Consumer advocates are calling on the Federal Trade Commission (FTC) to
take a closer look at the business relationships of an Internet service
provider (ISP) recently selected to participate in AOL Time Warner’s open access project.
One of the conditions to regulator approval of the $109 billion merger of
the largest ISP in the world and the second-largest cable network in the
U.S. was to prove it was opening up its cable network to competitive ISPs.
AOL Time Warner spent the months immediately prior to and following the merger
placating FTC officials by signing up national ISPs EarthLink
Inc. , and Juno
Online Services Inc. to offer cable Internet
access over its cable lines.
That fulfills the stricture for two of the three independent national ISPs
required
to access Time Warner’s cable network before AOL can offer its own
services, but advocates worry about the media giant’s choice for the third ISP,
announced in May.
High Speed Access Corp. , a broadband (cable) ISP
headquartered in Littleton, Colo., is a small company that capitalized on the
promise of high-speed Internet.
Founded in April of 1998, the ISP has gotten capital infusions from some of
the biggest names in the high-tech industry, companies that were themselves
looking to invest in ISPs that promised to deliver to an ever-growing
demand for high speed Internet access. The company now has more than
176,000 cable Internet users, mostly through a partnership with Charter
Communications , a cable network with investment ties to
the broadband ISP.
That list of investors, which include Microsoft Corp.
and Vulcan Ventures Inc., is what has advocates so concerned.
Paul Allen, Microsoft co-founder and Vulcan Ventures boss, has ties
throughout the cable industry. In addition to control of Charter, the
fourth-largest cable network in the U.S. behind AT&T , AOL Time Warner
and Comcast Communications , Allen and Vulcan Ventures have
members on the HSA board of directors, as well as investments in joint
ventures with AOL Time Warner.
It’s Vulcan’s ownership of HSA, in addition to ties with AOL, which has
Jeffrey Chester, executive director for the Center for Digital Democracy
worried. He points to a recent HSA filing to the Securities and Exchange
Commission which said the ISP can be forced to run Vulcan-dictated content.
“Under our programming content agreement with Vulcan, Vulcan has the right
to require us to carry, on an exclusive basis in all cable systems we
serve, content it designates, (which can) include start-up and related Web
pages, electronic programming guides, other multimedia information and
telephony services,” the SEC filing states. “Vulcan has the right to
prohibit us from providing content or telephony services that compete with
Vulcan content at Vulcan’s discretion and can require us to remove
competing content.”
If that sounds familiar, it’s because objections were raised throughout the
entire AOL/Time Warner merger process by critics, warning federal
regulators that a merged entity would bring those requirements to the table
for competing ISPs hoping to get on Time Warner’s cable network.
You can hardly say an ISP is independent and competitive if operations are
ultimately dictated by a man (Allen) who has a financial interest in
keeping AOL alive, well and happy, advocates maintain.
“In light of these business ties and unique relationships, we believe that
the (FTC) should withhold approval until it can evaluate evidence that HSA
will be able to compete effectively with AOL/TW as a non-affiliated ISP,”
Chester’s letter reads.
AOL, while silent for the first 90 days of its merger into the largest
old/new media corporation in the world, has been increasingly making its
presence felt in its many various holdings, flexing its muscles and
ruffling the feathers of competitors and regulators alike.
Microsoft has been in pitched battle with the world’s largest ISP for
nearly a month now, fighting AOL over everything ranging from digital
photography to desktop
advertising.
The FTC already has AOL on its mind, leveling charges Tuesday against
Time Warner Music and Universal Music for price fixing. The two
largest music distribution companies in the world were found guilty of
holding off discounts and not advertising certain musical products from its
own catalogs to boost the appeal of a forthcoming “Three Tenors” CD.
Joseph Simons, FTC bureau of competition director and ultimate judge in the
case of AOL’s open access policies, said in a statement that he holds
little tolerance for big companies that act in an anti-competitive fashion.
“Participation in a joint venture is not a license to fix prices on
products outside of the joint venture,” Simons said. “This case is
particularly troublesome because the companies involved here are large,
sophisticated, and should have known better.”
AOL officials reading that message likely experienced a chill; even
though the FTC ruling was the result of Time Warner music actions before
the merger, it doesn’t take much imagination to extrapolate that to today’s
advocate concerns.
AOL officials were unavailable for comment.
