AOL Adjusts Open Access Efforts

America Online, Inc. is backing away
from its commitment to open up access to proprietary cable networks.

Prior to its January proposal to buy Time Warner, Inc. America
Online (AOL)
had been a longstanding proponent of open access to cable networks.
According to the Wall Street
Journal,
AOL recently instructed its lobbyists to stop pushing state
legislation that would require open access in Virginia, Michigan, Maryland
and Pennsylvania.

Before the Time Warner (TWX)
deal was reached, AOL lead the campaign for open access nationwide. Its
lobbyists went head-to-head with AT&T
Corp.
(T) in an effort to compel cable operators to share their lines with Internet service providers.

At the time of the deal, Steve Case, AOL chairman, said the company first
started reviewing open access to cable platforms several years ago and that
it still believed market forces should prevail.

“We started raising the issue of open access a couple of years ago, we
really were focused on the fact that for the Internet to continue to
flourish, we need consumer choice,” Case said. “To have consumer choice we
needed to have competition among ISPs and access, that continues to be our
view.”

Case also said the combined company would continue to promote open and
competitive access to cable networks.

“This company will be leading the charge, we are looking forward to being
on the cable platform and we expect to have many competitors on that
platform,” Case said.

Peter Arnold, Hands Off the
Internet
executive director, said it was obvious Steve Case was
adjusting AOL’s approach toward open cable access last year.

“During investor meetings in November, Case said negotiated deals with
cable companies were clearly the means to obtain access to cable
networks,” Arnold said.

Rich Bond, openNET Coalition
co-director, said he did not think AOL would abandon the open access cause.

“I don’t think that they [AOL] would deceive us and I truly believe that
they are committed to open access,” Bond said.

“The morning of the merger they told us that this is going to change the
world, but its not going to change our goal and its not going to change our
commitment,” Bond said. “We’re just going to have to get there a different
way at this point.”

AOL and AT&T have
proven that the most effective way to obtain open access to cable networks
is to buy the firm or contract for access.

AT&T made a radical departure from its closed access policy when it struck
a deal with MindSpring Enterprise
Inc.
in December. AT&T agreed to share access to its cable systems with
MindSpring (MSPG)
when its exclusive contract with [email protected]. (ATHM) expires in mid-2002.

Utilizing the deal as a springboard, AT&T declared that it was in favor of
shared access to cable networks and that other independent Internet service
providers should start negotiating for access immediately.

National consumer organizations including the Consumers Union, and the Consumer Federation of America, Media Access Project, and < a href="http://www.cme.org">Center for Media Education believe that
consumers do not want to succumb to choosing between giant telephone or
Internet dictatorships.

The groups asked the Federal Communications Commission to review AOL, Time
Warner and AT&T wheeling and dealing because the companies maintain
anti-competitive levels of ownership over cable programming and Internet
services.

“We want the FCC to require open access, regardless of the promises made by
the players,” the groups demanded.

The consumer groups fear that AOL will immediately become the leader in
broadband Internet services, as they already dominate narrowband services
in the U.S.

In related news, The Federal Trade Commission has been tapped to handle the
investigation of America Online’s proposed $127 billion purchase of Time
Warner.

The FTC or the Justice Department typically investigates mergers of this
nature. The FTC reviewed Time Warner’s acquisition of CNN, which was
announced in 1995 and approved in 1997 after the firms agreed to divestitures.

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