AOL-Time Warner merger under monopoly spotlight

US consumer groups have warned the Federal Communications Commission (FCC) that the merger of AOL and Time Warner will create an entertainment monopoly.

The groups - which include the Center for Media Education, Consumer Federation of America, Consumers Union and the Media Access Project - claim the merger will create a media behemoth that will limit consumer choice and curb online innovation.

Their main objections concern the ownership of cable networks. AT&T owns a ten per cent stake in Time Warner, which is itself involved in a complex web of cable and Internet companies. If the merger is approved, AT&T and AOL-Time Warner will control more than 50 per cent of US cable lines.

David Butler, a spokesman for the Consumers Union, said: "AOL and Time Warner are in a unique position because of their involvement in cable lines. They could bar other companies for using their services which will automatically narrow down the competition."

John Moroney, principal consultant at Ovum, said that the need for regulation is paramount. "The argument is based on a lock-out position where the owner of cable lines might decide not to open its services. To prevent this from happening, the regulator needs to develop frameworks to stop cross-subsidisation from happening."

But Noah Yaskin, analyst at research firm Jupiter, told Silicon.com that the deal will bring increased content to consumers and dismissed claims that customer choice will be limited. He said: "The Internet offers unlimited choices and AOL-Time Warner would have to work very hard to restrict the content."

The FCC filing is the second objection to the merger in the space of a few days. Internet service companies iCast and Tribal Voice have also asked the FCC to force AOL open up its Instant Messaging service for competition.

The FCC's official deadline for filing documents for or against the deal is this week.