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It’s long been an article of corporate faith that God’s on the side of the big battalions. But what if the biggest of battalions not only turn on each other but take on the trappings of mega-tarantulas trapped in the same bottle? You get a long day at the Federal Communications Commission, for one thing. But you also get a day unlike any the FCC has ever seen. We’re talking about the July 27 en banc Hearing on America Online Inc. and Time Warner Inc. — a hearing so popular it required unprecedented admission procedures. Who wouldn’t line up to see the likes of Time Warner chairman and CEO Gerald Levin tag-team with AOL chairman and CEO Steve Case in an attempt to beat off vociferously voiced complaints by the Walt Disney Co.’s government-relations executive VP, not to mention man of the hour, Preston Padden? Never mind that at the hearing’s core stood the ostensibly dry subject of content vs. conduit. Time Warner already has both: cable programs (or content) to push through its cable pipes (or conduit). Those who oppose AOL’s unrestricted acquisition of this old-media company — and they are many, including General Electric Co.’s NBC and USA Networks Inc.’s Barry Diller — fear this content/conduit combo will give the merged entity an unfair advantage once computers extend their utility to those few functions still owned by television. Oh, what the heck, let’s hear how Disney’s Padden put it: “This transaction would merge AOL’s Internet-dominating closed and proprietary ‘walled garden’ architecture and business practices with Time Warner’s bottleneck cable pipelines and vast content library to pose a clear threat to consumer choice and competition in Interactive Television. “The combined company would [then] control,” Disney’s designated merger destroyer went on to complain, “the bottleneck cable pipeline past 20 million homes, 50 percent of the narrowband Internet marketplace, a vast content library including a dozen leading cable networks, set-top box hardware, the operating system for those boxes, ‘sticky’ applications such as e-mail and chat, a near monopoly in ‘instant messaging’ and publishing rights to nearly 80 percent of the music used in popular films and television programs.” Padden had help at the hearing in his rant against the new-media machine AOL Time Warner wants to be, from such entrepreneurs, special-interest representatives and fellow captains of industry as Ross Bagully, CEO of instant-messager Tribal Voice Inc., Manuel Mirabal, chair of the Hispanic Association of Corporate Responsibility, and William F. Reddersen, executive VP of BellSouth Corp. But he could have used more help from Disney itself, it seems, especially in light of all the firepower the AOL-Time Warner team showered on the event. Seldom has Time Warner chief Levin looked so attentive, and therefore appeared so effective, as he was on listening to Nancy J. Bloch, executive director of the National Association of the Deaf, articulate (via sign language simultaneously voiced by an interpreter) a heart-felt need for a universal system of instant messaging. Levin’s unflagging attention to her concerns, especially so late into hearings that were already breaking up, not only made Disney chairman and CEO Michael Eisner conspicuous by his absence but cast doubt on his decision — as stated in the July 31 edition of The New Yorker — of not wanting his company’s AOL-Time Warner problems “to be too closely identified with him or with the Disney brand.” Despite Eisner’s absence, which the Disney team declined to explain, none of those who showed at the FCC for their first-come, first-serve ticket (dispensed at an equally unprecedented 8 a.m. for a 1 p.m. meeting) left disappointed. So heated were parts of the five-hour debate that Barry Schuler, president of AOL’s interactive services group, dismissed an interrupter with an over-the-top “Let me finish!” Only after yelling “Let me finish!” more adamantly a second time did he realize his heckler wasn’t some anti-merger competitor but William E. Kennard — yes, the very FCC chairman Schuler’s passionate argument was meant to sway. Even the highest of populist expectations were exceeded during the hearing’s question-and-answer sessions. For it was then that Time Warner president Richard D. Parsons dared to call Disney’s interests in an AOL-Time Warner merger “a matter of business disputes dressed up to look like public policy.” It was also then that Parsons sought to expose the open-access concerns of the Mouse House as being a rat-like ruse for furthering corporate