Proposed AOL deal raising concerns

U.S. Senate considers hearings

companies' stocks decline sharply

January 12, 2000|By Mark Ribbing | Mark Ribbing,SUN STAFF

A day after American Online Inc. announced its bid to buy Time Warner Inc., the chief executives of the two companies publicly campaigned in support of the deal yesterday, saying it would bring broad social benefits.

Policy-makers expressed concern about whether the biggest corporate acquisition in history would be in the country's best social and economic interests, while skeptical investors sent the stocks of both companies into sharp declines.

"This is not just about big business. This is not just about money," said Gerald M. Levin, chairman and chief executive officer of Time Warner. "This is about making a better world for people, because we now have the technology and the instruments to do that."

Levin's counterpart at AOL, Steve Case, said on NBC's "Today" show: "Together we have an unbelievable opportunity to really make a difference, not just in terms of the services people use, but also in terms of the kind of impact we can have on society."

The $179.1 billion deal, unveiled Monday, would create a company with unparalleled Internet and media assets. AOL is the largest Internet access company, and Time Warner owns CNN, Time magazine and a galaxy of other well-known news and entertainment entities.

That immensity gives some policy-makers and industry experts pause. The AOL-Time Warner marriage would continue a long trend of media consolidation and raises the prospect of a single company with unequaled power over what Americans read and watch.

Sen. Patrick J. Leahy, a Vermont Democrat, said in a statement that the acquisition "may make strategic sense" for the companies involved, but "at some point, all of this concentration and convergence has implications for consumers because it will minimize competition and choice, giving us fewer voices and fewer pipelines in the marketplace."

Two of Leahy's colleagues on the Senate Judiciary Committee -- Republican Mike DeWine of Ohio and Democrat Herb Kohl of Wisconsin -- said they plan to conduct hearings on the acquisition.

Senate staff members said the hearings would probably be held before the lawmakers' spring recess in late April but that the timing would depend on when Case and Levin could appear together in Washington.

One of the chief concerns raised by the AOL-Time Warner deal involves Internet access. The telephone and cable TV companies that carry Internet traffic are scrambling to offer high-speed connections that greatly improve the quality of Internet transmissions. In the past, AOL has been concerned that those phone and cable companies, such as AT&T Corp., would seek to control Internet access on those networks and bar competing Internet service providers.

AOL has advocated open access, saying it had no high-speed wires of its own and depended on access to other companies' networks.

The acquisition of Time Warner would change that. Time Warner is the nation's second-largest cable company, and AOL would gain access to those high-speed communications lines. With that bounty in hand, AOL might be tempted to give up its open-access crusade and seek to dominate Internet access on Time Warner's cable systems.

Mark Cooper, research director of the Washington-based Consumer Federation of America, said open Internet access becomes especially important in a market in which two companies, AT&T and Time Warner, own such a large share of the nation's high-speed cable networks.

"They monopolize all the cable wires. They dominate all the [cable television] programming. Their wires don't even overlap, because they don't compete with each other," Cooper said.

Other opponents of the deal said it would mark another long step in the march toward media consolidation.

In recent years, U.S. magazines, newspapers, television networks, book publishers, movie studios, Internet service providers and other industry organizations have increasingly come under the control of a small number of large corporations. The Sun, for example, is owned by Times Mirror Co., a nationwide newspaper chain based in Los Angeles.

Some industry experts say the trend has ensured the survival and even the improvement of many broadcast and print outlets. Critics say it has contributed to a decline in the quality and variety of news sources.

"The defenders of deals like this one will claim exultantly that we now have three 24-hour news operations on cable. Well, fine. I challenge anyone to watch those channels and tell me what the difference is" between them, said Mark Crispin Miller, a professor of media studies at New York University.

Miller said the growth and diversification of large media companies will make it more difficult for journalists to cover the activities of high-technology businesses owned by or affiliated with their parent companies.

The International Federation of Journalists warned yesterday that the AOL-Time Warner deal could "threaten democracy, plurality and quality in media."

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