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FCC Takes a Hard Look at AOL-Time Warner

It's no surprise that the Federal Communications Commission (FCC) is interested in open access and instant messaging issues in its consideration of the merger of America Online Inc. and Time Warner Inc.. But less public attention has been paid to AOL's interests in interactive television and both companies' ties with AT&T Corp. But at the urging of non-profit groups petitioning the merger, FCC reviewers are taking a harder look at those areas.

Earlier this week, AOL and Time Warner filed a set of answers to questions posed by the FCC in an Aug. 14 letter to the two companies. The Aug. 14 letter was the fourth request for additional information made by the FCC. The FCC's questions delved into AOL's and Time Warner's stance on interactive TV, AOL's DSL agreements, and both companies' agreements and shared interests with AT&T.

In the area of interactive TV (ITV), the commission was especially interested in how AOL deals with unaffiliated programming services as opposed to its ITV partners.

AOL responded, "The ultimate success of AOLTV will depend in large part upon the availability of interactive content. Accordingly, AOL built AOLTV around open standards in order to ensure compatibility with the broadest possible range of content. Thus, while AOL is actively pursuing interactive content agreements with video programmers, the open nature of AOLTV guarantees that any video programmer -- regardless of whether it is an "ITV partner" or, indeed, has any agreement or relationship with AOL -- can reach AOLTV subscribers with its interactive content."

The company added that AOLTV incorporates Liberate Technologies' open platform and supports the Advanced Television Enhancement Forum (ATVEF) Enhanced Content Specification. This allows non-ITV partners to deliver content to AOLTV by incorporating ATVEF "triggers" into video signals.

The FCC also questioned AOL's and Time Warner's relationships with Replay TV Inc. Last year, Time Warner made a $10 million investment in Replay Networks Inc. (later renamed Replay TV Inc.), giving the company a 3.3 percent stake in Replay's fully diluted equity and voting rights for that 3.3 percent. Time Warner does not have the right to appoint any Replay directors but does have observer rights at board meetings and holds three seats on Replay Advisory Council.

"The only current agreement between Replay and any Time Warner affiliate is a Network Service Agreement between Replay and Turner Broadcasting System Inc. that sets forth certain mutual rights and obligations with respect to the non-exclusive license for distribution of Turner Network programming and content through the Replay TV Platform and the Replay Network Service," Time Warner answered. Further, the company said, the agreement does not provide for exclusivity to any Time Warner video programming or content. AOL said it has no relationship with any personal video recorder (PVR) company other than TiVo Inc., a relationship covered in previous filings.

In the area of DSL, the FCC asked if a DSL customer can get AOL ISP service via DSL if AOL has no contractual arrangements with the DSL provider.

AOL responded, "Under AOL's Bring Your Own Access (or BYOA) offering, any consumer with a DSL connection may become an AOL BYOA subscriber even if AOL itself has no contractual arrangement with the DSL provider. BYOA offers consumers who already have an Internet connection the ability to access all of the content of the AOL flagship service at a reduced subscription rate."

On April 26th, a group of non-profit organizations and consumer advocacy groups -- including Consumers Union, the Consumer Federation of America, Media Access Project and the Center for Media Educat