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, and the Consumers Project on Technology 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.

For further information please contact
Michael Janigan
Executive Director/General Counsel
Public Interest Advocacy Centre (PIAC)
1204-ONE Nicholas Street
Ottawa, ON, K1N 7B7
(613)562-4002 ext 26 (613) 562-0007(fax)
Andy Reddick
Director of Research
Fredericton, NB
(506)457-9115 (o) (506) 458-9140 (fax)