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Press Release

    Tech Bytes - Tid Bits in Tech News: FCC: Enough Already with the AOL Merger

    09/01/2000

    Sometimes cultural trends take a while to migrate from California to the east coast. And they take a particularly long time to penetrate the Washington Beltway. Take, for example, the Silicon Valley concept of “Internet time,” as in: The pace of our high-tech economy has forced competitive people and businesses to move on Internet time.

    At the Federal Communications Commission, watches are still set precisely to Postal Service time. As the pace of business accelerates, this extracts an increasingly expensive bureaucracy tax. The FCC’s foot-dragging on the proposed AOL/Time Warner merger is exhibit A.

    On February 11th, Time Warner Inc. and AOL Inc. applied to the FCC for permission to transfer their various FCC licenses to the combined company. This should have been a formality. Even if you believe that government should be granting communications licenses instead of just letting people communicate, it’s not like these companies were applying to transfer all their licenses to Vladimir Putin or Larry Flynt. Two companies, which have won the support of tens of millions of consumers, wanted to combine in order to offer even more competitive products to those consumers.

    By law, the FCC is supposed to review license transfers to ensure that the deal will not harm consumers. But the staff of the FCC now seems to believe that their job is to ensure that a deal will not harm competitors.

    That’s why the FCC’s exhaustive review of the merger is about to enter its sixth month – an outrage. After various requests for documents (which the companies had fulfilled) numerous petitions from assorted parties and a public hearing in July, the staff sent mid-August letters to AOL and Time Warner demanding a new round of data and documents. One line of questioning focused on the channel guide that will appear on the “AOLTV” interactive service and what the terms will be for video programming producers who want to create interactive features to appear on the service. This is a matter for the Federal government.

    Right now, I don’t think even the companies involved in this developing industry know which business models will succeed, so I’m pretty confident the FCC doesn’t either. But the staff of the agency apparently feels comfortable reviewing the terms and setting appropriate conditions for interactive TV deals. Obviously, a combined AOL/Time Warner will do its best to make money and beat the competition. After all, that’s why they did the deal, right? You don’t go through the hassle and sweat of a merger to become less competitive. So let’s allow consumers, not bureaucrats, to judge whether the combination yields a better product. This week, AOL and Time Warner responded to the agency’s latest request for documents. Now it’s time for the FCC to approve this merger.

    James K. Glassman is the host of Tech Central Station.