Would AOL Time Warner Give Case Too Much Power?

Legend has it that Microsoft’s Bill Gates looked AOL CEO Steve Case in the eye seven years ago and spread the following dose of sunshine:

“I can buy 20 percent of you or I can buy all of you. Or I can go into this business myself and bury you.” My, have times changed. This year, if the $160 billion (US$) merger of AOL and Time Warner comes off without a hitch, Case could well rival or surpass Gates’ stature as a mogul for the ages.

Power Shift

This high-tech power shift has not gone unnoticed in the real world. Just this past Sunday, some of the biggest players in the new economy met at Stanford University for a freewheeling discussion of where the Web is and where it is going.

The two hour “Summit in Silicon Valley” was hosted by NBC News anchor Tom Brokaw and cable channel MSNBC, and brought together top executives from such high-tech titans as Microsoft, Intel, Cisco Systems, AOL, Yahoo!, Amazon.com and eBay.

More Power Than Charles Foster Kane?

Brokaw suggested that the Time Warner merger could put Case, who appeared at the meeting via a live video feed, in the same league as the title character in Orson Welles’ famed 1941 film “Citizen Kane.”

“If you get the Time Warner deal completed, you’ll have more power than Citizen Kane ever imagined, everything from CNN to rap artists, everything from Time magazine to Web sites,” Brokaw said. “Why shouldn’t we believe that’s simply too much power? That anyone who wants to do business will only have to do it on your terms?”

Case appeared to be unfazed. “We don’t believe that bigger is better,” he replied. “We’re not doing this simply to get bigger. We believe it is better. And these two companies can, we think, really enhance people’s lives in very fundamental ways.”

Does Such a Non-Answer Cut It?

This sort of non-answer would have been acceptable when AOL was just a fledgling online service provider, but I think such circuitous pabulum will not cut it when Case and Time Warner CEO Gerald Levin appear before the U.S. Senate Judiciary Committee Tuesday.

The Judiciary Committee is holding hearings this week on various aspects of the proposed merger between AOL and Time Warner. During the last several weeks, a number of consumer organizations have voiced serious concerns about what they perceive to be an about face by AOL on the issue of open access to the Internet. There are also numerous concerns about the growing accumulation of power by monster media firms like the proposed AOL Time Warner.

When Case testifies before the committee, his answers on these issues will have to be far more comprehensive than they were with Brokaw. Otherwise, the proposed merger may start generating some real negative attention.

Focus Shifting to Case

Soon after AOL and Time Warner announced their proposed deal in January, Judiciary Committee Chairman Orrin Hatch (R-Utah) urged caution.

At the time, Hatch said that the converging media and Internet industries needed to avoid the pitfalls of a much earlier industrial consolidation, which was “dominated by oil barons and railroads, and ultimately resulted in heavy-handed regulation.”

It used to be that such titles were reserved only for Bill Gates, but it now seems that the media and government spotlight has begun to switch its focus to Case. One wonders if he is prepared for all the extra attention.

When Case and Levin testify this week, expect them to be grilled about such issues as open access and concentration of power. If their answers do not sit well with members of Congress, there is no guarantee that the merger will sail ahead as smoothly as everyone imagined when it was first announced.