Summary

  • The FCC's 2001 AOL–Time Warner merger order restricted a specific advanced messaging service: new streaming video using a names and presence database over AOL Time Warner broadband. It offered three ways to obtain relief, including an interoperability standard, three competitor agreements, or a successful material-change petition.
  • On 20 August 2003 the FCC released an order granting AOL Time Warner the third route. The majority saw a more competitive messaging market; Commissioners Copps and Adelstein argued in dissent that the evidence did not clear the order's demanding test.

A contact list looks like a convenience until the contacts are locked inside one company's presence database. In 2001 the Federal Communications Commission treated AOL's names and presence system as a potential lever for its newly merged broadband and media business. Someone who wanted to reach an AOL friend in real time could be pushed toward AOL's service. Add a new video feature, and the old contact list might become a launchpad for the next market.

The 2001 merger order responded with an unusually specific gate. AOL Time Warner could not offer a new advanced instant messaging service that transmitted streaming video through its names and presence database over its own broadband facilities until it satisfied one of three conditions. The order named AIM 4.3 and ICQ 2000b as the existing baseline. Ordinary upgrades outside the defined advanced service, and video communication outside the presence-database path, fell outside this restriction. The line was drawn around the merger's possible combination of an existing social network and newly joined distribution assets.

The first exit was engineering. AOL could implement a server-to-server interoperability standard issued by the IETF or another recognized standards body. The rival's server would need access to the address and presence information that AOL users could see about one another, with comparable processing quality and speed. This was a demand for working interconnection between services, not a logo on a standards committee's minutes.

The second exit was contracting. AOL could sign with a significant, unaffiliated provider for server-to-server interoperability before launching the covered service. An officer then had to certify readiness to negotiate with other providers in good faith. Within 180 days of the first contract, two more significant unaffiliated providers had to be signed. That structure sought more than a private bridge to one favored partner. It made a launch conditional on opening multiple routes into the same presence network.

The third exit was an evidentiary petition. AOL could ask the Commission to remove the condition if material circumstances had changed enough that the condition no longer served the public interest. The FCC set a clear-and-convincing evidence standard. It required technical progress reports every 180 days and otherwise set the condition to expire after five years. The regulatory wager was explicit: build the bridge, contract for it, or prove that the danger which justified it had ebbed.

AOL Time Warner took the third option. Its April 2003 petition argued that competition from other major messaging services had developed since the merger. The FCC's August 2003 order accepted the market-change case. The majority said the presence of stable competitors and AOL's declining position weakened its earlier fear that messaging would tip toward one dominant network. It also reasoned that letting AOL join the advanced video messaging market could give consumers another choice and stimulate rivalry. Paragraph 14 granted the petition and removed the restriction. No server-to-server standard or set of three interoperability contracts was the basis of that decision.

Two commissioners refused to treat market movement as a completed substitute for network access. In their official dissent, Michael Copps and Jonathan Adelstein argued that AOL had not carried the clear-and-convincing burden. They objected that the evidence did not separate consumer from business messaging adequately and that the majority had not analyzed how removing the condition could affect future services built on AOL's contact network. Their vote lost. Their question remains visible in the record: how much competition among closed systems is enough to retire a requirement that those systems communicate?

This was a narrower decision than the familiar story that government forced instant messaging to interoperate, or that it simply banned AOL video chat. The 2001 rule attached three exits to one defined product path. The 2003 Commission opened the market-change exit. By its own terms, the original interoperability demand could be discharged without a live connection between the networks it had intended to join.

Original records