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AOL,TW find pol pals

After weeks of tense merger-review talks with regulators, Gerald Levin and Steve Case last week found a receptive audience on Capitol Hill.

House Telecommunications Subcommittee Chairman Billy Tauzin (R-La.) gave the chairmen of Time Warner and America Online a rare chance to make a public case for their $183 billion merger without being immediately followed by a panel of naysaying competitors and public advocates. The companies also earned bipartisan praise for their pending deal.

The merger's critics will get their chance to speak Oct. 6, when Tauzin promises to hold a follow-up hearing.

This is a critical time for the merger. Federal Trade Commission and FCC staffers, as well as those for the European Commission, are expected to make their recommendations on the deal soon. Recommendations to FTC commissioners were anticipated late last week. Each of the agencies is expected to rule on the deal by mid-October.

The EC indicated late last week that it was leaning toward approving the deal, as long as Time Warner drops plans to acquire British music conglomerate EMI.

Most lawmakers who took a stand on the deal roasted the regulators for pushing open access and other conditions, when regulators have yet to decide whether open access should apply to the rest of the cable industry. Rep. Edward Markey (D-Mass.), however, previously said he favors open access.

Leading the attack on the agencies was House Commerce Committee Chairman Thomas Bliley (R-Va.), who didn't attend the hearing but released letters to the agency heads criticizing proposed merger conditions that have been leaked to the press.

"I do not believe the merger review process is the appropriate forum to address an issue of this magnitude," he wrote in a letter to FCC Chairman William Kennard. Others opposing merger conditions included Tauzin, Rick Boucher (D-Va.), Cliff Stearns (R-Fla.) and Michael Oxley (R-Ohio).

Despite the bipartisan criticism, Tauzin predicted regulators would pay critics little heed until Congress limits the scope of regulators' merger-review powers.

"As long as they've got the power to do it, they will," Tauzin told reporters following the Sept. 27 hearing.

He may be right.

The FCC last week opened its industrywide inquiry into open access. Although FCC officials did not respond directly to the congressional complaints, they pointed out when briefing reporters on the inquiry that they have authority to impose that condition on the AOL-Time Warner deal, even if other industry players don't face the same requirement. "There may be something this combination does" that would justify conditions, one staffer said.

Levin and Case argued against conditions floated by the agencies, which in addition to open access include letting AOL's instant-messaging users communicate with competing services and forcing the companies to cut financial ties to AT & T and DirecTV.

"Most issues have to do with public policy or national policy and what the broadband policy should be for our country," Case said.

The prospect of strict conditions, Levin argued, appears to have delayed Time Warner's effort to develop open-access alliances with unaffiliated Internet providers, because ISPs believe the FTC will limit how much AOL Time Warner can charge for carriage.

"We've invited every ISP to come and join us. So far we haven't been overwhelmed by responses," he said.

Besides developing technology that will let its cable system carry multiple ISPs, Levin reiterated the companies' pledge to allow unlimited video streaming and to let ISPs connect to a cable system's headend rather than collecting additional revenue by insisting that they attach at AOL's Internet backbone.

But critics of the merger weren't impressed. Ross Bagully, senior vice president of CMG and head of its Tribal Voice instant-messaging unit, said AOL has a history of failing to live up to its promises.