[Ecommerce] AOL/TimeWarner merger

[Pippa Lawson]

FYI: action on the Canadian front...
see www.piac.org

THE PUBLIC INTEREST ADVOCACY CENTRE (PIAC) 
CALLS FOR GOVERNMENT ACTION ON AOL TIME WARNER MERGER
 
	MEDIA RELEASE	January 14, 2000

The Public Interest Advocacy Centre (PIAC) joined with American consumer
organizations today in questioning the benefits to consumers from the AOL
Time Warner Inc. blockbuster merger. The Consumers Federation of America,
Consumers Union, the Consumers Project on Technology  and the Media Access
Project have called for the AOL acquisition of Time Warner to be stopped.

Michael Janigan, Executive Director of PIAC noted that the AOL Time Warner
merger is hardly good news:

	"There is much to indicate that this deal is a win for the shareholders of
the merging companies without any increase in availability of services for
consumers."

Janigan also contrasted current market reality with past predictions of the
future, 

	"For the first part of this decade, we nourished the fiction that
competition was going to build the Information Highway. Now, it seems as if
the industry stakeholders think it will be built by eliminating the
competition itself."

In a letter to the Honourable John Manley, Minister of Industry, PIAC has
submitted that the federal government should make a formal request pursuant
to the 1995 agreement between the United States of America and Canada
regarding the application of their competition and deceptive marketing
practices laws. The request, pursuant to Article V of that Agreement, would
be for US competition authorities to initiate appropriate enforcement
activities against the anti-competitive implications of the proposed merger. 

 In a statement released on January 10, the American groups noted that:

	"AOL is the single most important force today in advocating for open
access to the cable broadband platform. If the merger is approved, AOL's
interest will be fundamentally changed."

 They further noted that:

	"AOL is a direct competitor to Time Warner as an internet content provider
on broadband services thereby lessening competition and raising the threat
of discrimination among content providers effectively degrading the
services offered by competitors."

The Public Interest Advocacy Centre describes concerns particular to
Canada. In 1995, the federal government's  Information Highway Advisory
Council issued a report entitled "The Challenge of the Information
Highway". The report noted the importance of maintaining carriage/content
separation: 
	"The Broadcasting Act calls for programming that is varied and
comprehensive, expressing a range of differing views on matters of public
concern; indeed, the promotion of diversity has been a tradition in
Canadian broadcasting policy and regulation. As companies merge to face
global competition, maximize competitive advantage, and benefit from
vertical integration, maintaining diversity will require structural
measures that discourage preferential treatment based on ownership
interests." 

The report went on to recommend: 

	"The principle of carriage/content separation should be maintained at a
minimum through the requirement of structural separation between
programming and distribution undertakings and with other reasonable
safeguards."

The federal government acknowledged the legitimacy of these concerns in its
later report "Building the Information Society: Moving Canada Into the 21st
Century" in particular, the dangers to Canadian content for new media
services were highlighted:

	"More important within the emerging information industry itself, there are
signs of growing vertical integration between providers of broadcasting
carriage and content services. This trend could ultimately leave providers
of Canadian content vulnerable to discrimination. The present policy and
regulatory framework may have to take this new reality into account."

The implications of the merger calls into question the "hands off" policy
of the government towards the internet. AOL has indicated that they have
discretion about "populating channels" on Canadian AOL where they see fit
(National Post, January 12, 2000).

	 "We appear to be getting regulation of the internet and control of access
but it is private corporate regulation not necessarily initiatives in
keeping with Canadian objectives." Janigan added.
 
______________________________________________________________________________

January 13, 2000

Honourable John Manley
Minister of Industry
235 Queen Street
11th floor, East Tower
Ottawa, ON
K1A 0H5

Dear Minister Manley:

Re:	AOL Time Warner Merger

The AOL acquisition of Time Warner presents serious implications for
Canadian consumers of broadcasting and new media services, as well as
potential problems of access for Canadian content providers. These problems
are not confined to Canada. Significant and reputable consumer groups in
the United States, including the Consumers Federation of America, Consumers
Union, the Consumers Project on Technology  and the Media Access Project,
have called for the AOL acquisition of Time Warner to be stopped. We
believe that the analysis of the American consumer groups is compelling,
and that a thorough review of the competitive and other implications of
this deal is called for.

As you are aware, the issue of the importance of carriage/content
separation is not a new one for the federal government and your department.
In 1995, the Information Highway Advisory Council report entitled "The
Challenge of the Information Highway" had this to say on the issue:

	"The Broadcasting Act calls for programming that is varied and
comprehensive, expressing a range of differing views on matters of public
concern; indeed, the promotion of diversity has been a tradition in
Canadian broadcasting policy and regulation. As companies merge to face
global competition, maximize competitive advantage, and benefit from
vertical integration, maintaining diversity will require structural
measures that discourage preferential treatment based on ownership
interests." 

Recommendation 7.7 of the aforesaid report provided as follows:

	"The principle of carriage/content separation should be maintained at a
minimum through the requirement of structural separation between
programming and distribution undertakings and with other reasonable
safeguards."

The legitimacy of these concerns was acknowledged by the federal government
in its later report "Building the Information Society: Moving Canada Into
the 21st Century". That report noted  the dangers to Canadian content for
new media services:

	"More important within the emerging information industry itself, there are
signs of growing vertical integration between providers of broadcasting
carriage and content services. This trend could ultimately leave providers
of Canadian content vulnerable to discrimination. The present policy and
regulatory framework may have to take this new reality into account."

PIAC is of the opinion that the AOL Time Warner merger may have serious and
sustaining implications for access and distribution of new Canadian media
services. It not only blurs the line between the desirable carriage/content
separation, it potentially lessens competition. In the words of our
American counterparts the deal:

	"...raises the threat of discrimination among content providers
effectively degrading the services offered by competitors."

We believe that the implications for Canada and Canadian consumers are such
that the government should make a formal request pursuant to Article V of
the 1995 "Agreement between the government of the United States of America
and the government of Canada Regarding the Application of Their Competition
and Deceptive Marketing Practices Laws" 

The Agreement provides that:

 	"If a party believes that anti-competitive activities carried out in the
territory of another party adversely affect its important interest, the
first party may request that the other parties competition authorities
initiate appropriate enforcement activities..."

We believe that AOL's acquisition should be afforded a rigorous review by
American competition authorities. It is also our preliminary view that the
merger in its current form should be stopped.

We welcome the opportunity to discuss these concerns with your office and
your officials. We would be pleased to provide any further information that
may be of assistance to the government in making this request.

Thank you.

Yours truly,


Michael Janigan
Executive Director/General Counsel

cc:	Konrad von Finckenstein, Commissioner of Competition


------------------------
Philippa Lawson
Counsel
Public Interest Advocacy Centre
1204 - 1 Nicholas St.
Ottawa, Ontario  K1N 7B7
tel: (613) 562-4002 ext.24
fax: (613) 562-0007
e-mail: pippa@web.net
PIAC webpage: http://www.piac.ca