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The BBC's Richard Quest
"The US regulator insisted on certain changes"
 real 56k

Thursday, 14 December, 2000, 17:50 GMT
AOL-Time Warner merger approved
AOL and Time Warner logos
US regulators have voted to approve the merger between America Online and Time Warner, nearly a year after they announced what was then the biggest merger in corporate history.

America's five-member Federal Trade Commission (FTC) voted unanimously in favour of the merger, following 11 months of studying what is now the $109bn purchase of Time Warner by AOL.

There have been a wide range of concerns raised by rivals and consumer groups, many of whom fear that the merged firm might limit consumer choice for internet content and access.

Time Warner
Headquarters: New York
Formed in 1990
Employees: 69,000
1999 revenue: $27.3bn
Market Value: $96bn
TV services in 15 countries and seven languages, including CNN
Largest premium TV network, HBO (35m US subscribers)
Film studios Warner Bros.
Second largest US cable system (13m subscribers)
120m magazine readers
320,000 high-speed Internet subscribers

The two companies managed to soothe the FTC's fears, but they still have to secure approval from the Federal Communications Commission, having been given the green light from regulators in Europe earlier this year.

The merger could now be completed at the end of this year or early next year.

Many observers believe the FTC decision could set a precedent for how regulators will oversee the development of new internet services.

"In the broad sense, our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology," Robert Pitofsky, chairman of the FTC, said. "This order is intended to ensure that this new medium, characterised by openness, diversity and freedom, will not be closed down as a result of this merger."

The companies have called the agreement "a win for consumers" .

AOL Milestones
1992: floats on stock market
1994: 1m subscribers
1996: launches in Europe
1997: 10m subscribers
1998: acquires Compuserve and Netscape
1999: 20m subscribers
2000: merges with Time Warner

The "commitment to consumer choice embodied in the FTC agreement will become a model for other cable systems throughout the country," they said in a joint statement.

AOL is America's largest internet service provider with 26 million subscribers.

Time Warner is a long established media giant which runs some of the best-known names in entertainment, including CNN, HBO and movies and music from Warner Brothers.

Since it was first announced, the deal has lost almost a third of its value because AOL's share price has fallen 50% as investors have fled internet stocks.

Shares in Time Warner rose $1.90 or 2.6% to $74.50 while shares in AOL closed 3% or $1.55 higher at $50.

Cable dominance

Competitors and regulators had feared that together, the two companies might be able to shut out competitors as new faster cable-based internet services are rolled out.

Time Warner has an extensive network of cable lines, capable of serving about 21 million homes, and through which the next wave of web access is expected to be piped.

America Online
Headquarters: Dulles, Virginia
Founded 1985
Employees: 15,000
2000 revenue: $6.89bn
2000 profit: $1.2bn
Market value: $113bn
World's largest online service
Most popular e-commerce platform
24m AOL members
2.8m CompuServe members
4.4m international members

In response to some of the regulator's concerns the two companies have agreed to conditions aimed at preventing them from dominating the developing online world.

Under the settlement, the combined business cannot discriminate in providing Time Warner content to internet companies besides AOL.

The merged company also cannot discriminate against content from other sources that it uses on its internet systems or interactive television service.

The companies have given assurances that consumers would have a choice of online providers, not just AOL, on Time Warner's cable internet systems

To back up that offer, Time Warner forged an agreement to offer AOL's chief rival, EarthLink, a deal which regulators have been studying to see if prices and terms are fair.

The agency wants a blueprint in place so other internet providers, such as Microsoft's MSN service, could reach similar agreements with Time Warner.

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See also:

11 Oct 00 | Business
EU statement: AOL, Time Warner
22 Sep 00 | Business
AOL/Time Warner concede to EU
06 Sep 00 | Business
AOL, Time Warner face Europe probe
05 Sep 00 | Business
US, EU threat to AOL deal
20 Jul 00 | Business
AOL's billion dollar profits
19 Jun 00 | Business
EU hurdle to AOL, Time Warner merger
11 Oct 00 | Business
EU clears AOL merger
17 Mar 00 | Business
Bertelsmann sells AOL stake
14 Dec 00 | Business
The FTC judgement in full
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