The sale of part of AOL to Google is likely to get FTC approval because the stake is small and doesn’t cede much control, said experts in merger and antitrust law. A Google purchase of 5% of the world’s largest Internet service provider for $1 billion was unveiled late Tues. The much ballyhooed deal implies AOL is worth $20 billion, but analysts we contacted said that’s too high. Google is paying a premium for striking a strategic relationship with the Time Warner business, they said. Google likely would seek an early termination waiver of Hart Scott Rodino antitrust rules from the FTC, said merger and antitrust specialists. “The percentage is so small, you just go down to Washington and beg” for such a waiver, said Tom Burnett, research director of Wall Street Access. “They realize you don’t control the thing at 5 percent,” said Burnett, who advises clients on mergers and acquisitions. “I'd be surprised if they didn’t ask for that,” said Womble Carlyle lawyer Michael Hazzard. “It would save a lot of time and money,” he said. Further reducing the potential for friction -- lack of concern among some Internet service providers. Officials at Google and Time Warner didn’t comment. One media activist voiced concern about the deal. “The FTC and DOJ need to investigate the interactive marketplace, especially in the light of a potential Google and AOL.com combination,” said Jeff Chester, exec. dir.-Center for Digital Democracy. “Online privacy is placed at further risk by this deal.”
National video franchise reform, pushed by the Bells, is probably inevitable, NCTA Pres. Kyle McSlarrow said at a UBS investor presentation in N.Y.C. Meanwhile, sources said the cable industry is poised to unveil a plan for a family tier next week. The industry, which has faced criticism over the absence of a programming tier aimed at children, won’t be subject to a la carte requirements, said McSlarrow.
The FCC issued a wide-ranging information request on the Adelphia cable transaction, seeking data on regional sports networks (RSNs), carriage accords, broadband network neutrality and regional clustering of systems. Several of the requests appear to reflect concerns expressed by rivals, suppliers and media activists that the deal may: (1) Increase RSN concentration. (2) Stifle independent and unaffiliated programmers’ efforts at carriage. (3) Result in limiting access to some Web sites. Several observers said the request was unusual in its scope. The firms must respond by Dec. 19. Time Warner will reply “in a timely manner” and “at this point we don’t expect requiring an extension,” said a spokeswoman. Time Warner and Comcast, together paying $17.6 billion for Adelphia systems, will file responses separately, she said. Adelphia and Comcast representatives didn’t immediately comment.
Time Warner is seeking a compromise on indecency that should be shared by other media and entertainment firms, said a top executive. Offering customers individual channels, however, isn’t the answer to the concerns raised last week by FCC Chmn. Martin (CD Nov 30 p1) and others at a decency hearing, said Time Warner Cable CEO Glenn Britt. Instead, the industry must work toward another solution, he said, adding that he hasn’t figured out such a compromise. Officials at other cable operators, including Charter, said they agreed with Britt’s comments.
Many N.J. residents want all pay-TV firms to fully build out their systems, said a survey paid for by N.J. Cable Telecom Assn. (NJCTA). The group has opposed a lawmaker’s statewide franchising proposal (CD Nov 16 p4); another lawmaker introduced franchise legislation Thurs. Telcos including Verizon, which is targeting N.J. for TV service, have said full buildouts aren’t necessary. Asked whether companies selling cable should be required to serve an entire territory or “only serve residents in higher income areas,” 89% picked the first option. Asked about the importance of local “control over companies that provide TV service,” 73% responded that was either “very important” or “somewhat important.” Two-thirds of respondents said they wouldn’t support legislation that “imposed a higher cable TV franchise fee” and removed local control. Asked about the wording of the questions, an NJCTA spokesman said Verizon is targeting higher income communities. In the approximately 100 municipalities where the firm wants to offer service, the median household income is about 40% higher than the statewide average, he said, citing Census figures. Verizon won’t engage in income discrimination, said a spokesman. He said NJCTA’s poll had low credibility and was “difficult to believe.” Penn Schoen & Berland conducted 463 interviews of N.J. residents for the poll. It cited a margin of error of plus or minus 4.6 percentage points.
Senate Commerce Committee Chmn. Stevens (R-Alaska) wants cable to volunteer in the fight against indecency, rather than submit to legislative controls, said an aide to the panel. The comments came after talks between industry executives and Stevens in which the industry side offered to submit to some broadcast indecency rules. The matter later was tabled (CD Nov 28 p8), likely due to concerns about constitutionality. Courts probably would not affirm such rules, a Constitutional scholar said.
The annual FCC video competition report will be voted on by Commissioners in circulation, said a person familiar with it. The report, for Congress, was identified among items likely to get a vote at a FCC Dec. 9 meeting (CD Nov 25 p6). The item is expected to be voted on before the Christmas holiday, said the source.
Imposing indecency rules on cable was raised with Senate Commerce Committee Chmn. Stevens (R-Alaska) but tabled, said a person familiar with the talks. That option was among many floated to Stevens and staff, said the person, who asked not to be identified. The cable industry has been working for about a year with Stevens on indecency issues. He wants to fight vulgarity and sexual content on TV, perhaps by applying broadcast rules to subscription services -- a First Amendment breach, constitutional scholars have said. Officials with Stevens’ office weren’t available for comment. Multichannel News had reported cable would accede to oversight of basic and expanded basic content if such curbs did not apply until a court ruled on its legality. NCTA declined to comment.
Broadcasters, facing regulatory scrutiny over payola (CD Nov 23 p10), say they've been fighting the practice at the source: using training and other techniques to ensure adherence to FCC rules, industry officials said. Self- policing began in some instances before N.Y. Attorney Gen. Eliot Spitzer hammered stations, but efforts intensified after the AG undertook several high profile probes. On Tues., Spitzer’s office touted a payola settlement with Warner Music Group. That inquiry “uncovered a rampant industry practice of record labels offering streams of financial inducements to radio stations and their employees to obtain airplay for the recordings by Warner’s artists,” Spitzer’s office said.
FCC slowness in sending an information request to the 2 firms buying Adelphia cable systems is among the hold- ups on the $17.6 billion deal, said sources familiar with the regulatory inquiry. The information request, which, under the agency’s informal timetable, normally would have been made almost 3 months ago, is in draft, said people familiar with the situation. The agency’s staff can’t usually make a recommendation on whether a deal should be approved until after receiving responses to data requests from the companies involved, sources said. Investors in Time Warner and Comcast, which unveiled their plan to buy Adelphia in April, said they're unconcerned about regulatory delays.