AOL-Time Warner Take Open-Access Vows

By Patricia Fusco,

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

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

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

“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

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
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.