AOL Time Warner Presents Renewed Threats

America Online (AOL) and Time Warner have cleared the last legal hurdle in their merger, creating potential threats for Microsoft in a variety of consumer markets, including broadband Internet access, media content, and instant messaging (IM). The new conglomerate, dubbed AOL Time Warner (AOLTW), faces integration challenges, but Microsoft will also need tighter coordination and integration between various arms of its business in order to meet the threat head-on.

Microsoft lobbied both the Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) to impose certain restrictions on the merger. Although the restrictions actually imposed were not as strict as Microsoft had hoped, they will have some positive effect on Microsoft’s future business, particularly in the area of IM technology, and they show that the company is learning how to negotiate the political jungle of Washington, D.C. The federal government also showed, with this merger, its regulatory interest in areas such as broadband access and Internet software standards, which could harm or help Microsoft in the future.