News

AOL Has Broadband Play, But Access Debate Lingers

1/16/2000 7:00 PM Eastern

America Online Inc.'s merger with Time Warner Inc. may
have resolved the platform-access issue for the Internet company, but it did nothing to
resolve the national debate over open access.

"AOL has its cable-access solution. What about the
other 6,000 ISPs who can't afford to buy an MSO?" said Paul Schneider, spokesman
for Internet Ventures Inc., a cable Internet-service provider that has actively pursued
open access under federal leased-access rules.

On the other hand, Daniel O'Brien, chief operating
officer at another cable ISP, High Speed Access Corp., saw an opportunity in declarations
by AOL and Time Warner executives that their broadband network would be willing to sell
access to competitors.

O'Brien said he planned to meet with executives at
Road Runner -- the cable ISP partly owned by Time Warner -- about serving some smaller
cable systems even before the deal closes.

"They can solve a business need" by extending
data service to unserved, exurban cable systems and help themselves with federal
regulators at the same time, former Time Warner Cable executive O'Brien said.

"I may be deluding myself, but I see it as a
positive," he added of the mega-deal.

Nick Miller, a partner with law firm Miller & Van
Eaton, said AOL apparently concluded that "it had to buy its way in" when it
realized that the Federal Communications Commission was not going to protect ISPs.

In the days following the merger announcement, AOL
officials said they still advocate open access. But Miller questioned whether AOL would
follow through, since that would create "business opportunities for its
competitors."

The OpenNet Coalition toned down its rhetoric on the issue,
given the fact that AOL has been an ardent backer of open access. The lobbying group vowed
to continue the fight on behalf of its members, calling the AOL-Time Warner merger "a
wake-up call to the cable industry."

"We will seek negotiation with both AOL Time Warner
[Inc.] and AT&T [Broadband & Internet Services], as well as the rest of the cable
industry, to define how and when open access will be implemented," Greg Simon,
co-director of the lobbying group, said in a prepared statement.

The group will also keep up pressure on federal authorities
for national regulation on high-speed-data platform access.

Meanwhile, people on the front line of the debate -- local
franchising authorities -- had mixed responses to whether the merger would fire up local
communities to join the fray as system transfers come up.

As with Tele-Communications Inc. transfers to AT&T
Corp., local authorities may even have to fight to have a voice.

Time Warner Cable has thousands of cable systems (the
company did not offer a specific number, because its definition of a system is different
from franchise areas) with thousands of contract language versions.

Attorneys are poring over them now to see if municipal
transfers are necessary, given the fact that there may technically be no actual change of
control of local systems. Ownership may change with AOL's acquisition of Time Warner,
but the Internet company won't be changing out local system managers or other
familiar personnel.

Transfer authority is transfer authority, change of
personnel or not, countered Barry Orton, cable consultant and professor at the University
of Wisconsin in Madison. He predicted that some communities might cite AOL's former
open-access position and "hoist it on its own petard."

By late last week, observers were speculating that the
combination of AOL and Time Warner might actually speed the day when networks are
unbundled.

Theoretically, the deal gives AOL the leverage to demand
open access from AT&T Broadband, which needs affiliations with Time Warner systems in
order to expand local telephony access to those homes.

"That's definitely a card they can play that they
couldn't play before," said David Olson, franchising director for Portland,
Ore., the jurisdiction that triggered the whole open-access debate.

In a posting on the National Association of
Telecommunications Officers and Advisors' internal e-mail list, Olson told Time
Warner Cable jurisdictions that AOL had assured Portland that its "commitment to open
access will not waver." Therefore, he urged those venues to include open-access
provisions in their upcoming transfer agreements.

"When the rubber meets the road, it seems that no
good-faith objection can or should be made by AOL under the circumstances, and inclusion
of such a condition will help to hasten the date when cable subscribers will have true
competition and choice in their broadband Internet access," Olson wrote.

Meanwhile, Scott Cleland, managing director with Legg Mason
Wood Walker's Precursor Group, said the tide is already turning in favor of open
access, citing AT&T's promise to unbundle in 2002, the Clinton
administration's statements favoring consumer choice and warnings by Federal
Communications Commission chairman William Kennard to the industry to take actions in
order to avoid a consumer revolt.

"Anybody who thinks open access is going away is
delusional. The top two cable companies say they're committed to it, but the rest of
the cable industry hasn't committed. They're wishing it would go away," he
said. "Just like it took a decade to open the telephone platform, this is going to be
an issue for years."

Kent Gibbons contributed to this report.

September