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AOL-Time Warner deal on verge of approval

The megamerger between the Internet giant and the media goliath could win final approval by the Federal Communications Commission as early as Wednesday, according to reports.

The megamerger between Internet giant America Online and media goliath Time Warner could win final approval by the Federal Communications Commission as early as Wednesday, according to reports.

The FCC, which missed its targeted deadline last month, is nearing an approval that does not include tighter restrictions on instant messaging, The Wall Street Journal reported.

Disagreements between commissioners surrounding restrictions on the IM market, which is dominated by AOL, have delayed approval, according to the Journal. FCC Chairman William Kennard and Commissioner Susan Ness have decided to proceed to a vote without Commissioner Gloria Tristani's backing.

The newspaper reported that Tristani had been holding out for stricter restrictions on instant messaging, working to make certain AOL could not get around conditions that would require it to open its services to rivals.

Though the FCC is widely expected to give the merger a thumbs-up, the proposed marriage still could be limited by certain conditions attached to the deal by the commissioners.

The No. 1 issue still on the table is how to treat instant messaging. Commissioners are debating whether to permit waivers that would free AOL from opening its IM systems to competitors, according to a report published in The Washington Post. As the paper reported, one proposal says AOL would not be forced to provide interoperability to its IM system if another advanced IM provider offered services over cable.

The Net giant also would be released from an IM condition if its share of users in the market dropped below 50 percent or 55 percent, the Post reported.

Instant messaging has been one of the most heated topics concerning the proposed merger since it was announced last January. AOL's biggest competitors, including Microsoft, Yahoo, AT&T and Excite@Home, have been actively lobbying federal regulators to force the online giant to open its IM network.

AOL has argued that it supports interoperability but has concerns about the potential privacy and security issues that could arise from opening its system. The company has also denied that it holds a monopoly in the market.

The FCC vote is the last regulatory hurdle for AOL and Time Warner. If three out of the five commissioners vote to approve the deal, the two companies win the official green light to merge.

The deal,

which was expected to close in fall 2000, gained approval last month from the FTC, a development that had been largely viewed as the biggest hurdle to the deal's passage. Last October, both companies scored approval from the European Commission. But as part of that approval, AOL divested its relationship with German media giant Bertelsmann, and the commission played a key role in preventing Time Warner from completing its acquisition of EMI Recorded Music, a major music label.