World''s largest media company is born

A year and one-day after
16 January 2001

Earlier, in September 2000, European competition authorities had approved the merger. In the process, this has created the world’s first and biggest Internet-powered media and communications company, even beating the recently combined forces of . The FCC approval came after a prolonged review that took into consideration the views of a variety of groups, which included Walt Disney, Microsoft, consumer activists and rival internet service providers, who made representations against the merger.

In order to maintain competition and protect consumer interests, the FCC imposed some conditions. One of the conditions requires AOL to open its highly popular instant messaging system as it deploys its internet service over Time Warner's high-speed cable network, an issue that took most of the time at the FCC hearings. According to Jupiter Research, almost half of all Internet users use instant messaging services.

Instant messaging is a quick and chatty form of email used by millions of teenagers. AOL has more than 22 million users of its instant messaging service, while rivals like Microsoft and Yahoo each have about 11 million users for a similar service they provide. Increasingly, instant messaging is going beyond just messages and is being used to transmit non-text messages, such as video conference images, video and music.

The FCC was forced to determine whether AOL's dominance of instant messaging posed a threat to competition on the internet, as its rivals made it out to be. Presently, users of rival instant messaging systems cannot gain any access to the AOL system. The FCC decided AOL must open its system as it develops 'advanced' instant messaging services. The FCC ruling fell short of the representations made by rivals who wanted the AOL messaging system opened up right away.

The FCC has further stated that Time Warner should not discriminate against AOL's rivals seeking to offer internet service over its high-speed lines. Analysts were very upbeat when the merger was announced last year at the height of the internet bubble. However, with the stock market’s fervour over the internet fading and the economic slowdown casting a shadow on the advertising market, several concerns are being raised as the merged entity comes into existence.

However, Mr Levin insisted the rationale behind the deal has not been affected by shifting stock market fortunes. With the fall in AOL share prices by over 35 per cent since the merger was announced, the value of its all-stock purchase of Time Warner has come down to around $105 billion from $160 billion at the time of the announcement. The deal makes immense sense to Time Warner.