Steve Case and Jerry Levin are so confident in the future of AOL Time Warner that they just aren't going to let powerful competitors, wary consumers or, especially, the Federal Government stop them. That's why for more than six months they directed their top executives to endure hundreds of hours of interrogation in Room No. 385 of the Federal Trade Commission building in Washington, and why they showered thousands of proprietary documents on their inquisitors. And it's exactly why they faxed, on the eve of last week's FTC vote, the final written concession that led to unanimous approval of the $112 billion marriage between Case's America Online and Levin's Time Warner.
The combination will be, for better or worse, the world's biggest media conglomerate. (Of which TIME will be a part.) It's a vast empire of broadcasting, music, movies and publishing assets, complemented by AOL's dominant Internet presence, all fed to consumers, ultimately, through Time Warner's cable network. Think of it as AOL Time Warner Anywhere, Anytime, Anyhow.
In the world of the near future, all manner of content--magazines, movies, music, books, shopping--will be pouring into your home through your cable television line. The cable is now known as broadband because, even though it looks the same, technology has made it fatter and faster. When broadband access fuses the new and old economies with a bang, consumers will have a simple concern: If the broadband world is ruled by one company, will we have to pay more? Will we have a choice of what we watch? And if we don't stop them now, will we be able to later?
Nobody knows. And that put the FTC in the ungainly position of regulating the future. The FTC's solution was to ensure that the pipes, just like federal highways, were open to everyone, making "open access" to the two companies' cable and Internet services the price of approval. Case and Levin agreed to allow at least three other Internet service providers access to Time Warner cable lines and decreed that AOL would continue to invest in slower, phone-based DSL service.
But Case and Levin wouldn't budge when the FTC demanded the right to regulate the placement of AOL Time Warner content, fearing they would lose control of their own products. It was a make-or-break issue. In their 11th-hour concession, signed off on at 5:30 last Wednesday afternoon, they agreed to report any complaints from competitors who believe they've been denied AOL Time Warner content.
If there's a reason analysts are so bullish, competitors so fearful and regulators so confused, it's that even now very few people understand the future scope or reach of a company as big and diverse as AOL Time Warner. Time Warner is in the traditional media business; AOL is an Internet company. Because the two didn't overlap, antitrust lawyers saw no need for concern. But the more people looked, the more they thought this was not just a marriage of two companies in different arenas. It was potentially game changing.