AOL's Time Warner Buy Not Expected to Draw Government Ire

One official says regulators are loath to intervene when the precedent isn't clear.
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Just last year,

AOL

(AOL)

was complaining that

AT&T

(T) - Get Report

wasn't playing fair when it came to broadband.

Now, with its $180 billion proposed acquisition of

Time Warner

(TWX)

, AOL is taking matters into its own hands. And don't expect regulators to stand in the way, say an industry observer and a government official.

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"This is another example how the traditional ways of thinking don't necessarily seem to apply," says a top

Commerce Department

official who asked not to be identified. "The way we have characterized these things in law and regulation doesn't make any sense any more."

Content Is King

Cable strategist Cynthia Brumfield, president of

Broadband Intelligence

, a Bethesda, Md.-based consulting firm, says the deal doesn't raise immediate regulatory concerns because it brings something completely different to Time Warner, namely the Internet.

"Time Warner already has all their various media -- a Hollywood studio, TV programming, news media, and music production -- under their control, and there are really no restrictions on how much content you can own," says Brumfield, who has consulted with all the major cable companies. "I don't foresee any specific federal regulations that stand in the way."

Indeed, AOL Chairman

Steve Case

echoed that sentiment at the companies' press conference Monday, saying he believed the deal would pass antitrust muster because of the companies' diverse interests.

Heal Thyself

Of course, officials with the

Justice Department

, the

Federal Trade Commission

and the

Federal Communications Commission

must review the merger. The agencies face a monumental quandary as they try to ascertain whether old rules against industry dominance still apply at a time when they have pronounced mass-market broadband availability a paramount goal.

"First, do no harm" is the guiding principle they seem to have latched onto.

The Internet is still evolving and market forces, not bureaucrats, should determine its shape and mission, says the business side, hands-off crowd. At the same time, consumer groups and Net strategists urge caution because the Internet is far too important a communications medium to fall entirely into the hands of commercial interests.

Still, the Commerce official says the government typically intervenes only once a clear case has been established, rather than jumping into murky waters. "Regulation is a lagging indicator, not a leading indicator," he says.