Tuesday, August 19, 2003

Rights and Reason: FCC to Allow Video on AOL Messenger

This from Jonathan Krim of the Washington Post:

The Federal Communications Commission has agreed to allow America Online to transmit video entertainment over its popular Instant Messenger system, 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.
Well thank God our federal fathers were protecting us from video transmitted via Instant Messenger. Until they changed their minds, of course.

And I'm glad AOL spokeswoman Tricia Primrose is pleased with AOL's "compelling case" to the FCC. I wonder if anywhere in that case was there an argument that AOL has a right to its property and that was outright idiotic for the government to regulate IM in the first place. The Post article would indicate there was not.

When it approved the [Time-Warner/AOL] 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.
I wonder if it bothers AOL that their ability to improve their product and profit accordingly hinges not on their technological ability, but on their declining share of the market.

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