Juno Seals Open Access Pact with AOL Time Warner

Following months of discussion, Juno Online Services Inc. Thursday nailed a
deal with AOL Time Warner Inc. to offer broadband services across Time
Warner’s cable lines.

Juno is the second company to strike up such a deal with AOL. The Internet
and media giant sealed a similar agreement with EarthLink Inc. last November.

The discussions between AOL Time Warner and ISPs over how to go about
rolling out cable service have been difficult, in large part due to
disagreements over whether the owner of the cable network (Time Warner
Cable) or the ISPs will be responsible for billing, technical support and
customer service. While neither AOL Time Warner nor Juno released specific
details about the deal announced Thursday, Juno apparently conceded a number
of points.

“At least initially, Time Warner will be responsible for billing; customer
service will be our responsibility,” Juno President and Chief Executive
Officer Charles Ardai told InternetNews.com. “Customer service that relates
to their cable service or their equipment in their homes, we’re not equipped
for those services and Time Warner will handle those.”

That means AOL will be able to communicate with Juno’s customers directly.
Also, the deal gives both parties the go ahead to market the service
independently, with Time Warner taking a proportionally larger share of the
revenue if it, rather than Juno, is responsible for bringing a customer on
board.

“We split the revenue,” Ardai said. “The revenue will vary depending on
whether the customer was brought in via Juno marketing services or Time
Warner marketing services.”

He added, “On the billing side, there are some provisions that allow us to
change how that’s handled over time.”

However, Ardai was quick to point out that just because it has the right to
do so, Time Warner won’t necessarily undertake an initiative to market the
service to customers. And he said Juno will primarily market the service to
its existing free and premium dial-up customers — a market that it can
easily communicate with at much lower costs than communicating with the
general population.

“We don’t consider this agreement onerous,” Ardai said. “I think the terms
we ended up with are reasonable and fair.”

Juno said the initial rollout of the service — through the company’s
high-speed Juno Express arm — will begin in the second half of 2001.

And there is a good possibility that the first community to have a chance to
buy those services will be Columbus, Ohio. Juno and Time Warner Cable just
concluded tests of the service in that community. The tests were initiated
last July.

“I wouldn’t be surprised if the first market is Columbus because we already
had the trial there; but I don’t think that’s been decided for sure,” Ardai
said.

Regardless, whenever and wherever Juno rolls out, AOL is sure to follow with
the rollout of its own cable broadband service.

As part of the Federal Trade Commission’s (FTC) conditions on AOL’s merger with Time Warner, the company agreed that at
least one AOL competitor must offer high-speed cable access in cities served
by Time Warner before AOL can itself offer high-speed cable service on those
lines. AOL had the ability to meet that requirement once it signed the deal
with EarthLink last year. But the consent order also called on the company
to open its lines to two more competitors within 90 days, and to negotiate
with further ISPs in good faith.

The FTC also required that any agreements AOL signs with other ISPs must be
submitted to it for approval. Furthermore, the commission required that AOL
Time Warner include a “most favored nation” clause in all alternative cable
broadband ISP service agreements submitted to the FTC for approval. The
clause would require that if AOL makes a deal with another cable company to
offer broadband service on that company’s lines, it must provide a Monitor
Trustee with a copy of the agreement. It must also share that information
with each ISP that has made a deal to use AOL Time Warner’s cable lines.
Those ISPs can then choose to opt in to those terms and rates in their
agreements with AOL Time Warner.

Even with those protections, Ardai said Juno will not charge into cable
broadband blindly, noting that the company has a responsibility to its
shareholders.

“It is not our intention to roll out the service so aggressively that we
lose money,” he said. “This is the stage in the evolution of broadband where
you have to form relationships with partners, you have to experiment.”

Juno spokesman Gary Baker pitched in, “We are very focused on how much this is
going to cost us.”

And Ardai indicated that, as with Juno’s DSL offering, the company is not
afraid to make the move into broadband slowly and deliberately. Unlike more
exuberant evangelists of the broadband revolution who predict massively
available high-speed access in the next few years, Ardai said, “I do believe
that five to 10 years from now, most people will have a high-speed option.”

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