Microsoft attacks AOL/Time Warner merger

According to a report in the Wall Street Journal, Microsoft is quietly raising questions with federal regulators at the FTC about the proposed merger of online giant America Online (AOL) with cable giant Time Warner. Microsoft has concerns about consumer access to the high speed Internet pipes that would be owned by the combined company, an issue that was raised by antitrust experts in the federal government earlier. AOL and Time Warner had originally stated that they would accept no oversight of their Internet bandwidth, but after rumors circulated that the government would seek to block the merger, the two companies reversed course and agreed to allow its competition to use the connection. With that agreement, it was expected that regulators would approve the deal next week. But the software giant has told the FTC that the combined companies have not really changed their ways and have, in fact, already denied Microsoft access to its bandwidth.

The tentative agreement with the FTC has AOL/Time Warner opening up its high-bandwidth Internet access lines to competition before AOL uses the same lines. As a show of faith, the companies have already struck a deal with Earthlink, a small national ISP, which allows that company to access Time Warner's bandwidth. But Microsoft argues that the Earthlink deal doesn't go far enough and that Time Warner is refusing to offer it a similar deal. Microsoft also argues that it should get an even better deal than Earthlink, because it has more users.

Microsoft isn't alone in challenging the AOL/Time Warner merger. Entertainment giant Disney has raised issues about the combined companies' interactive TV plans, and telephony giant Verizon Communications has also discussed the merger with the FTC. But the Microsoft complaint comes at a delicate time, as FTC regulators pour over the complex legal documents that define the merger. Microsoft pinpointed AOL as one of its major rivals years ago, so it's easy to dismiss this maneuver as petty competition, but the reality is that a combined AOL/Time Warner would yield awesome power over what is sure to be a key industry of the next decade. Now it's up to the FTC to sort out this mess