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FTC OKs Time Warner-Turner Deal

Media: Provisions on rates, programming fail to appease consumer groups. FCC approval also needed.


WASHINGTON — The Federal Trade Commission announced Thursday that Time Warner Inc. can proceed with its $6.5-billion acquisition of Turner Broadcasting System Inc., although the agency imposed restrictions it said would prevent the entertainment giants from unilaterally raising cable TV prices and limiting program choices.

The FTC said its five commissioners voted 3 to 2 on Wednesday to approve the deal. The vote came after Time Warner agreed to half a dozen restrictions aimed mainly at limiting the influence of cable giant Tele-Communications Inc.--a major Turner shareholder--on the new company.

"This settlement would preserve competition and protect consumers from higher cable service prices and reduced programming choices by ensuring that competing cable operators, new technologies and future programmers can gain access to Time Warner-Turner's customers and programming," FTC Chairman Robert Pitofsky said.

The decision did not appease representatives of some consumers groups, who said the deal would bring higher prices for cable TV and fewer programming choices.

"We are disappointed that they didn't block the entire deal from going forward," said Gene Kimmelman, co-director of the Washington office of Consumers Union. "I think it's going to be difficult for them to monitor this agreement. I'm very concerned the consumers will still face cable rate increases . . . "

The deal awaits approval by the Federal Communications Commission, which must review the transfer of Turner's Atlanta television station license to Time Warner. But the FTC review was regarded as the most serious threat to the merger, and company executives have scheduled separate meetings with Time Warner and Turner shareholders for Oct. 10 to approve the transaction.

The combination of Time Warner and Turner would create the world's biggest media conglomerate, with about $20 billion in annual revenue--not only from cable TV operations, but from books, magazines, movies, music and telephone service. But it was the deal's potential impact on the nation's cable industry that worried regulators.

Concerned that TCI's interest in Turner would lessen the cable giant's incentives to carry non-Time Warner programming, the FTC ordered a restructuring of the original deal. Under the new terms, TCI would be required to divest its interest in Time Warner or accept a maximum 9.2% nonvoting interest in Time Warner.

In addition, to prevent Time Warner from using its market clout to unilaterally raise prices, the company must maintain its current cable prices in areas where it is the only local cable provider.

Also, Time Warner's programming arm is prohibited from discriminating against rival cable systems.

And Time Warner's own cable systems must carry an alternative cable news show to Turner's Cable News Network in order to encourage program diversity.

Spokesmen for Turner and Time Warner, which together control 40% of all U.S. cable programming, expressed happiness with the FTC decision.

The restrictions were opposed by Commissioners Mary L. Azcuenaga and Roscoe B. Starek III, who argued that they were unnecessary because the deal, in their view, did not pose an antitrust problem.

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