Determining that the acquisition would not violate antitrust laws, the department decided not to challenge the estimated $425 million deal announced in April. The cash and stock deal, which had already been approved by WebTV shareholders, was completed immediately after today’s decision.

Approval of the deal clears the way for Microsoft’s official entry into the convergence of computer and television technologies for Internet uses. Seen as key to the growth of the Internet among new users, the market has led to other major developments, such as Sun Microsystems’ plans to acquire set-top box maker Diba.

The clearance is the second high-profile victory for Microsoft on antitrust issues this week. On Tuesday, it was disclosed that the Federal Trade Commission said it has officially rejected three senators’ request to reopen an investigation of Microsoft’s alleged antitrust practices.

The WebTV deal and the request for an FTC investigation have been viewed as key barometers for those concerned about antitrust issues involving Microsoft and other companies that have rushed headlong into the emerging new media and relative technologies.

Sources on Capitol Hill have said there is growing concern about media monopolies in general, extending well beyond any one company or suspected violation. The Senate Commerce Committee could “very likely” hold hearings on media convergence as early as the end of this summer, said the staff member, who asked not to be identified.

“Technologies are converging, and one way they’re going to converge is through the PC,” said an aide to Sen. Conrad Burns (R-Montana) in a recent interview. “If a company has a monopolist position over what appears on the screen and can pick winners and losers in content, that is a real concern.”

WebTV issues specifications that allow TV set-top boxes and built-in television connections to access the Internet. The company offers Internet service through agreements with ISPs nationwide.

Microsoft’s interest in the company is at least twofold: to acquire another vehicle to extend its Windows CE operating system and, more broadly, to find another outlet for its expanding media and content operations, which range from the joint cable venture MSNBC to the Microsoft Network online service.

Although WebTV’s 115,000 subscribers are not expected to notice immediate changes from the Microsoft merger, WebTV spokesman Aaron Mata predicted that the integration of Microsoft’s CE operating system will result in what he called a “wealth of content” for customers. He added that “we are very excited but not at all surprised” about the Justice Department decision.

Microsoft spokesman Greg Shaw described the investigation as a routine review applied to any merger above a certain size. Such reviews are conducted to determine whether mergers will result in unfair competition or monopolies in a given industry.

“This is a competitive, innovative marketplace,” Shaw said, citing Sun-Diba deal as an example. The WebTV acquisition “is good news for consumers,” he added.

Sun declined to comment on today’s announcement, but spokesperson Jenny Johnstone touted her company’s commitment to “an open system that will provide consumers and manufacturers with choices.” That, she said, stands in stark contrast to Microsoft’s closed, proprietary system.

The acquisition had drawn opposition from the Committee to Fight Microsoft, which has warned that the software giant was using its technology “as a way to injure competitors.” It is this prospect of empire-building that has caused some nervousness in Washington.

“You have to look at essential facilities—in other words, if you have facilities that your competitors need to get into the market, you have to give them access. Microsoft says that Windows is not an essential facility; others say it is. And you have to look at abuse of dominance, where a company uses its monopoly position in one market to unduly influence another market,” one official told CNET’s NEWS.COM in early July. “These are questions that belong in front of Congress or the Supreme Court.”

Since President Clinton signed the Telecommunications Reform Act on February 8, 1996, media, telecommunications, and other technology companies have made an astonishing number of mergers, alliances, and competitive thrusts into each other’s traditional markets. Outgoing Federal Communications Commission chairman Reed Hundt has publicly questioned the wisdom of such mergers, including the recently quashed AT&T-SBC union.

FAQs

  1. What was the key decision made regarding the $425 million deal announced in April?
    The department determined that the acquisition would not violate antitrust laws, allowing the deal to proceed.

  2. Why is the approval of the deal significant for Microsoft?
    The approval paves the way for Microsoft’s official entry into the convergence of computer and television technologies for Internet uses.

  3. What concerns have been raised regarding media monopolies on Capitol Hill?
    There is growing concern about media monopolies, extending beyond any one company or suspected violation, prompting potential hearings on media convergence.

  4. How does WebTV enable TV set-top boxes to access the Internet?
    WebTV issues specifications that allow TV set-top boxes and built-in television connections to access the Internet and offer Internet service through agreements with ISPs nationwide.

  5. What are Microsoft’s primary interests in acquiring WebTV?
    Microsoft aims to extend its Windows CE operating system and broaden its media and content operations through the acquisition of WebTV.

  6. What changes are expected for WebTV’s subscribers post-Microsoft merger?
    While immediate changes are not anticipated for subscribers, the integration of Microsoft’s CE operating system is predicted to deliver a “wealth of content” for customers.

  7. Why has the acquisition drawn opposition from the Committee to Fight Microsoft?
    The Committee to Fight Microsoft believes that the software giant is using its technology to harm competitors, raising concerns about empire-building.

  8. What actions have been questioned in terms of abuse of dominance?
    Concerns have been raised about companies using their monopoly positions in one market to unduly influence another market, prompting discussions about essential facilities and abuse of dominance that may require congressional or legal intervention.

Summary

The article discusses the approval of a $425 million deal between Microsoft and WebTV, highlighting its significance in the convergence of computer and television technologies for internet use. The decision not to challenge the acquisition based on antitrust laws sets the stage for Microsoft’s expansion into new media and content operations. The potential impact on media monopolies and concerns about unfair competition have sparked discussions on Capitol Hill, with calls for hearings on media convergence. The merging of technologies and the implications of dominance in the market raise questions about essential facilities and the need to prevent monopolistic practices. Overall, the article sheds light on the evolving landscape of technology mergers and alliances, emphasizing the need for regulatory scrutiny to ensure a competitive and innovative marketplace.

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