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FCC GETS SNOOPIER
WITH AOL-TW MERGER

Regulators Raise More Questions, AOL-TW Left Only With "Phone-A-Friend" Lifeline
Federal regulators focused their attention a little more closely on the proposed America Online-Time Warner merger, honing in on key concerns and posing a few new questions to the companies on Monday (8/14), the Wall Street Journal reported.

The Federal Communications Commission zeroed in on the merged company's plans to open its cable pipelines to multiple Internet-service providers and to grant competitors access to AOL's instant-messaging network. The FCC requested specifics on companies supplying competing IM services.

"We're pleased with how the regulatory review is proceeding," said AOL spokeswoman Kathy McKiernan, giving the spin that these requests for more information were a normal part of the merger reviews.

The FCC also requested documents supporting Time Warner's stated intent to get out of an exclusive contract with Internet service provider Road Runner.

According to a quarterly filing with U.S. securities regulators, Time Warner could be required to take a one-time charge ranging from $200-$300 million related to the proposed restructuring of the Road Runner high-speed Internet-access venture. Part-owner AT&T has agreed to divest its ownership position, as a condition (imposed by the Justice Department) of the company's acquisition of the MediaOne cable group. Time Warner said the charge would be used to "cover any premium paid to redeem Road Runner's Preferred Equity Interest, lease termination and other related restructuring costs."

While some of these concerns were dealt with in a hearing last month—attended by both FCC commissioners and officials of the two companies—the FCC questioned whether AT&T's cable systems would carry AOL's Internet service and whether TW's cable system would carry AT&T's local phone service. And just who it was who murdered Prof. Plum in the conservatory with the lead pipe.

Another request made of the companies by the FCC was whether the merged company would give less prominence to programming from unaffiliated video networks on an electronic AOL-TV programming guide and whether there would be a difference for consumers when accessing partner versus non-partner content of AOL's TV service. AOL TV is a recently launched initiative aimed at allowing the viewer to surf the Internet using a television, visiting e-commerce and other sites related to the programming.

The FCC also asked whether AOL had entered into any contracts to provide Internet service over digital-subscriber lines, which provide high-speed Internet access over phone lines. The commission also asked if a customer who subscribes to a DSL service that doesn't have an Internet-service contract with AOL would be able to subscribe to AOL.

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