reached to merge our companies than our vision of AOL-Time Warner’s ability to be a catalyst for meaningful change in the way our country-indeed, our world-offers its children the opportunity for creative expression, intellectual enrichment and material success,” said Levin.
Lawmakers are not so sure.
Sen. Mike DeWine (R-Ohio), chairman of the Senate Judiciary antitrust subcommittee, said even though AOL and Time Warner do not compete with each other, the deal is troublesome.
“[T]he more I examine this deal the more I am convinced that it does raise very significant competition and public policy issues that must be thoroughly explored,” he said.
Sen. Herb Kohl (D-Wis.), ranking minority member of the Senate Judiciary antitrust panel, agreed.
“This deal appears to continue a troubling trend: the emerging American `kerietsu’ of interlocking relationships among the major media, Internet and telecom barons,” said Kohl.
Nonetheless, Kohl predicted the Federal Trade Commission and the Federal Communications Commission will ultimately approve the AOL-Time Warner merger.
Consumer groups, like Hatch, are skeptical about promises by AOL and AT&T Corp., which intends to acquire cable TV giant MediaOne, to provide open access to broadband Internet pipes they will control.
“To put it bluntly, it is patently obvious that public policy, to determine the free flow of commerce and information in the `Internet Century,’ cannot be left to the whims of the large corporations whose commercial interests change with every merger or acquisition,” said Mark Cooper, research director of the Consumer Federation of America.
In a new study by CFA, Consumers Union and Media Access, the groups said AOL and AT&T reversed their position on open access to the broadband Internet.
The strongest statement in favor of the AOL-Time Warner merger came from Senate Judiciary Committee member Charles Schumer (D-N.Y.), who said, “The government should be hesitant to interfere in new mergers.”
Time Warner, which is headquartered in New York City, was the fourth-largest contributor to Schumer’s successful 1998 Senate race against then-incumbent Republican Alfonse D’Amato.
