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AOL Defends Merger Despite Concerns of Media Monopoly

By Alec Klein
THE WASHINGTON POST -- BRUSSELS, Belgium

America Online Inc., yielding few concessions and dismissing critics, defended its plan to merge with Time Warner Inc. in a tense standoff Thursday before European regulators.

Officials of Dulles, Va.-based AOL, speaking to staffers and attorneys of the European Commission in a private hearing, tried to play down concerns that its merger would create a media powerhouse that would level competitors, dominate the Internet and control consumer choice, according to sources who were among the 100 invited guests at the eight-hour hearings.

The AOL team of at least a dozen lawyers and economists argued that the company’s success as the world’s biggest Internet service provider was simply a matter of knowing what consumers want and giving it to them.

AOL and Time Warner officials could not be reached for comment after the session.

Led by Paul Cappuccio, AOL’s general counsel, and Barry Schuler, president of Interactive Services, AOL assured regulators that it would not favor Time Warner’s content over such rivals as Walt Disney Co., and maintained that it was not in its business interest to discriminate. For instance, if AOL users want to surf for Mickey Mouse, a Disney property, AOL said it would not force Bugs Bunny, a Time Warner favorite, on them.

But critics maintained that AOL has erected a virtual “walled garden” that makes it difficult for its 26 million subscribers to navigate on the Web beyond its service. In testimony before the commission, Ross Bagully, chief executive of Tribal Voice Inc., a Denver-based instant-messaging firm, accused AOL of preventing users of competing systems from communicating with AOL’s subscribers.

“The wall that AOL has built around the IM (instant messaging) marketplace today will become virtually impervious to competition,” Bagully said.