Juno Online Services Inc. Wednesday forged an agreement with Comcast Cable Communications Inc., making the Internet service provider the first, in theory, to provide competitive services on the cable owner’s network.
The deal between the third largest ISP and the third largest cable owner in the nation is expected to culminate in the Philadelphia field trials in the first quarter of 2001, although it’s unclear when the tests will be completed and competitive service will be available to Comcast customers. Philadelphia represents Comcast’s largest concentration of customers and is also the company’s headquarters.
Comcast struck the deal at a good time, when most regulators and the Internet industry are focused on the open access policies of AT&T Broadband and Time Warner Inc. Both have come under intense scrutiny by critics for delays in providing open access.
“The fact that it’s not a deal forced by the government is interesting, and it may pave the way for other major cable companies to take a second look at this,” said Rob Lancaster, Internet Market Strategies analyst with The Yankee Group. Lancaster said that because the deal is not a result of government pressure, the two parties were able to create an agreement on their own terms.
“The fact that they are doing so is actually a good sign for the industry,” he said. “It shows that they see some value in opening their pipes to ISPs that will represent profits for them down the road.”
Steve Burke, president of Comcast, agreed. Burke said in a conference call Wednesday morning, “This is a significant announcement because we are doing this because we think it makes good business sense. Period. The end.”
He added, “We have always felt that as long as we were properly compensated for the investment that we’ve made in our infrastructure, and the decision is made on a commercial basis, that having multiple ISPs could be a very good investment for our company.”
However, Lancaster said it is still too early to assume that the deal will go beyond the testing phase, pointing out that the two companies only signed a letter of intent.
“Until we have any of the competing ISPs running on any of the cable systems, we shouldn’t be overly excited,” he said.
Burke said the Philadelphia field trial will give his company a better understanding of the ISP industry and what they want.
“This trial should help us to figure out what kinds of value-added relationships with ISPs will be most attractive to our customers,” he said. “Based on what we learn, we are eager to move ahead with plans to offer a choice of ISPs on terms that make sense for our ISP partners and us. Partnerships done on terms that are a win/win for us and for our ISP partners will grow both of our businesses.”
He added that Comcast is holding discussions with several other ISPs and that the company anticipates announcements of further deals in the not-so-distant future.
Open cable access has come to a head with America Online’s intention to acquire Time Warner. The merger, stalled by anti-trust worries at the Federal Trade Commission, would give America’s largest ISP almost exclusive access to the country’s second largest cable network.
Time Warner officials, also in talks with Juno to finalize an open access agreement announced at the beginning of the year, would not comment on how the deal affects current talks.
Mike Luftman, Time Warner spokesperson, said the agreement between Juno and Comcast, however, is another good example of the marketplace working to provide choice. It has been the company’s contention since talks began with the FTC and the Federal Communications Commission that the marketplace, and not the government, should dictate policy on cable networks.
Time Warner signed a deal last week with its biggest ISP critic, EarthLink Inc., to provide competitive services.
Juno also has an initial agreement with Time Warne
r to take a part in that company’s field trials in Ohio, but it is unclear when that trial will take place.
“To the best of my knowledge, Time Warner has not gone ahead with that trial,” Lancaster said.
However, Lancaster said the FTC may keep pressure on Time Warner to add a second ISP beyond EarthLink. That could give Juno the bargaining chip it needs to cut a favorable deal with Time Warner.
Juno is also participating in a cable access trial with AT&T Broadband. Charles Ardai, president and chief executive officer of Juno, said that the combination of the company’s cable relationships — together with existing DSL and satellite relationships — will give the vast majority of its existing customers access to high-speed connections.
