Sen. Hatch: AT&T-Time Warner a threat

Summary:If the industry combines AT&T's 25 percent stake in the Time Warner Entertainment with AOL there could be big problems for consumers, senator warns.

WASHINGTON -- The chairman of the Senate Judiciary Committee warned that ties between AT&T Corp. and a merged America Online Inc. and Time Warner Inc. threaten competition, even as AOL vigorously defended those ties.

The ties -- AT&T owns a 25 percent stake in the Time Warner Entertainment partnership -- effectively link what many expect will be the nation's two largest providers of high-speed Internet access, said Sen. Orrin Hatch (R., Utah).

"I am concerned that the AOL-Time Warner merger, if approved with this intertwined interest with AT&T, might have anticompetitive effects to the detriment of consumers," the chairman wrote in a letter to the Federal Trade Commission, which is reviewing the deal.

Gene Kimmelman, co-director of the Consumers Union advocacy group in Washington, welcomed Hatch's letter. "Policy makers are finally choking on the enormous level of consolidation and cross-ownership in the cable industry," he said.

Meanwhile, in a letter to the Federal Communications Commission, AOL (aol), a Dulles, Va., Internet-services provider, said it shouldn't be forced to sever ties with AT&T (T) as a condition of the merger because the agency addressed the issue in a review of an earlier merger. "Neither through ownership nor contractual relations will this merger give rise to any 'AT&T connection' that would harm competition in any relevant area," lawyers for AOL and Time Warner (twx) wrote in a letter to the FCC.

Time Warner Entertainment holds most of Time Warner's cable-television and entertainment-programming operations. AT&T, of New York, acquired its 25 percent stake when it bought cable giant MediaOne Group this year. In approving that merger, the FCC ordered AT&T to reduce its cable holdings to below a national ownership cap of 30 percent of cable households; one option it was given to come into compliance was to sell the Time Warner Entertainment stake.

The market power of AOL and Time Warner was the No. 1 topic Friday during the second round of hearings in front of the House Commerce Committee's telecommunications panel.

At the hearings, rivals of AOL and Time Warner urged the government to require Time Warner to let multiple Internet providers use its cable-TV lines as a condition of the proposed deal, an important issue in both the FTC and FCC reviews. The rivals disagreed on whether the government should require such a policy for the entire cable industry.

Louis Meisinger, executive vice president and general counsel for Walt Disney Co., which has led the charge against the merger, and Maggie Wilderotter, chief executive of the interactive TV company Wink Communications Inc., of Alameda, Calif., told lawmakers they supported open access only in the AOL-Time Warner case. Others told the panel that the government should mandate open access for the entire industry -- a topic the FCC began looking into last month.

"I don't need government to force people to use my application, but apparently I need government to help AOL to realize its public commitments," said Margaret Heffernan, chief executive of iCast, an Internet entertainment concern in Woburn, Mass., that offers an instant-messaging service in competition with AOL.

Heffernan decried AOL for raising security and privacy concerns as the basis for not letting iCast customers communicate with users of AOL's service. "Believing these motherhood statements is like believing the Berlin Wall was really built for the safety of the East German citizens," Heffernan said.

After the hearing, George Vradenburg, an AOL senior vice president, said the company is working to develop a way for all instant-messaging services to interact. "[We] don't know which path is going to lead to interoperability more rapidly but obviously we're working on both paths," Vradenburg said. WASHINGTON -- The chairman of the Senate Judiciary Committee warned that ties between AT&T Corp. and a merged America Online Inc. and Time Warner Inc. threaten competition, even as AOL vigorously defended those ties.

The ties -- AT&T owns a 25 percent stake in the Time Warner Entertainment partnership -- effectively link what many expect will be the nation's two largest providers of high-speed Internet access, said Sen. Orrin Hatch (R., Utah).

"I am concerned that the AOL-Time Warner merger, if approved with this intertwined interest with AT&T, might have anticompetitive effects to the detriment of consumers," the chairman wrote in a letter to the Federal Trade Commission, which is reviewing the deal.

Gene Kimmelman, co-director of the Consumers Union advocacy group in Washington, welcomed Hatch's letter. "Policy makers are finally choking on the enormous level of consolidation and cross-ownership in the cable industry," he said.

Meanwhile, in a letter to the Federal Communications Commission, AOL (aol), a Dulles, Va., Internet-services provider, said it shouldn't be forced to sever ties with AT&T (T) as a condition of the merger because the agency addressed the issue in a review of an earlier merger. "Neither through ownership nor contractual relations will this merger give rise to any 'AT&T connection' that would harm competition in any relevant area," lawyers for AOL and Time Warner (twx) wrote in a letter to the FCC.

Time Warner Entertainment holds most of Time Warner's cable-television and entertainment-programming operations. AT&T, of New York, acquired its 25 percent stake when it bought cable giant MediaOne Group this year. In approving that merger, the FCC ordered AT&T to reduce its cable holdings to below a national ownership cap of 30 percent of cable households; one option it was given to come into compliance was to sell the Time Warner Entertainment stake.

The market power of AOL and Time Warner was the No. 1 topic Friday during the second round of hearings in front of the House Commerce Committee's telecommunications panel.

At the hearings, rivals of AOL and Time Warner urged the government to require Time Warner to let multiple Internet providers use its cable-TV lines as a condition of the proposed deal, an important issue in both the FTC and FCC reviews. The rivals disagreed on whether the government should require such a policy for the entire cable industry.

Louis Meisinger, executive vice president and general counsel for Walt Disney Co., which has led the charge against the merger, and Maggie Wilderotter, chief executive of the interactive TV company Wink Communications Inc., of Alameda, Calif., told lawmakers they supported open access only in the AOL-Time Warner case. Others told the panel that the government should mandate open access for the entire industry -- a topic the FCC began looking into last month.

"I don't need government to force people to use my application, but apparently I need government to help AOL to realize its public commitments," said Margaret Heffernan, chief executive of iCast, an Internet entertainment concern in Woburn, Mass., that offers an instant-messaging service in competition with AOL.

Heffernan decried AOL for raising security and privacy concerns as the basis for not letting iCast customers communicate with users of AOL's service. "Believing these motherhood statements is like believing the Berlin Wall was really built for the safety of the East German citizens," Heffernan said.

After the hearing, George Vradenburg, an AOL senior vice president, said the company is working to develop a way for all instant-messaging services to interact. "[We] don't know which path is going to lead to interoperability more rapidly but obviously we're working on both paths," Vradenburg said.

Topics: AT&T, Government

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