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Dispatches The Buzz (Publick Occurrences)

the digital revolution marches on

AOL Time Warner takes 2 to tango

A walk in the Vermont woods. Dinner in Manhattan. Dinner in suburban Virginia. With that, a $350 billion corporate behemoth was born. The walkers and diners were two titans of American industry: Steve Case, CEO of America Online, and Gerald Levin, CEO of Time Warner. Both saw their companies as a perfect fit: AOL, the world's largest Internet service, needs an endless supply of content, which Time Warner, the world's largest media company, can provide. Time Warner also has 13 million cable subscribers, giving AOL a leg up in the race to provide "broadband" Internet access (that is, faster than a phone line). When the two men shook hands, they set into motion the biggest corporate merger in history. The stock swap creating a new company, AOL Time Warner, is valued anywhere from $160 to $183 billion. Some of the best-known names in computers and entertainment-America Online, CompuServe, Netscape, Entertainment Weekly, CNN, the Atlanta Braves, and Fred Flintstone-will now be under the same corporate roof. It all happened with astonishing speed. The two CEOs agreed to the merger after a Thursday dinner at Mr. Case's Virginia home. Immediately, secret calls began going out to company executives, lawyers, and investment bankers. All day Friday-then on through the weekend-they met in a 30th-floor conference room overlooking New York's Lexington Ave. Alpha Tango, as the merger was dubbed (Alpha for AOL, Tango for Time Warner), was kept top secret to avoid leaks to the press or the competition. Meals were prepared on-site so no delivery people would have to enter the building. In legal documents, the companies were referred to as "black" and "blue" so that secretaries would not know who was involved. On Sunday afternoon, each company's board got details of the proposed merger, and by 9 p.m., both boards had signed off on the plan. From handshake to vote, the entire process took some 72 hours. Although billed as a merger of equals, AOL's fat profit margins and rapid growth rate effectively allowed it to take over the bigger but stodgier "old media" company. Will NBC and MGM be next to be gobbled up by the likes of Yahoo, Lycos, or Microsoft? Disney, the world's second-largest media company, could be the next to go, since its stock dropped 28 percent last year following disappointing earnings. "There's a trend toward Internet companies partnering with traditional media companies," said Mark Mooradian, an analyst with Jupiter Communications, a Manhattan-based Web research firm. The Time Warner-AOL merger "is the pinnacle of that kind of partnership in the making, but I definitely think we're going to see more of this." Will this change the content or quality of what Americans see? In a Monday morning conference call with 1,700 analysts, Mr. Case vowed the new company would have a "positive impact on society." In a news conference later that day, both he and Mr. Levin promised to create a "socially responsible" company, without defining just what that might mean. Still, any sort of unified message from the media giant is unlikely: For all its clout, AOL Time Warner will serve largely as a holding company, with decisions about specific brands left up to the head honchos of various divisions. Immediately after the announcement, the stock prices of other traditional media companies began to soar as analysts looked for the "convergence" trend to continue. TV, radio, print magazines, movies, and even professional sports are on a collision course with the Net. If companies don't have a significant presence in cyberspace, they don't seem to matter much anymore. With people surfing the Net on their TVs and watching TV broadcasts on their computer screens, the technological lines were already blurred. Now the biggest merger in history makes it official by blurring the corporate lines, as well. The so-called Internet "bubble" so hotly debated on Wall Street may not burst at all: It may simply continue to grow until it encompasses almost every facet of everyday life. The No-Comment Zone

  • A federal judge did not let himself be pushed by Jesse Jackson's flamboyant defense of six black students expelled from a Decatur, Ill., high school for fighting at a football game. U.S. District Judge Michael McCuskey ruled against a lawsuit filed by the Rainbow/PUSH Coalition, saying the local public school board had the authority to boot the students. "The citizens and students of Decatur should be able to go to a high-school football game without worrying about a violent confrontation erupting in the stands," Judge McCuskey wrote. Mr. Jackson's four-month campaign in the community has heightened racial tension; he vowed another lawsuit and more protests.
  • Some people will do anything to get high: Surgeons at Southeast Georgia Regional Medical Center removed 55 small glass pipes used to smoke cocaine from the stomach of a 35-year-old Jacksonville man, who went to an emergency room complaining of severe abdominal cramps, heartburn, and indigestion. Then police looked at what came out. "At first, I thought it was vials of powder cocaine. Then I realized it was crack pipes, and when I saw how many there were, I really couldn't believe it," said Brunswick police investigator Alison Drawdy. The man apparently swallowed the pipes while high on crack and did not realize what he was doing, she said.
  • Robert Kosilek killed his wife in 1990 and now wants the government to turn him into a woman. The life convict contends he is a woman trapped in a man's body, so he sued the state of Massachusetts to make taxpayers pay for a sex change. State officials said no, and that denial, Mr. Kosilek claims, amounts to "cruel and unusual punishment." He demands hormone therapy and surgery that would allow him to "assume some level of psycho-sexual congruity," as he put it in court papers. Corrections officials refuse to cough up the estimated $10,000 to $15,000 to make Robert into Roberta and want the case dismissed.
  • Cover up, Cosmo. Kroger is putting its copies of Cosmopolitan magazine in special racks starting this month that will cover up everything but the magazine's name. America's biggest grocery chain said that customers complained about the magazine's raunchy headlines, such as "Sex Tricks He's Never Seen Before." A Kroger vice president said he "had to pull Cosmo many times because the cover was not fit for the checkout area," where children would see it.
  • U.S. District Judge Ed Prado ruled that Texas's high-school graduation test does not discriminate against blacks and Hispanics. The Mexican American Legal Defense and Educational Fund argued that the higher failure rate of Hispanic and black students (20 percent) compared with white students (10 percent) proved that the test was discriminatory. State lawyers argued that other factors explained the differences in failure rates and that the gap was closing. Passing the standardized test has been a requirement for a diploma from a Texas public high school since 1990. Singer Crosby the dad of lesbians' kids

