AOLTW GETS REPRIEVE

Federal Trade Commission officials considered a new Internet-access contract between TW and AOL competitor EarthLink as a major step forward, people briefed on the talks told the Wall Street Journal. But officials wanted more information on the EarthLink contract and could still seek changes before approving a merger, these sources said.

The FTC had demanded that Time Warner negotiate a contract with a major AOL competitor to provide Internet access over TW cable systems before AOL itself could sell such a service.

FTC officials also are pressing for assurances that TW's news and entertainment programming will remain available to AOL's Internet competitors if the companies are permitted to merge, sources told the Journal. On Monday (11/27), AOL and TW rejected this demand.

Still, the EarthLink contract moved settlement talks ahead because the pact would offer high-speed access to EarthLink below prices offered by phone companies for similar service, people briefed on the talks said.

A series of meetings are planned this week to go over other contract terms, delaying a previously scheduled Thursday vote against the deal by the five-member commission, the people said.

But even as settlement talks continued, FTC officials took new steps toward a lawsuit. Commission staff last week sent formal notification to a number of companies and groups that documents they provided during the investigation of the merger may be used "in connection with an action in U.S. District Court seeking to preliminarily enjoin the acquisition of TW by AOL."