America Online's $163 billion stock merger with Time Warner, announced by the two companies Monday morning, will give the Internet giant access to the best of both multichannel worlds: cable and satellite. AOL already has an eye on satellite, spending $1.5 billion on a deal with Hughes in 1999. Under the companies' agreement, Hughes' DirecTV unit will launch the AOL TV interactive service later this year, while AOL will help Hughes get its Spaceway broadband endeavor off the ground. PaineWeber's Tom Eagan said Monday's announcement "validates AOL's investment and affiliation with DirecTV, as a high-speed broadband content provider. We don't believe the Time Warner-AOL merger will affect DirecTV's roll out of AOL TV...as DirecTV's 8 million-plus subscribers are crucial to AOL's vision of 'AOL Everywhere.'" Eagan added that EchoStar and Pegasus also will benefit "by the association of satellite with broadband high speed Internet service." The AOL/Time Warner merger also gives the nation's largest Internet provider links to an important cable outlet. "AOL will gain access to Time Warner's 13 million-plus cable subscribers at a time when their cable networks are being upgraded to platforms that can support high-speed cable modems and other new media services," said Denver-based Janco Partners in its morning research brief. "And as Internet video and audio streaming technologies evolve at a fast clip, AOL (already a web information/entertainment/e-commerce supermarket) will be able to tap into Time Warner's powerful television, HBO and music divisions for content." Eagan said the merger may facilitate affiliations between AOL and other cable operators, "which should accelerate the rollout and adoption of the cable broadband high-speed Internet service," he said. "Indeed we expect the migration to retail sale of cable modems (which we have been discussing for sometime) to be accelerated by associating with the powerful AOL brand name." Under terms of the agreement, Time Warner shareholders will receive 1.5 shares of the new company, called AOL Time Warner, for every share of Time Warner stock they own. AOL shareholders will receive one share of the new company for every AOL share. The new company will be 55 percent owned by AOL and 45 percent owned by Time Warner. The merger, the largest in corporate history, will create a combined company with a market capitalization of $350 billion and an annual revenue stream topping $30 billion. Time Warner head Gerald Levin will become chief executive of the new company. AOL chairman and founder Steve Case will serve as chairman. Ted Turner, Time Warner's vice chairman, will serve in the same capacity with the new company. The founder of TBS, CNN and Cartoon Network, and who currently controls 9 percent of Time Warner's stock, reportedly agreed to the deal.

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FCC Seeks Comment On Sat Rules

The Federal Communications Commission is seeking comment on network non-duplication, syndicated program exclusivity and sports blackout rules proposed for satellite carriers. Monday's action is the second of several proceedings to implement provisions in the Satellite Home Viewer Improvement Act, signed into law by President Clinton in November. Congress set a one-year deadline for the FCC to adopt the rules. Network non-duplication laws allow a local station to protect its exclusive distribution rights for network programming, while syndicated program exclusivity allows a station to protect its exclusive distribution rights for syndicated shows. Under similar rules for cable, a local station may demand that a cable system blackout any duplicate carriage of a network or syndicated program. Sports blackouts are aimed at protecting exclusive distribution rights to a local sporting event. Under the rules, if a local station doesn't have permission to carry a local game, then no other broadcast signal displaying the game can be shown in the local blackout zone. The FCC is required to apply the sports blackout rule to satellite carriers' retransmission of network stations as well, but only "to the extent technically feasible and not economically prohibitive."

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ICTA Expands Board For New Year

A number of new private cable operators and satellite interests joined the Independent Cable and Telecommunications Association (ICTA) board as part of the organization's strategic plan for 2000. The Washington, D.C.-based ICTA represents private cable operators (PCOs), DBS providers, the supporting industry of manufacturers and vendors and Internet service providers. Joining the ICTA board for the new year are 11 multi-family dwelling unit (MDU) companies and REITs, or rental properties. Scott Wiggins, a vice president with Dominion Realty Trusts, said his business joined the ICTA because "apartment building owners know that unless there is competition from alternative video providers like (private cable operators) that product and service improvements by the incumbent cable companies will not materialize." According to the ICTA, there are approximately 1000 PCOs in the nation.

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Globalstar To Sell Shares

Globalstar Telecommunications announced Monday that it plans to sell 7 million shares of common stock through a public offering. The company said it will use proceeds from the sale to pay for general corporate purposes, accelerate the rollout of the sat-phone service and possibly repay some of its debt. Globalstar shares rose more than $1 to $36.88 in trading Monday.

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TECH: Satellites Increase Web Capacity