Most educators seemed cautiously optimistic about the merger announced Jan. 10 between America Online (AOL) and Time Warner. School leaders who spoke with eSchool News shortly after the announcement expressed the hope that the pact might help close the “digital divide” by increasing high-speed internet access to poor schools.

Some said the deal might increase the amount of digital content available to enrich instruction. Others expressed concerns about too much media concentration and about whether the deal would cool AOL’s enthusiasm for open cable access.

Assuming the transaction is approved by federal regulators, the $162 billion stock deal would be the biggest corporate merger of all time, as well as an aggressive bet that online delivery of media is the wave of the future.

“This merger will launch the next internet revolution,” said Steve Case, America Online’s chairman and chief executive. “We’re still just scratching the surface.”

Case will be chairman of the new company, which will be called AOL Time Warner Inc., and Time Warner chairman Gerald Levin will be its chief executive. America Online shareholders will own 55 percent of the company, and Time Warner shareholders the rest.

The deal marks a major turning point in the media industry, providing irrevocable proof of the massive power and value that internet companies like AOL have built up over the past several years.

In combining the leading internet company with the leading traditional media company, the deal also shows that despite the many differences between vanguards of “new media” and “old media,” the two sides need each other more than ever before.

AOL needed access not only to Time Warner’s media content machine—which produces films, music, TV shows, and magazines—but also to Time Warner’s large network of cable TV lines, which is second only to AT&T’s and reaches 20 percent of U.S. households.

Time Warner, like other major media companies, has been in the middle of a major effort to reinvent its own internet strategy. Last year it named its chief financial officer, Richard Bressler, to lead a company-wide effort to take advantage of internet opportunities and set aside $500 million to invest in them.

With the AOL deal, Time Warner acquired a large, well-established online platform of 22 million subscribers for delivering its content to users, a goal it has had for some time. “This really completes the digital transformation of Time Warner,” Levin said. “These two companies are a natural fit.”

Early reaction from observers to the merger was mixed.

Aware that telephone dialup connections are too slow to provide the kind of online TV, movies, and music people want, AOL has been on a campaign to force cable providers to open up access to their lines, which can provide much faster access than phone lines. Some consumer groups now fear that AOL will reverse its field. Set to own a major cable provider, it now might ease up on its efforts to ensure “open access” to cable systems for other service providers.

Coming just four months after the latest blockbuster media merger—the proposed combination of CBS Corp. and Viacom Inc.—the AOL/Time Warner deal also raised concerns from consumer groups and at least one U.S. senator about the increasing consolidation of ownership among major media companies.

Sen. Mike DeWine (R.-Ohio), chair of the antitrust subcommittee, said the deal “raises a whole host of competition and public policy issues.”

“Is this merger the beginning of the end of the internet as an effective counterweight to traditional media outlets, or is this just another step on the road to making the internet a more useful and viable source of information?” DeWine asked rhetorically.

Many were cheered by the announcement, however. Bob Moore, director of instructional technology for the Blue Valley School District in Kansas, is excited about the potential benefits of a merger between traditional and cutting-edge media.

“Look how the internet has evolved since its creation,” Moore said. “At first, most of the content was free, and now a lot isn’t. Change should be expected. I think this merging of content providers and access providers is probably pretty important to the evolution of the internet.”

Moore added that media and internet mergers like this one could be very beneficial in the effort to close the digital divide. “Many poorer urban areas that do not have high-speed DSL access [now] will have cable access. This will bring a new level of equity to these schools,” he noted.

He also dismissed fears that the merger of the two mega-conglomerates might stifle the free-flow nature of internet content. “If this brings a new wave of users in, it could create a wave of new content, which could potentially benefit schools,” he said.

For his part, Case said the company remains committed to providing consumers with as many choices as possible, and he predicted the deal would result in several new companies offering internet access service.

The deal is subject to regulatory approvals and the approval of AOL and Time Warner shareholders. The companies said the merger is expected to be finalized by the end of the year.

The Justice Department said it was unclear whether it or the Federal Trade Commission will be asked to approve the proposed merger. Each agency has its own group of antitrust experts, and they typically split regulatory reviews after deciding among themselves whose experts are most appropriate to decide the questions that such a mega-merger might raise.

The new company will be headquartered in New York, the current location of Time Warner’s corporate offices, and will have a significant presence in Dulles, Va., where AOL has its main office.

America Online
http://www.aol.com

Time Warner
http://www.pathfinder.com/corp

Federal Communications Commission
http://www.fcc.gov

U.S. Justice Department
http://www.usdoj.gov

Federal Trade Commission
http://www.ftc.gov