FCC Defends AOL/Time Warner Decision

The Federal Communications Commission (FCC) today
defended its decision to "stop the clock" on its review of America
Online's acquisition of Time Warner in favor of letting
the Federal Trade Commission (FTC) decide the matter first, saying
action on the merger before antitrust regulators have had a chance
to air their concerns with the two companies would only delay the
FTC's decision.

In a letter responding to inquiries from Senate Antitrust
Subcommittee Chairman Mike DeWine, R-Ohio, and ranking Democrat
Herbert Kohl, Wisc., FCC Chairman William Kennard cited press
reports that the FTC and the two companies were still negotiating
"significant issues that could have a substantial impact" on the
FCC's review.

"It would be inconsistent with sound administrative procedure and
unfair to the parties for the FCC to rush to a decision under these
circumstances," Kennard wrote. "For example, if AOL and Time Warner
change their proposal with respect to the access issue in
significant way, it is not clear why it makes sense for the FCC to
rule on whether their application, as it now stands, is in the
public interest."

Late Thursday, the FTC announced it would hold off on taking action
against the proposed merger, citing last minute proposals from both
companies that "address competitive issues in connection with the
proposed merger." The FTC said it would delay action for a period of
not more three weeks.

Recent reports have said the FTC is pushing for AOL to provide firmer
guarantees
that competing Internet service providers will have equal access to Time
Warner's
cable TV lines after AOL buys the media giant.

Kennard's comments were in response to a Nov. 3 letter from both
DeWine and Kohl claiming that in waiting for the FTC's decision, the
FCC was violating its own self-imposed 180-day time limit for
approving license transfers between companies. The senators said it
was clear from the commission's decision that the FCC could not be
trusted to limit its own reviews periods, and that such restrictions
should be spelled out in new federal legislation.

The lawmakers also said the FCC too often defers to the FTC and the
Department of Justice before making a decision, and that the FCC
should not need to wait for FTC guidance, because the two public
interest reviews use entirely different standards in their
evaluations.

DeWine and Kohl have authored legislation to scale back the FCC's
merger review powers, as has Senate Commerce Committee Chairman John
McCain, R-Ariz., and House Telecommunications, Trade and Consumer
Protection Subcommittee Chairman W.J. "Billy" Tauzin, R-La.

DeWine and Kohl also have legislation on the table that would raise
the monetary bar at which company mergers would spark automatic
antitrust investigations.

In his reply, Kennard said compelling the FCC to act on license
transfers prior to action by the antitrust agencies could in many
cases result in both "waste and delay." He also noted that the
commission reserved the right to "stop the clock" when the parties
to a merger make last-minute changes to an application, again
hinting at a shift in strategy between the FTC and the two
companies.

"The extended period of antitrust review in this case reflects not
only the complexity of this particular merger, but also choices by
the merging parties as to the best way to advance their case. The
uncertainty of timing of agency action flows from those
circumstances."

The FCC stopped the clock on Oct. 11, 2000, two days before the
review was to have reached its 180th day. Kennard assured the
senators that the time clock would be restarted once the FTC has acted.

The FTC's site can be found online at http://www.ftc.gov.