Disney asks Congress to look critically at AOL Time Warner

Walt Disney is approaching members of Congress in an attempt to spark further scrutiny over the proposed merger between America Online and Time Warner.

Disney is concerned that the pending union between the largest Internet and media companies will exclude rival entertainment companies from reaching Internet consumers. It also is concerned that AOL Time Warner may limit access to its high-speed Internet network.

"We have been on the Hill sharing with people our fear that our content might not get equal treatment by someone who controls the pipe and is also the content provider," said Disney spokesman John Dreyer. "Time Warner and AOL would be the case in point right now."

Disney is not alone in its lobbying efforts. Staff members for several legislators, including members of Senate staffs in the Judiciary and Commerce committees, are approaching other entertainment companies as well, according to one entertainment industry lobbyist who spoke under condition of anonymity.

In addition, a source close to entertainment and beverage company Seagram said the company has been approached by regulators and legislators "repeatedly to discuss concerns" over the AOL-Time Warner merger. Seagram owns Universal, which produces music and films.

An AOL spokeswoman declined to comment on Disney's lobbying efforts, although she alluded to previous statements by AOL CEO Steve Case and Time Warner CEO Gerald Levin during their testimonies before the Senate Judiciary Committee.

"Let me be clear: We do not intend to limit content diversity on any of our systems," Case said during the hearing. "If we limit content, if we do not promote a diversity of voices, if we do not maintain scrupulous journalistic standards, then consumers will waste no time migrating to other Internet and media services."

At issue is the future of convergence between traditional entertainment vehicles and the Internet. Media companies are concerned that the AOL-Time Warner merger would create a powerhouse that could dictate which content providers can deliver their products on the merged company's dial-up and high-speed networks. Rival companies also fear that AOL Time Warner's own content might get preferential treatment in being presented to AOL's sizable Net audience.

AOL has come under criticism in the past regarding its treatment of content partners on its service. At least two companies have ended their distribution deals with AOL alleging the online giant bullies smaller businesses into accepting contractual limits in working with competitors. The issues raise questions to whether AOL Time Warner will impose harsher restrictions on its partners when the merger is completed.

The combination of AOL and Time Warner will encompass a wide range of leading products, bringing together diverse businesses including Internet access, music, film, broadcasting and e-commerce. The companies will own brands popular among online and offline consumers, such as CNN, Time magazine, Netscape and the ICQ instant messaging service.

Critics and legislators are concerned that the combined company's grip on high-speed Internet access lines will make AOL Time Warner the gatekeeper to broadband consumers. Many entertainment companies are banking on broadband as a way to deliver their existing content online.

AOL and Time Warner have been taking steps to ease concerns among rivals and regulators. The companies last month issued a memorandum of understanding that the merged company would open its cable lines to outside competitors, but details remain murky.

Last month, Case and Levin testified in front of the Senate Judiciary and Commerce committees to mollify concerns that the merger would spark unfair competition. But during the hearing, Senate Judiciary Committee chairman Orrin Hatch questioned the companies' pledge to open their cable TV systems to other Internet service providers.

Entertainment industry executives, meanwhile, want to see AOL Time Warner act on its rhetoric.

"We are trying to put some teeth into some of the commitments that Mr. Levin and Mr. Case have made orally about what open access means," the entertainment lobbyist said.

Disney's Dreyer would not elaborate on who the company has contacted. But he said Disney would continue its lobbying push.

"We're concerned about having access, and we are studying the situation and determining how we will deal with the situation," Dreyer said. "Increasingly, the owners of the pipes will be owning the content. What marketplace is there, then, for other creators of content?"