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.