interests. “They were essentially saying: ‘Protect us and we’re fine. Promise to do for us everything that you do for yourselves and we’re fine,’” Time Warner’s attack-dog of a president alleged of a less-than-democratic Disney premise. And what if Time Warner refused to comply? In a response attributed to Disney delegates who went unnamed, Parsons then charged: “We’re going down to Washington and splash cold water over your merger.” Let the record show Padden responded that neither Disney nor its ABC TV network asked for “preferential anything” other than a simple assurance that any AOL Time Warner “system will function for consumers when they’re seeking to interact with our content the same way it does when they’re seeking to interact with their content.” But he also took the occasion to revisit Disney’s own account of Time Warner’s pulling the plug on ABC earlier this year, advancing this oft’ told tale with a revelation designed to further outrage. “Worse yet,” Padden said of what he called a “clear pattern” of Time Warner’s choking off consumer choice, “when ABC tried to provide consumers with an alternative by giving away satellite dishes, Time Warner fought furiously to maintain its monopoly by threatening financial retribution against ABC. Time Warner threatened to reduce Disney/ABC license fees by $5,000 per dish given away.” Padden also worked the FCC Commissioners from a step removed, citing Time Warner efforts to “reduce consumer choice in electronic program guides,” or so-called navigation maps for Interactive Television. “By affirmatively stripping Gemstar data streams out of local-broadcast station VBI’s [vertical blanking intervals],” he said, “Time Warner rendered the Gemstar guide an empty and useless vessel. This action left consumers with only one choice in interactive guides — the Time Warner guide.” Regulatory sessions such as these seldom stray from sleepy reserve, but even prepared texts in this instance signaled the brouhaha the hearing would become. It’s unfortunate so few of these canned comments saw light outside the Commission Meeting Room, for many brought an eloquence to proceedings that were newsworthy, if at all, for heated extemporization. Consider, for instance, what Barry Orton of the University of Wisconsin-Madison offered by way of prepared example and delectable metaphor: “If AOL had been selling hundreds of thousands of tickets to a Bruce Springsteen concert in a 5,000-seat arena, and then made it difficult for frustrated customers to get refunds, it would have been indicted.” Or observe his AOL as consumer “sandbox” comparison, in which “AOL’s policy of marketing to novice users who do not realize they are paying for less-than-robust services and features assures that having an AOL e-mail address continues to be the equivalent of driving a car with a big ‘Student Driver’ sign on the roof.” Or listen to the koan-like context provided by Esther Dyson, chairwoman of EDventure Holdings. The acclaimed Internet seer, who admitted to being an AOL Time Warner proponent, identified the “underlying question” as: “Is the marketplace changing so quickly that (1) regulation can’t keep up with it or (2) it is impossible for any companies to keep up with it, so that seeming monopoly positions can’t be exploited? In other words, the market WILL [sic] take care of it.” There was also the unfortunate timing of Hispanic spokesman Mirabal who, in reference to a “Seinfeld” episode featuring the Puerto Rican Day Parade that was produced by Time Warner’s Castle Rock Entertainment, chastised “the burning of Hispanic Flags as jokes and type-cast(ing) Hispanics like gang members from ‘West Side Story.’ Time Warner has done little to rectify this situation to date,” Mirabal charged in a statement that elicited from Parsons what the Time Warner president termed “a slow burn.” So the sparring continued, with concerns about potential AOL Time Warner abuses through some form of “bundling” seldom straying from center stage. Finally, on being pressed if AOL carriage would ever be a requisite for cablers to obtain Time Warner programming, Parsons was forced to articulate: “Unequivocally, we will not tie them together.” It was that rare specific response to a specific question, to which chairman Kennard was heard to respond, “Great.” But the FCC chief, whose goal for the hearing was to bring “transparency” to all aspects of the proposed merger, could have just as easily been remarking on the air-clearing, fire-breathing session in its entirety. Copyright �2000 TDD, LLC. All rights reserved.

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