    Donor Dad

    Lesbian pop star Melissa Etheridge says her two kids, whom she raises with her girlfriend, were fathered by donor sperm from a fellow rock star, David Crosby. In a cover story for Rolling Stone magazine, she says the singer and songwriter from Crosby, Stills, and Nash sired the two children via artificial insemination with Ms. Etheridge's girlfriend Julie Cypher. The Grammy-winning Etheridge said Mr. Crosby's wife first suggested the idea when the two couples chatted during a vacation in Hawaii a few years ago. Mr. Crosby, who is 58 and the father of three other children, thinks the two kids, Bailey and Beckett, make a profound social statement: "Maybe it's a good thing for a lot of straight families to see that this is not something strange." He will have no role in the rearing of the children. net 'intoxication' blamed for threat

    Old argument, new media

    When Michael Ian Campbell threatened to "finish what begun" at Columbine High School last April, he wasn't dangerous, just drunk on cyberspace. That's what the Cape Coral, Fla., 18-year-old's lawyer said when the teenager pleaded innocent to making an online threat. Attorney Ellis Rubin told reporters that Mr. Campbell was intoxicated by the Internet to the point of being hypnotized when he made the remark to a Columbine student using America Online's instant message system. Mr. Rubin's strategy is something of an update of the argument he used in defense of another Florida teenager in 1977. He argued that "television intoxication" led Ronny Zamora, 15, to murder an elderly neighbor. (The young man was convicted.) Mr. Campbell's alleged threat led Columbine administrators to cancel two days of school. The student who received the message also transferred to another school. If convicted, the teenager could be sentenced to five years in prison and fined $250,000. Religious broadcasters irate over FCC ruling

    Religion isn't 'educational'

    This time the threat to religious broadcasting is real (unlike the false Madalyn Murray O'Hair petition rumor perennially making the rounds in the mail and on the Internet). In approving a complex transfer of a Pittsburgh PBS television station's license to evangelical Cornerstone TeleVision, the Federal Communications Commission quietly issued "additional guidance" Dec. 29 that carries the weight of law. The guidance requires broadcasters operating on noncommercial educational licenses to have as their primary purpose service to the "educational, instructional, or cultural needs of the [local] community," and to devote at least one-half of their programming hours to topics that serve these purposes. Such programming, the FCC said, must not be "primarily devoted to religious exhortation, proselytizing, or statements of personally held religious views and beliefs." Listing examples, the FCC said programs about religion qualify as educational, but "church services, emotional appeals to religious faith, or any form of proselytizing" do not. Religious education, yes; "exhortation," no. To conform to the new guidelines, Cornerstone agreed to include more nonreligious educational programming in its schedule. Two of the five FCC commissioners issued a dissenting opinion. They protested the government's attempt to define what is acceptable religious speech and what is not. Why would a church service meet cultural needs of the community any less than an opera? they asked. They also criticized the FCC's departure from standard procedure in failing to consult the affected broadcast community before issuing such a sweeping order. Religious broadcasters, led by president Brandt Gustafson of National Religious Broadcasters, complained loudly, and some members of Congress warned the FCC to back off. In response, FCC chairman Bill Kennard emphasized the guidance affected only a limited number of religious broadcasters who seek licenses for specially reserved educational channels (about 20, according to FCC estimates, out of some 285 TV stations that carry religious broadcasting, 183 of them full-time). He said such licensees always have had to serve primarily "the educational needs of the community." Meanwhile, members of an alliance opposed to the Cornerstone license transfer said the FCC order did not appear to be enforceable, and they may file an appeal against the decision. Elian spared Jan. 14 repatriation; future uncertain

    Life in the bubble

    As the case of Elian Gonzalez ping-ponged between federal and state officials, the 6-year-old boy started adjusting to his uneasy life in the limelight. Elian has become the subject of international television coverage. He had his mug on the cover of Time and even received a visit from New York Yankees ace Orlando "El Duque" Hernandez, a Cuban who also escaped Fidel Castro's worker's paradise. Not that Elian has escaped just yet. Following a Florida state court ruling that would keep Elian in the United States until at least March, Attorney General Janet Reno reiterated that the boy must be returned to his father, who lives in Cuba and was divorced from his mother, who perished helping bring Elian to freedom in the United States. But Ms. Reno lightened up on her original insistence that Elian be sent back to Cuba by Jan. 14. In the state court, Judge Rosa Rodriguez granted temporary custody to Elian's great-uncle in Miami, pending a full hearing March 6, where Elian's father is ordered to appear. Elian has also been subpoenaed to appear before a U.S. congressional committee in February. Ms. Reno contends that any challenge to the government's decision to return Elian Gonzalez to his Cuban father must come in federal court. "The question of who may speak for a 6-year-old child in applying for admission or asylum is a matter of federal immigration law,'' Ms. Reno said in a letter to lawyers for the boy's Florida relatives. Republican lawmakers and presidential candidates are challenging Ms. Reno's decision. But they may find themselves up against the very law passed by the Republican-led Congress in 1996, when it approved an immigration reform law that denied most judicial reviews of Immigration and Naturalization Service decisions concerning "noncitizens."