AOL-TW, FTC PLAY CHICKEN

Mergers In Mirror Are Actually Farther Away Than They Appear
Battle lines are being drawn by both the Federal Trade Commission and America Online and Time Warner.

Federal regulators are demanding Time Warner make its news and entertainment content available to AOL rivals as a condition for the approval of the companies' merger. And USA Today is reporting that AOL and TW are prepared to go to court, even at the risk of delaying their merger, for their right to do as they please with Time Warner's content.

Time Warner has said it would not withhold its content because the company wants to reach a wide audience. However, TW wants to distribute the content to AOL first and not simultaneously among rival ISPs.

The FTC is prepared to sue AOL-TW to block the deal if it doesn't get concessions it says are needed to preserve competition.

Regulators also want to ensure that AOL won't move all of its Internet service from high-speed telephone lines (or DSL) to broadband cable.

"AOL is the 800-pound gorilla of the Internet, and on that level it's important to have them supporting DSL," said Pat Hurley, a telecommunications industry analyst. "Right now, though, DSL is doing fine without them."

Despite the bumps in the road, AOL Chairman Steve Case is still optimistic about the merger gaining approval. "There's really no question in my mind that the merger will close," Case said at an investor conference in Arizona. "And it will happen in the relatively near future. I think weeks rather than months."

The FTC is expected to make a decision by Dec. 15.

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