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AOL-Time Warner inch closer
January 11, 2001: 5:54 p.m. ET

Majority of FCC favor approving deal, but remain snagged on instant messaging
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NEW YORK (CNNfn) - The Federal Communications Commission has amassed sufficient support to approve America Online Inc.'s $107.9 billion purchase of Time Warner Inc., but delayed a final vote on the deal Thursday while officials there continued to wrangle over placing conditions on AOL's instant messaging service.

Sources told Moneyline late Thursday that approval of the deal could come at any time and the FCC has scheduled a press conference for 7:15 p.m. ET to discuss the deal.

Sources familiar with the situation tell CNNfn that of the FCC's five commissioners, Republicans Michael Powell and Harold Furchtgott-Roth have already submitted votes to approve the transaction without restrictions.

Among the panel's three Democrats, Chairman William Kennard supports approving the transaction, but is pushing for placing limited conditions on AOL's (AOL: Research, Estimates) instant messaging, the free Internet chat system dominated by the Dulles, Va.-based company, according to a source.

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graphicCNNfn's Greg Clarkin takes a look at AOL-Time Warner timeline.
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However, Democrat Gloria Tristani, who has been arguing for instant messaging conditions for weeks, has voted against approving the merger, believing that the limited conditions Kennard supports don't go far enough. Susan Ness has submitted her vote on the transaction, CNNfn has learned, although it is not yet clear which way she voted.

Kennard has yet to submit his vote because he is trying to build a consensus on limited restrictions among the three Democrats. Three votes are needed to approve the transaction, but if Kennard joins the two Republicans, the deal would go through without restrictions -- a scenario he does not want.

Instead, he continues to push for the strongest possible consensus on the proposed merger, one that will protect consumers and allow the innovation of products like instant messaging.

Once all five votes are submitted, the tally is final. Until that time, each commissioner can change their vote.

AOL-Time Warner not discussed at FCC meeting

The FCC has focused on instant messaging because the technology is expected to blossom from a fast way to send short notes to a platform for sending large amounts of data, such as video and music files. AOL rivals Yahoo!, (YHOO: Research, Estimates), Microsoft (MSFT: Research, Estimates) and others also offer instant message services.

The five FCC commissioners held an open meeting Thursday morning but did not discuss the AOL Time Warner merger.

Chairman Kennard, and commissioner Ness, the other two Democrats on the five-member panel, have negotiated intensely to address Tristani's concerns. graphic

Weeks of talks have yielded some concessions to Tristani's instant messaging conditions, and her colleagues have been reluctant to give in on further instant messaging restrictions.

Media analyst John Corcoran told CNNfn's Street Sweep that the FCC wants to solidify its position before it passes final judgment on the megamerger.

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Pressure to wrap up review before Kennard's exit

The AOL-Time Warner deal, announced on Jan. 10, 2000, originally was valued at about $164 billion, but has fallen with the price of AOL stock. Based on closing prices Thursday, the deal would now be valued at close to $108 billion.

Shares of Time Warner (TWX: Research, Estimates), the parent company of CNN and, climbed $4.19, or 6.3 percent, to close at $71.19 Thursday while AOL rose $2.36, or 5.26 percent, to $47.25. Both stocks have climbed higher in recent days as the FCC approval appeared imminent.

Pressure has been building to approve the deal before Kennard's term as chairman ends Jan. 20. AOL and Time Warner officials declined to comment. graphic

Approval of the deal by the commission's two Republicans was never in doubt since they feel the FCC doesn't have jurisdiction over such issues as instant messaging. By contrast, the three Democrats have been mired in debates on a range of issues.

Tristani has obtained language in the merger-approval deal that would require AOL to open its instant messaging service to many rivals when it begins to offer advanced services such as video streaming, which the company had promised to do only when its users' privacy and security could be guaranteed. The condition previously required AOL to open the service to only one rival. graphic


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