FRAMINGHAM (04/25/2000) - Four of the nation's leading consumer groups will present a 115-page petition to the Federal Communications Commission (FCC) tomorrow asking that the agency reject America Online Inc.'s bid to acquire Time Warner Inc.
The groups - led by Consumers Union of the United States Inc., the Yonkers, New York-based publisher of Consumer Reports magazine - say that consumers will suffer if the deal goes through.
"The merger would allow AOL/Time Warner to so dominate the market for Internet service and cable television that consumers could be left with higher prices and fewer choices and limited competition," said Consumers Union spokesman David Butler.
The other consumer groups joining the petition are the Center for Media Education, the Consumer Federation of America and the Media Access Project.
The $350 billion, all-stock deal - which must be approved by the FCC - would give AOL, the world's largest online access company, a new broadband distribution platform for its services, as well as new subscribers through access to Time Warner's media outlets. Time Warner's media outlets include cable networks; publishing, music and film companies; and cable and digital media. Some of its best-known properties are the magazines Time, Sports Illustrated, Fortune and People, as well as the cable television networks CNN and HBO, the movie company Warner Brothers and Warner Music.
The new company, to be called AOL Time Warner Inc., would have a combined revenue of more than $30 billion.
Butler said the consumer groups are concerned about the relationship between AT&T Corp. and AOL/Time Warner. He said that if the FCC approves AT&T's pending acquisition of cable company MediaOne Group Inc. - which owns a 25.5% stake in Time Warner Entertainment Co. - then AT&T and AOL/Time Warner would control more than half the cable lines in the country. Butler said that would violate FCC rules.
Last year, the FCC ruled that one company couldn't serve more than 30% of all the cable and satellite television households in the U.S. Published reports today suggested that the FCC plans to approve AT&T's acquisition of MediaOne if MediaOne sells off some of its assets, including its stake in Time Warner. The FCC couldn't be reached for comment.
Butler said the consumer groups are also concerned that AOL, once an advocate for open access to the broadband Internet, has shifted its position since the merger was announced. Butler said AOL previously claimed that the only way to guarantee open access was through government regulation. But since the news of the merger, Butler said, AOL has stopped supporting government regulation.
"Given this shift in position, we (feel) we need a public policy (on this issue)," Butler said.
The FCC's deadline for public comments on the merger is tomorrow.
The consumer groups will hold an 11 a.m. press conference tomorrow at Consumers Union's Washington office and release their petition to the FCC.
AOL didn't return a telephone call seeking comment.