US anti-monopoly regulator, the Federal Trade Commission (FTC), has taken the rare action of "stopping the clock" on its review of AOL's takeover of Time Warner. Having waited so long for the deal to be given the green light, another delay may not hurt anyone. But the latest hold-up seems to have got investors and stock market analysts in a tizzy.
The FTC's decision knocked about 4% off the share values of both firms at the end of last week. The regulator says it will now wait up to three weeks, but no more, for the companies to provide it with additional details of their proposals on third-party internet access to their cable networks.
"(The delay is) certainly unusual. But considering what's at stake it may not be," said Ken Kiarash, analyst at Buckingham Research Group.
Few analysts seriously believe that some eleven months after the $140bn merger was unveiled, that it will be scrapped now. But the FTC's action is likely to mean that the Federal Communications Commission in turn delays publication of its findings on the deal's impact on consumer internet and cable TV issues.
Under a draft agreement, the two have already agreed to allow three rivals to use Time Warner's network within 90 days of the deal being cleared. According to some behind the scenes sources, the FTC is now seeking that Time Warner open up its high-speed lines to competitor ISPs before AOL can have access to them. Some members of the commission apparently want proof that Time Warner has agreed this kind of access with a third party and are threatening to take the company to court.
The impact on the ISP industry could be important as wholesale prices will be set by commercial negotiation, not the diktat of AOL-TW. And it would also mean that Road Runner - a joint venture with Microsoft, AT&T, Compaq and Advance Publications -must end its exclusive access to Time Warner's broadband lines before its contract expires at the end of 2001. TW-AOL, as the US's second largest cable operator may also be restricted from doing further deals with AT&T, the biggest.
Spokesmen for both AOL and Time Warner say that they still believe the deal will gain approval and be completed this autumn. It was last month cleared by European regulators after Time Warner dropped the proposed acquisition of music group EMI.
In a separate, but related issue, it became clear that AT&T is considering spinning off its Liberty Media subsidiary controlled by John Malone. The move would be expected to help AT&T meet regulatory promises made earlier this year when it bought cable company MediaOne. "It probably makes sense to separate somewhere down the road, but it is AT&T's call," said Malone this week. A decision is likely before Dec 15.