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AOL Exec Questions FCC Merger Role

4/01/2001 8:00 PM Eastern

WASHINGTON -A senior AOL Time Warner Inc. official on Wednesday voiced criticism of the Federal Communications Commission role in reviewing America Online Inc.'s merger with Time Warner Inc.

And FCC chairman Michael Powell didn't argue with him.

AOL Time Warner Inc. executive vice president and general counsel Paul T. Cappuccio complained that the FCC applies a vague "public-interest" standard to mergers that leaves little room for judicial review.

"The agency is going to decide what the agency decides," Cappuccio told an American Bar Association audience. "That necessarily becomes a much more politically infused and less predictable and, I think, less healthy process."

Alongside Cappuccio on the panel were Richard Parker, an attorney now in private practice who headed the Federal Trade Commission's AOL-Time Warner review, and Powell, who voted to approve the deal, despite questioning some of the FCC's regulatory conditions.

Powell agreed that the FCC's duty to ensure that a merger serves the public interest was a troubling issue, a viewpoint he has raised in other forums.

"Congress wrote that. We didn't," the chairman said. "I have been there three and a half years; I still have no idea what it means. It is about as empty a vessel as I think you afford to a regulatory entity and ask them to make meaningful and substantial judgments premised on it."

Though he disagreed with the outcome, Cappuccio said the FTC's merger process was more rational, especially because AOL Time Warner believes it can go to federal court to overturn burdensome merger conditions.

"That is all, I think, very healthy and very American," Cappuccio said. "If I believed [Parker] was wrong and he had a terrible case, I could have gone to court and rolled the dice and seen how it went."

In December, the FTC, among other things, ordered AOL Time Warner to open its Time Warner Cable network to unaffiliated Internet service providers before launching a high-speed version of AOL. A month later, the FCC, in a broad package of conditions, effectively barred the company from launching advanced instant messaging until the system was interoperable with competing IM providers.

Had AOL Time Warner wanted to appeal, Powell said, it was required to appear before one of the FCC's three administrative law judges in a process with virtually no deadline.

"Those things are a commitment to purgatory and you'll be there for the better part of your life," Powell said.

Cappuccio's harshest comments were for the European Commission, a body he suggested was unaccountable for its actions.

"The FCC is harmless next to the European Commission," he said. "What do you do there, appeal to the Intergalactic Court of Justice?"

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