AOL-Time Warner Merger: Is Big Really Bad? Well, Yes

The other day a friend of mine was clearing out his attic, and he came across a copy of a 1967 newspaper called the World Journal Tribune. Its name was an amalgam of three defunct New York City newspapers, each of which had possessed a sharply defined identity. But by the time they morphed into the World Journal Tribune, its identity was as meaningless as its name.

So I was amused to read in an account of the press conference announcing the merger of Time Warner and America Online how AOL's Steve Case, who usually wears khakis and a denim shirt, put on a suit for the occasion, while Time Warner's Gerald Levin, who used to be a conservative dresser, showed up without a tie. The identity blur begins.

Then came the happy news. While I was naively prepared to believe the main purpose of the merger was to make more money for shareholders, all present assured us that the new entity was there to serve the public interest. Case: "Ultimately, this is about serving consumers." Levin: "The values that we feel we can leave as a legacy...have a lot to do with the social destiny of people everywhere."

Not only that, but because this was not a merger between two companies in the same field--cyberspace being something new under (or rather beyond) the sun--they foresaw no antitrust problems, even though the $165 billion takeover is the biggest in history. "This thing is instantly available everywhere...so it's my view that this is kind of a clean break with the past," said Levin. "I don't see a regulatory problem." He is undoubtedly right as a predictor of government (in)action. Which is to say the takeover will probably be the beneficiary of the Robert Bork-Chicago School efficiency theory of antitrust, which bloomed with Reagan and his deregulators.

Besides, editorialists at both the New York Times and the Washington Post tell citizens worried about media diversity and consumers worried about their pocketbooks to relax. This is a merger of cyber apples and earthbound oranges. AOL already has 20 million customers (about half the market) for the dial-up services that link computers to the Internet. Time Warner is already the world's biggest media conglomerate. Joining the two won't substantially increase either's share of its market. As the Post put it, "Down the road, there may be reasons to fear the muscle of AOL Time Warner ... But our sense is that in the near future the new company does not endanger consumer choice or competition."

Of course, the problem has precisely to do with "down the road"--two or three mergers down the road. Never mind that AOL's Case had been agitating for an FCC rule mandating nondiscriminatory access to Internet service providers (known as open access). Now that AOL has bought its own access, he seems to be saying that no governmental regulatory intervention is necessary. Good old AOL Time Warner will provide open access voluntarily.