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FCC to miss deadline for AOL-Time Warner decision

The Federal Communications Commission will delay its vote on the proposed merger between America Online and Time Warner until after the new year, according to sources.

The Federal Communications Commission will delay its vote on the proposed merger between America Online and Time Warner until after the new year, according to sources close to the agency.

The delay is another setback for AOL and Time Warner. When the companies announced their intention to merge in January, executives expected the deal to close in the fall. Instead, the companies faced delays as regulators picked apart the merger and wrestled the companies into making concessions for approval.

FCC Chairman William Kennard had said he hoped to complete the review and voting process for the deal by year's end. But the companies and the commission said the vote could be pushed into the new year. Sources would not say when the commissioners plan to vote.

An FCC representative declined to comment. AOL also declined comment.

The Internet giant has pushed the FCC to conclude the merger review before the end of the year. In a Dec. 19 letter to the agency, AOL attorneys said the companies would face "substantial" financial burdens if they closed the deal in 2001, citing the expenses for the mountains of filings to the Securities and Exchange Commission and other financial costs associated with the deal.

Although the delay raises another hurdle, the FCC is expected to approve the deal. So far, AOL and Time Warner have been bruised by regulators' conditions but not beaten.

On Dec. 14, the companies gained approval from the Federal Trade Commission, largely viewed as the biggest hurdle to the deal's passage. The FTC attached several conditions to its approval, however, including one that said AOL Time Warner must offer rivals access to its cable Net access service. The FTC also called for the appointment of a watchdog to ensure the companies do not violate the order.

In October, the companies got the green light from the European Commission. However, the commission forced AOL to divest its relationship with German media giant Bertelsmann and played a key role in preventing Time Warner from completing its acquisition of EMI Recorded Music, a major music label.

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, then the gates open for the two companies to combine. But even if the merger is approved, which is expected, the FCC can attach conditions.

Creating a media titan One of the most heated topics in the review surrounds instant messaging. AOL's biggest competitors, including Microsoft, Yahoo, AT&T and Excite@Home, have aggressively lobbied regulators and members of Congress to force the online giant to open its IM network.

Even Microsoft chairman Bill Gates has sounded off on the topic; he contacted three communications commissioners, including Kennard, to express his concerns about AOL's practices.

AOL has argued that it supports interoperability but has concerns about the potential privacy and security issues that could arise. The company has also denied that it has a monopoly on instant messaging, as many critics allege. AOL has argued that many rival IM services, such as those of Microsoft and Yahoo, are rapidly amassing market share.