FCC Approves AOL-Time Warner Merger, with Conditions

Following last night’s Federal Communications Commission approval of the merger of America Online and Time Warner, the two companies officially announced the creation of AOL Time Warner Inc.

The FCC’s approval came with a number of conditions. Among them, AOL must make its instant messager service compatible with IM systems hosted elsewhere.

“In reviewing this merger, I was particularly concerned about the future of the instant messaging platform, the ability of competing broadband ISPs to access Time Warner’s cable systems, and the potential for discrimination in the interactive television space,” wrote FCC chief William E. Kennard in an agency report issued yesterday.

“We don’t rely on good intentions. We require AOL to interoperate with competing instant messaging providers before it can offer videoconferencing and other streaming video over IM.”

He said the condition guards against AOL’s ability to leverage its existing IM dominance into the broadband IM marketplace. Parenthetically, Kennard announced today that he will be resigning as chairman of the FCC, effective Jan. 19.

As a result of the merger, Time Warner and America Online stock will be converted to AOL Time Warner stock at fixed exchange ratios. Time Warner shareholders will receive 1.5 shares of AOL Time Warner for each share of Time Warner stock. America Online shareholders will receive one share of AOL Time Warner stock for each share of America Online. America Online’s shareholders own approximately 55 percent and Time Warner’s shareholders own approximately 45 percent of the new company.

AOL Time Warner’s stock will be traded under the symbol AOL on the New York Stock Exchange. AOL opened this morning at $48.05, up nearly six cents per share from yesterday’s $42 6/10.