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Mickey Fears AOL/Warner Mega-Merger

On Thursday, March 2, 2000, South Carolina's Democratic Senator Ernest

Hollings of the Senate Commerce Committee told Time Warner CEO Gerald Levin

and AOL chairman Steve Case that the "Disney people are afraid to come

testify" about their concerns regarding the proposed merger of the two

companies. Hollings told Levin and Case, who were in Washington D.C.

testifying about their merger, that Disney is concerned that Time Warner

will retaliate against the company by relegating its cable networks to

inferior positions on Time Warner-owned cable systems' channel lineups or

remove them from the systems completely. Refusing to discuss Hollings'

statement directly, Preston Padden, Disney's top Washington lobbyist, said,

"We are studying the complex issues posed by the merger." Already, the ABC

television network and Time Warner are squabbling over channel positions on

cable systems in Houston, Texas. In turn, Time Warner systems may lose ABC

signals in other markets as well. Disney is worried that a Time Warner/AOL

merger will create an Internet stronghold that will direct Web surfers to

its own content at the expense of other companies. In addition, the merged

forces could make it easier and faster to access Time Warner's content via

AOL's high speed Internet network. The fearful Disney has had trouble

finding any support for its effort from other studios and content owners.

Earlier in the week in front of the Judiciary Committee, Case and Levin

insisted that the company will not become an Internet bottleneck. At

Thursday's hearing, Levin firmly declared that AOL would enjoy no

preferential treatment on Time Warner cable systems. As they did earlier in

the week, Levin and Case presented a "Memorandum of Understanding" between

the two companies that promises that Time Warner's high speed Internet

network would be open to rival Internet service providers such as Earthlink

and Prodigy. Senators expressed skepticism about the pledge between Time

Warner and AOL. Congress does not have the power to block the deal, which

must be approved by the Federal Trade Commission and the Federal

Communications Commission, however these commissions could impose

conditions on the deal as part of their approval. Several senators have

suggested that the agencies use the Time Warner/AOL "Memorandum of

Understanding" as a foundation for their okay.

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Rick DeMott
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