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AOL-Time Warner Take Open-Access Vows

Sep 08, 2000, 16:02 (3 Talkback[s])

By Patricia Fusco, Internetnews.com

America Online Inc. and Time Warner Inc. this week assured federal regulators that the companies would openly share access to its cable system with independent Internet services providers.

However, America Online's (NYSE:AOL) pledge to the Federal Communications Commission takes on the tone of a token guarantee made as an attempt to quell critics of its planned merger with Time Warner (NYSE:TWX).

AOL's good faith statement may deliver tacit open access, but it will not supply the Internet appliances necessary for independent ISPs to connect customers to all the communication services their networks could provide.

Without set-top boxes to connect customers, independent ISPs may be able to serve-up cable access to personal computers, but they would be excluded from providing telephony services and incapable of converting digital signals to make interactive programming functions possible on a television set.

AOL and Time Warner contend that set-top boxes were not a part of the memo of understanding they signed in February when they made their first vow to open access.

While before the FCC in July, Time Warner Chairman and Chief Executive Officer Gerald Levin openly invited independent ISPs to start negotiating terms for access to the combined companies cable network.

"We know Time Warner consumers want choice and innovation in cable Internet service, and we are going to deliver it to them, that includes access to AOL as well as to a variety of other ISPs," Levin said.

Levin assured Commissioners that it would announce a deal with a leading national service provider soon to show its commitment to open access. Three days later Juno Online Services, Inc. forged a pact with both companies to share access to Time Warner's cable system.

AOL and Time Warner contend they further illustrated their commitment to open access when they announced that the companies initiated multiple ISP connectivity tests in Columbus, Ohio. AOL and its wholly owned subsidiary CompuServe joined Juno in the high-speed joint venture with Road Runner.

Gary Baker, Juno spokesperson, said the firm has yet to get the exact terms of its deal with AOL-Time Warner hammered out.

"We just made our initial announcement one month ago and we are working out business and technical details to make the Ohio tests work," Baker said. "We have every indication that AOL and Time Warner are seriously committed to sharing cable access with us."

Baker added that set-top boxes were not an issue for Juno because it is not actively seeking to deploy digital TV or telephony services over cable at this time.

But open access is not the only barrier the media-Internet merger must hurdle. Rivals of AOL are demanding rock solid guarantees from regulators that their content will be delivered over the merged company's cable system and that their instant messaging services will be wholly interoperable.

Walt Disney Co. has repeatedly warned government officials that AOL and Time Warner should not to be trusted to uphold their support of consumer choice and unencumbered competition.

Preston Padden, Disney (NYSE:DIS) executive vice president for governmental affairs accused AOL and Time Warner executives of peddling "snake oil" to federal regulators if the government accepts anything less than a real, non-discriminatory open access guarantee.

Ross Bagully, Tribal Voice chief executive officer has been another outspoken critic of the merger. As a leading provider of instant messaging services, the Tribal Voice leader routinely dismisses privacy and security claims made by AOL as a viable reason to keep its instant messaging services closed to others.

Bagully said AOL conducts an ongoing campaign of terror against rival instant messaging services.

"AOL's most recent filing to the FCC is yet another attempt to couch its efforts to dominate the instant messaging marketplace by hyping security and privacy as barriers to interoperability and open standards," Bagully said.

Rhetoric aside, AOL anticipates that the merger will continue on its path to closure this fall. If it does so, the deal would effectively unite the country's largest Internet provider with the world's largest media company, and make AOL the second largest cable operator in the U.S.