Any time now, government economists will decide whether America Online's (AOL's) $165-billion proposed take-over of Time Warner is likely to be good or bad for consumers. If good, the government will sign off. If bad, there'll be negotiations with AOL and Time Warner until an agreement can be reached on what the new company would have to do to answer economic objections. The inquiry will be quiet and businesslike, occurring in colorless offices and occasionally in meeting rooms filled not only with economists but also with government lawyers and the counsel and investment bankers representing AOL and Time Warner.
I'll save all those economists and lawyers and bankers a lot of time and trouble, and answer their questions right here:
Is the combination efficient? Yes. AOL serves about 20 million Internet subscribers. Time Warner serves 13 million cable subscribers and also has a lot of content--magazines, movie and music studios, and cable channels. AOL wants to give its subscribers high-speed cable service and a lot of content. Time Warner wants AOL's customers.
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Will the combination monopolize the market? No. AOL and Time Warner are in separate industries. And even if you consider the entertainment-telecommunications-Internet confabulation a single giant industry, there are enough competitors to keep AOL-Time Warner on its toes. If it tries raising prices too high or starts providing lousy service, ABC/Disney, MCI WorldCom, and GE-NBC-Microsoft will grab its customers away.
Does the combination have total control over any important distribution channel? Not really. Time Warner's cables are important, but other companies are laying millions of miles of new fiber-optic cable for high-speed Internet service. Steve Case, AOL's chairman, has even publicly committed to giving other Internet companies access to the new company's cables. Besides, the future is wireless--and whole constellations of satellites are being launched.
Will the combination deter innovation? No. There's nothing here like a Microsoft operating system that's so ubiquitous as to discourage outside inventors from trying something new. And America's awash in venture capital.
So the take-over should fly through.
But if government officials were paying proper attention, they wouldn't let this one slide by. The antitrust movement of the last decades of the nineteenth century wasn't animated by concerns about consumer welfare. Reformers worried that concentrations of economic power would undermine democracy. Republican Senator John Sherman of Ohio, chief sponsor of the Sherman Antitrust Act of 1890, said the power of the trusts amounted to "a kingly prerogative, inconsistent with our form of government."
Here's a checklist of questions government officials should ask about the proposed take-over, and the answers:
Will the combination create large efficiencies of political influence? Yes. AOL is America's biggest Internet company, with a great deal of political clout, in an industry whose influence in Washington is growing daily. Time Warner is America's largest media and entertainment company, whose news outlets have significant influence on American public opinion. Together, they'll have more clout in Washington than Vernon Jordan.
Will the combination reap large political benefits? You bet--federal tax breaks and subsidies, trade agreements over intellectual property, and Federal Communications Commission rulings over spectrum allocation or ownership. Plus, expect every state and city in the nation, not to mention other nations, to bid for pieces of the action--locations for suppliers, contractors, distributors--which will lead to still more tax breaks and subsidies.
Will it be able to use the threat of litigation to get its way? Of course. Together, these giants can afford platoons of lawyers to fight anyone audacious enough to take them to court, and litigate forever against any government agency seeking to enforce the law. Everything will be settled out of court, on terms highly favorable to the new company.
Will it deter criticism of itself? It won't censor directly, but journalists will think twice about criticizing such a large hand that now feeds or could feed them some day. Elected officials will be reluctant to speak out against such a media megapower. Citizens and Netizens who are employed by it--or by one of its innumerable subcontractors, content providers, or distributors--will mute their concerns.
Will it censor what citizens learn, see, or hear? No, but it will force producers, editors, and Web content providers to pander even more than they do now to anything that will attract eyeballs--whatever's popular, trendy, and titillating. Forget a marketplace of ideas, on which democracy depends; it's just a marketplace.
Don't expect to hear much discussion about any of this. Economists are in charge of antitrust these days. That's a fundamental mistake. The antitrust laws still can and should be about political power. Sure, I want cheap Internet access, and I'll be happy to have a lot of lively entertainment over the Web. But I'd rather have a lively democracy. ¤