FCC to allow video on AOL Messenger

This would be ending a restriction imposed when it approved the merger of the online company with media giant Time Warner Communications in early 2001.

A source familiar with this week’s decision said that the commission’s three-member Republican majority decided in favor of lifting the ban while the two Democrats dissented. The result of the vote, which is not required to be conducted in a public session, is expected to be announced in the next 48 hours.

The decision is a victory for struggling AOL Time Warner Inc., which lobbied hard for the change and hopes to use instant messaging to promote its video content. AOL spokeswoman Tricia Primrose declined to comment on the decision before an official announcement from the FCC but said the company has been hoping for a favorable decision.

“We think that we made a compelling case,” Primrose said.

FCC spokesmen declined to comment.

AOL and Time Warner were primarily in different businesses when they announced their merger in early 2000. But regulators were concerned about the marriage of the largest online service provider with one of the nation’s most powerful media conglomerates.

They reasoned that a combined company that included a large cable television system, magazines, CNN, and Warner movies and music could dominate news and entertainment over the Internet and lock out competitors.

As a condition of merger approval, the FCC zeroed in on the area where AOL had particular dominance: instant messaging. The tool has rocketed from a hit with teenagers and online aficionados to a ubiquitous means of electronic communication.

AOL members are not required to use Instant Messenger, but AOL has not allowed the system to work with competing systems, such as Microsoft Corp.’s MSN Messenger service or Yahoo Inc.’s Messenger. As a result, users of the different systems cannot communicate with each other.

When it approved the merger, the FCC said it would need to see convincing evidence that AOL’s instant-messaging dominance had significantly lessened.

According to people familiar with the vote to lift the ban, AOL prevailed by demonstrating that since the merger, its share of the instant-messaging market had dropped from a percentage in the mid-sixties to the mid-fifties.

As part of a legal settlement announced in late May, AOL and Microsoft said they were beginning negotiations on making their messaging systems compatible, but no agreement is close.

A spokesman for competitors Microsoft, Yahoo and EarthLink Inc. declined to comment last night.

Source: Washington Post