Washington-America Online Inc. and Time Warner Inc. last week called a proposal to force the new company to choose between content and distribution "absurd" and a blow to companies that want to take advantage of media convergence.
The Walt Disney Co., which is fighting the merger, offered the breakup proposal in a recent filing with the Federal Communications Commission, but the proposal was short on specifics.
However, Disney did tell the FCC that AOL-Time Warner had both the ability and incentive to discriminate against unaffiliated content providers.
Disney said the model it was advocating related to now-defunct FCC rules that banned TV networks from owning primetime programming or the syndication rights, as well as the Supreme Court case that upheld the cross-ownership ban between movie studios and movie theaters.
"Disney's proposal is absurd. There is absolutely no basis for any condition of this sort on this merger," a Time Warner spokesman said.
An AOL spokeswoman said Disney was advocating the revival of regulations that once kept Disney from buying the ABC television network.
"It's absurd to turn back the clock, and it would be anti-consumer," she added.
The Time Warner spokesman said it and AOL have repeatedly stated that the combined company would not discriminate against other content providers and that they were demonstrating this with the launch of a trial in Columbus, Ohio, that gives consumers a choice among Internet-service providers.
"We have been crystal-clear about our commitment to providing consumers with access to a board array of the best content available, regardless of who is producing it, and to delivering our own content as widely as possible on as many platforms as possible," the Time Warner spokesman said.
The Columbus trial, launched in June by Time Warner Cable, is in-house for now, with participants including AOL, AOL-owned CompuServe Interactive Services Inc. and Road Runner. But the trial will be expanded to include unaffiliated ISPs, perhaps later this summer.
"They are in the process of expanding it to include a variety of other ISPs, but I can't identify who those are at the moment," the Time Warner spokesman said. "There will be others. I would just say several."
Meanwhile, Disney is planning to hold a press conference this week on interactive TV intended to show how AOL-Time Warner could treat unaffiliated content providers unfairly.