America Online Inc. and Time Warner Inc. Tuesday reached terms that will establish a framework for open access to its cable systems.
The memorandum of understanding commits the merged company to open access
as a standard business procedure and effectively quiets critics of the
proposed $160 billion deal currently under review by the Senate Judiciary Committee.
Steve Case, America Online (AOL)
chairman and chief executive officer, said choice, competition and innovation have been the factors driving the Internet’s explosive growth to date. AOL intends to keep the momentum of an wide open competitive
framework driving new services.
“I am very pleased that we have been able to make this significant step
forward today toward making open access a reality for consumers in the
marketplace.” Case said. “It is exactly what we believe our two companies
can achieve when we work together: providing new choices for consumers and
value in the marketplace.”
Gerald Levin, Time Warner (TWX)
chairman and chief executive officer, challenged other cable access providers, like AT&T Corp. (T), to make the same commitment to open access.
“I look forward to the rest of the cable industry following this same path
of choice and innovation, which I believe will greatly accelerate consumer
adoption of cable broadband services,” Levin said. “Today’s announcement is
another step forward in delivering on the promise of the interactive medium
and helping make broadband access a reality for every consumer.”
Joe Collins, Time Warner Cable chairman and chief executive officer, said the broadband provider looks forward to delivering diverse content and connectivity.
“At Time Warner Cable, we are committed to delivering the services
consumers want. Our subscribers want a first-class array of choices, and we
look forward to working with AOL and other ISPs to deliver that to them,”
Collins said.
Key elements of the understanding include commitments offer consumers a
choice among ISPs. Consumers will not be required to purchase service from
an ISP that is affiliated with AOL-Time Warner in order to enjoy broadband
Internet service over the merged companies cable systems.
AOL would not place any limits on the number of ISPs with which could enter
into commercial arrangements with the Internet industry leader.
While the announcement is subject to existing Time Warner obligations,
including as its contracts with Road
Runner, Time Warner affirmed that it is committed to providing a choice
of ISPs to broadband consumers as quickly as possible.
The understanding is big win for the much-maligned chairman of the Federal Communications Commissions. Although
William Kennard has not offered comment on the memorandum, it proves his
point that market forces would work more efficiently than regulatory action
to produce competition in the broadband marketplace.
Scott Cleland, Legg Mason (LM)
Precursor Group analyst, said the memorandum marks a quantum leap into open
access from where Time Warner was last year.
“It’s a very significant because its a much more open deal than the AT&T-MindSpring (MSPG) letter
of intent. They have apparently secured commitments from Time Warner that until today had been greeted with were ‘no way,'” Cleland said.
“They’re going to allow video streaming, they pledged not discriminate
against ISPs. They’re not going to force you to use their backbone and
they’re allowing ISPs to controls the customer the relationship,” Cleland
said. “This is by no means a done deal for open access, but this is a
quantum leap toward openness from where Time Warner was last year.”
Donald Weightman, Washington D.C. attorney specializing in Internet and
broadband issues, said maybe the memorandum is merely the market in motion
racing to deploy broadband services.
“Cable which seems like its had a head start in the broadband deployment
wars, may be looking about going saying we can do this a lot faster if we
have a whole lot of customer service reps called ISPs, rather than trying
to do it all in house,” Weightman said.
He further speculated that the advents of wireless solutions might have
forced AOL and Time Warner to take action. Either way, Weightman noted that
the memorandum does detail a timeline for open access.
“There are no deadlines and that’s always a concern,” Weightman said. “But
they realized its much better to get it out there sooner and do what they
have to do even if they don’t maximize every possible short run profit.
They can still gain market share.”
Jim McGann, AT&T spokesperson, concurs with the FCC “hands off” approach to
cable access regulation. He said the AOL-Time Warner announcement is
further recognition that the market place is the best place to solve the
issue of ISP choice on the cable broadband pipe.
“We announced a similar commitment back in December,” McGann said. “We said
at the time that the marketplace is where this issue should be solved and
that’s clearly the direction that the industry is heading.”
“The announcement further reinforces that there is no need for government
regulation in this matter,” McGann added.
Greg Simon, OpenNET coalition
co-director, said the AOL-Time Warner memo hit the fast forward button for open access.
“We call on the cable industry to make the open access principles contained
in the AOL-Time Warner memorandum a national standard of open access to
cable networks,” Simon said.
Simon added the group would continue to work with ISPs to ensure that
future commercial negotiations are truly non-discriminatory to all parties.
The Media Access Project is a
25-year-old public interest telecommunications law firm that acts
as an advocate for consumers on issues of public policy. Andrew Jay
Schwartzman, MAP president, advocates establishing an enforceable national
standard for open access.
Schwartzman said that the AOL-Time Warner announcement, if sincere, is a
genuine move in a very positive direction
“This is a right step in the direction toward open access,” Schwartzman
said. “Because the AOL-Time Warner deal addresses most of the major issues
of opening cable access to competition, it should be established as a
national standard.”
Schwartzman added that the next step for opening cable access is to
determine whether shared access to cable networks is plausible, an issue of
contention with Excite@Home and AT&T.
“AOL and Time Warner committed to something today that is allegedly
technologically impossible. Now we get to see how AT&T responds,”
Schwartzman said. “This is like OPEC, and the primary incentive of any
cartel is to fix prices, it’s beneficial to cheat the system. That’s why we
need an enforceable national standard for open access to work.”
