AOL Time Warner was never as dangerous
as some critics suggested
LOS ANGELES - When the Berlin Wall and a half-dozen
Communist regimes fell in 1989, long-toiling dissidents were
right there, appearing on live television, speaking at massive
pro-democracy rallies and taking the reins of provisional
Yet their self-appointed counterparts in the United States
were strangely silent last week, despite the momentous near-
collapse of the entity they have variously described as "Big
Brother," "the end of an independent press" and the harbinger
of a "new totalitarianism."
What was this beast that nearly swallowed the world's
oldest democracy? AOL Time Warner Inc., which on July 18
suffered an accounting scandal, a 5% drop in its
already-battered share price and the resignation of disgraced
chief operating officer Bob Pittman.
Suddenly, the standard-bearer for the scary-sounding
media-business fads of "synergy" and "convergence" was
admitting defeat and talking openly about a new strategy of
"dis-aggregation." Big Brother was revealed to be little more
than a holding company for various media divisions that
despised each other.
It was a far cry from Jan. 11, 2000, when America Online's
takeover of Time Warner was greeted with a chorus of boos and
calls for anti-trust intervention by dozens of journalism
professors, political columnists and media analysts.
The sight of the dominant Internet-access provider merging
with the owner of Time, CNN, Warner Music and Time Warner
Cable set off a boomlet of apocalyptic hyperbole.
The merger press conference had barely finished when Tom
Rosenstiel, director of the Project for Excellence in
Journalism, warned The Associated Press about "a new era in
American communications that sees the end of an independent
press." Hartford Courant columnist Susan Campbell thundered
against "the monopoly of ideas that rests in the wicked little
hands of a sullied few." Two days later, columnist Robert
Scheer, writing in the Online Journalism Review, groused it
was time to "forget the Internet as a wild zone of libertarian
The gloom was not limited to south-of-the-border
universities and newspapers. Donald Gutstein, a communications
lecturer at Canada's Simon Fraser University, told The Toronto
Star's Mitch Potter on Jan. 12 the merger was "grim news for
Canadian expression, frankly. AOL Time Warner and whatever
ubiquitous combinations of companies that follow will come at
us through every possible medium. We can't stop them."
Many of these ominous complaints were groundless on their
face: No division or product line in the new company, with the
exception of AOL's free instant-messaging service, came within
screaming distance of cornering 50.1% of any market (a decent
enough definition of the word "monopoly"). And the low cost
and ease-of-use of the World Wide Web virtually guaranteed
that an independent press -- not to mention the
hacker-anarchist-libertarian bloc -- would have the kind of
access to publishing their forebears would have gladly died
So why dredge up these bogus predictions? Because the
Federal Communications Commission (FCC) -- the U.S. government
body that oversees the newspaper, broadcast, cable and
telecommunications industries -- is preparing its most
ambitious overhaul of media regulations since at least 1996,
the year of the landmark Telecommunications Act. That law,
which radically altered the media and telecom landscape in the
United States, sailed through Congress without significant
public opposition ... except from the very same people who
were warning us about AOL-Time Warner's "brave new world."
This time, ironically, they may be closer to the truth.
With the latest round of corporate scandals in the United
States -- including massive bankruptcies and accounting-fraud
investigations at the long-distance companies WorldCom and
Global Crossing -- recent scrutiny of the Telecom Act has
focused primarily on its provisions for the telephone
industry, which is in a shambles (AT&T, for example,
announced a second-quarter loss this week of nearly
My own local cable monopoly, Adelphia Communications, had
its owners hauled off to jail on fraud charges just this
Wednesday. The FCC, which normally spends its time saying yea
or nay to mergers, has found itself in the awkward position of
having to make sure the collapse of such companies as WorldCom
does not do things like wipe out half the Internet (which runs
through WorldCom's backbone).
But to the media consumers I know, the most noticeable
effect of the Telecom Act was the way it transformed
commercial radio into something no longer worth listening to.
Before 1996, no company could own more than 40 radio stations
in the entire country, or more than four in a single market
(two each on AM and FM). Now, companies can own up to eight
stations in one city, and a single company, Clear Channel,
owns more than 1,200 nationwide. The result has been a
flattening conformity, with regimented musical formats pumping
out the exact same set-list to all 50 states.
Despite the Telecom Act's unintended side effects, the FCC
is looking to lift media-ownership restrictions even further.
Chairman Michael Powell -- son of Secretary of State Colin
Powell, who is a former board member of AOL -- has announced
that every existing FCC regulation needs to justify itself or
face extinction. Federal courts have demanded, on
free-expression grounds, that the FCC revisit ownership
restrictions that, for instance, prevent newspapers from
buying TV stations in their local market; the first of several
promised preliminary responses was released last month.
Michael Powell is an avowed fan of the free-market notion of
"creative destruction;" his chief media deputy is a
regulation-averse industry lawyer who used to work for cable
and satellite companies and media-merger opponents despise
"Don't for a second think that Powell wants real
competition, real media diversity, any more than his corporate
paymasters," wrote the prominent media-consolidation critic
Robert McChesney last year.
But Powell has a ready rejoinder that few media alarmists
ever discuss. As he told Wired magazine, "By any measure, the
media is wider, more diverse and more varied than it's ever
been in history."
He's on to something. Listening to the critics, you'd think
that desktop publishing hadn't yet been invented, let alone
the Internet, or 900-channel television packages. It's hard to
take seriously the notion of a single Internet company acting
as Big Brother, when 41,000 individual Web sites using
"Blogger" software were reportedly created in January
It is worth noting that the wrath of many journalism scolds
is frequently directed at the most competitive of media
outlets -- local newscasts, New York's tabloid newspapers,
talk-radio stations, and cable television -- rather than at
actual monopolies, such as the daily newspapers where many of
them work. But even in those mega-profitable markets,
technology is creating the means to compete. Under most
analysts' radar screens, new daily newspapers have sprung up
the past few years in Boston, Philadelphia, Nashville, New
York City, Palo Alto and elsewhere, and most claim to be
reaching profitability already.
This tech-fertilized undergrowth has served to dilute the
influence of the journalism establishment's signature
products. The nightly network newscast, the morning newspaper,
and the serious news magazine have all suffered steady
declines in audience, while failing miserably to attract the
None of this prevents the largest media conglomerates from
abusing their power, compromising their journalism in the name
of cross-promotion, or deadening most everything they touch.
AOL notoriously twisted the arms of its advertisers and ran
roughshod over its own customers' privacy. The four major
global music companies lobby the government to do such things
as impose prohibitive royalty rates on tiny Internet radio
Knowing that these sprawling, deep-pocketed companies have
a friendly face in charge of sweeping reforms at the FCC is
cause for alarm in and of itself.
Yet there is no Big Brother here, and there won't be --
such overheated language serves mostly to cry wolf. There are,
however, a handful of drunken uncles crashing about, handing
out twenties to the referees. In a season of corruption
scandals, demanding they play fair is simply a matter of