Consumer Groups Plead for Open Broadband Policy

Consumer groups are lining up to show their disdain for the proposed America Online Inc. , Time-Warner Inc. merger on the eve
of the Senate Judiciary
Committee’s
initial review of the transaction.

Tuesday the Senate Committee on the Judiciary, under the chairmanship of
Senator Orrin Hatch (R-UT), will begin its formal review of the proposed
$160 billion merger.

Chairman Hatch said when the deal was announced Jan. 10 that it could have
profound public policy implications. The Utah Republican called for caution
before embracing it.


The Consumers Union, Consumer Federation of America and
Media Access Project agree that
the deal should be scrutinized. The group’s fear that a conflict of content
and conduit may create severe ramifications for broadband Internet access
policy in the U.S., should the online giant and the media mogul marry.

CU, CFA and MAP leaders Monday released a detailed analysis of their
official filings on open access to the broadband Internet by America Online
(AOL)
and AT&T Corp. in the U.S.

The study details how AOL and AT&T (T)
reversed their position on open access since announcing plans to purchase
major cable companies. The groups are asking that lawmakers thoroughly
review the AOL-Time Warner deal, because AOL and AT&T have not delivered on
promises to deliver open access to broadband networks.

Mark Cooper, CFA research director, said enforcement, not broken promises,
is the essential to make open access work.

“Before AOL and AT&T bought cable companies, they both argued vigorously
for government-backed obligations to provide open access to cable,” Cooper
said. “They no longer do, although they still support such a legal
obligation on facilities owned by other companies.”

Gene Kimmelman, co-director of CU’s Washington office, said AOL and AT&T
have done a policy flip-flop.

“They are asking policymakers to take a hands-off approach to open access,
claiming they can be trusted to do what they previously claimed could only
be done through regulation,” Kimmelman said. “The companies have made
honesty an issue. We believe it is appropriate to scrutinize whether these
companies can be trusted.”

Andrew Jay Schwartzman, MAP president, said open access must be enforced
for the Internet to continue to thrive through the innovations made by
independent service providers.

“Thousands of innovative ISPs serving entrepreneurs and millions of
individual citizens will never be able to purchase their own cable wires,”
Schwartzman said. “Those ISPs still need the protections that these two
huge corporations once demanded.”

AOL backed away from its commitment to open up access to proprietary cable
networks earlier this month. Prior to its January proposal to buy Time
Warner (TWX),
America Online had been a longstanding proponent of open access. As a
result of the policy shift, AOL instructed its lobbyist to stop pushing for
state legislation that would require open access in Virginia, Michigan,
Maryland and Pennsylvania.

AT&T pledged its commitment to open access late last year. The telecom
titan said that due to its exclusive contract with [email protected], open access would not be
possible until the agreement expired in June 2002. Meanwhile, AT&T signed a
letter of intent that would grant broadband cable access to MindSpring Enterprises Inc. (MSPG), when the [email protected] (ATHM) deal is done.

The groups point out that if the AOL-Time Warner deal is approved, the
nation’s largest online company would own the world’s largest media
corporation and the nation’s second-largest cable provider. AT&T, the
largest telecommunications company and cable operator in the U.S., would
own more than 10 percent of a merged AOL-Time Warner through its pending
acquisition of MediaOne.

Cooper said that companies’ gains are consumers’ losses when mergers and
acquisitions muddy the playing field and dilute competition in the
marketplace.

“The events of the past year make it patently obvious that public policy to
determine the free flow of commerce and information in the ‘Internet
century’ cannot be left to the whims of the large corporations whose
commercial interests change with every merger or acquisition,” Cooper said.

The consumer groups want to assure that legislators review AOL’s record on
open access. The groups further fear an AOL monopoly of Web content that
could dramatically impact the nature of the Internet due to its abundant
affiliations with other online entities.

The groups are concerned that the merger is a threat to the future of
online communications. An AOL-brand mentality described by some observers
as a “virtual shopping mall” and the “triumph of consumerism” would
undermine the public-interest values of democracy and diversity that have
long been the hallmark of the Internet.

A number of regulator agencies are expected to weigh in on the AOL-Time
Warner deal. The Department of Justice,
Federal Communication Commission and the
Federal Trade Commission will also review
the merger.

FCC Chariman William E. Kennard will likely testify at each of the hearings
and weigh in with his agency’s separate review of the deal.

Initially, Kennard said the AOL-Time Warner deal was an encouraging sign
that market forces are working to keep high-speed Internet cable access
open and competitive.

“I think it’s encouraging,” Kennard said. “I’ve been saying since the very
beginning of this debate that the marketplace should work this out.”

Kennard added that the details remain to be reviewed, but that the FCC has
no interest in requiring that cable companies share access to their
networks with independent Internet service providers.

“This transaction will raise some interesting new issues that we haven’t
confronted before,” Kennard said. “Now the devil is in the details and
we’ll have to look and see what is really being committed to.”

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