Consumer Groups Want Changes

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Washington-Consumer and public-interest groups last week urged regulators to block America Online Inc.'s merger with Time Warner Inc. if the government won't require a series of divestments that include ownership ties to AT & T Corp.

The groups said that AT & T should be forced to sell its 25 percent stake in Time Warner Entertainment and its 9 percent stake (through Liberty Media Group) in Time Warner Inc.

They also said AOL-Time Warner should be forced to drop its sub-5 percent stake in DirecTV Inc. and to adhere to broad Internet open-access rules.

Lastly, they said Time Warner should be required to divest its stake in Road Runner, the No. 2 cable Internet-access service.

A petition to deny the AOL-Time Warner merger was filed with the Federal Communications Commission by the Consumers Union, the Consumer Federation of America, the Media Access Project and the Center for Media Education. They made an identical filing with the Federal Trade Commission.

AOL and Time Warner have an opportunity to reply to their critics May 11.

The groups said the various asset sales were necessary to divorce AOL-Time Warner from AT & T in terms of control over cable systems, cable programming and high-speed Internet-access facilities.

Without restructuring, they said in a 157-page filing, AOL-Time Warner and AT & T would form "a digital communications cartel."

Gene Kimmelman, co-director of the Consumers Union's Washington office, said the FCC and the FTC had to act to block "a pattern of activity" that is leading to "monopolization" of the cable and Internet-access markets.

"We are simply asking the FCC to do its job and implement the law," Kimmelman said at a press conference.

SBC Communications Inc. took similar swipes at the deal, saying it would create a "Standard Oil-like tangle of equity interests and contracts," leading to excessive concentration in the narrowband and broadband Internet-access markets and the cable-programming market.

"The FCC must insist that AOL and Time Warner divest their interest in any property that they co-own with AT & T, and that AT & T divest its interest in any property it co-owns with Time Warner," SBC said.

The American Cable Association, the small-operator trade group, asked the FCC to ensure that AOL-Time Warner is prevented from forcing small operators to buy AOL services as a condition of obtaining Time Warner and Turner Broadcasting System Inc. programming.

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