Questions Remain On AOL-TW Plans

America Online Inc. [NYSE:AOL] and Time Warner Inc.
officially unveiled their intent to allow competing Internet
service providers to gain access to the merged company's cable
infrastructure, but consumer group officials and at least one
senator still want more answers.

AOL and Time Warner in a memorandum of understanding released
today offered a basic framework under which the merged company
would offer consumers a choice of ISPs (Internet service providers)
on its broadband cable system.

But the details remain unclear, according to a spokesperson for
Senate Judiciary Committee Chairman Orrin Hatch, R-Utah, who
is expected to hold a hearing on the proposed merger later today.

"(Hatch) has said it sounds like a good step but it's not clear
whether the memo of understanding was developed with input of those
it impacts, that is, consumers," said Committee spokesperson Jeanne
Lopatto. "He intends to put that question to the two companies this

The frequent rival to that committee, the Senate Commerce Committee
under Chairman John McCain, R-Ariz., has planned a hearing on the
merger for later this week.

One well-known consumer advocate and frequent collaborator with Ralph
Nader agreed.

"My first impression is that the devil will be in the details," said
Consumer Project on Technology Director James Love. "I look forward
to what exactly the proposals will be. But there's also a difference
between AOL making promises and doing what it promises."

Love mentioned AOL's former open source arrangement on Mozilla,
including the company's abrupt turnaround on the open source deal.

"It's important to have something that's legally binding before the
merger is consummated, and the beauty contest is over and consumers
and ISPs are back on their knees again," Love said.

According to a statement released by the two companies, AOL and
Time Warner have agreed to 11 points, most notably that they would
enter into a binding, more definitive agreement as quickly as
possible in order to provide a model format for agreements with other

There are some "equivocations" in AOL's strategy, according to
Commercial Internet eXchange (CIX) President Barbara Dooley, though
she said CIX prefers this plan to federal regulation.

"Our opinion was always to see if the private sector can resolve the
problem," Dooley said. "(We) have way too much experience in the
regulatory process to think that's a swift and effective way to
bring about change for small companies."

OpenNet co-Executive Director Greg Simon said that the plan
"is a huge step forward. (We) think the principles in this agreement
ought to be the basis of a national standard for open access."

Simon said that his organization would pursue a regulatory path,

"We will ask cable companies to adopt (open access), and the
government to require it," Simon said.

The two companies expressed a commitment not to require that
their cable customers to subscribe to their branded Internet service.

The new company also would not place any fixed limit on the number of
ISPs with which it would enter into commercial arrangement to provide
broadband service.

AOL and Time Warner acknowledged in the MOU that economic
arrangements between the new company and various ISPs will differ
depending on the individual contracts it arranges, but that
it will not discriminate on the basis of whether or not an ISP is
affiliated with AOL Time Warner.

AOL Time Warner also specifically agreed in the MOU to allow
ISPs using its cable system to provide video streaming without
blocks or time limits.

ISPs also would be able to connect to AOL Time Warner's cable systems
without having to purchase broadband backbone transport from the

Consistent with technological capability, AOL Time Warner agreed to
offer ISPs the choice to partner with it to offer broadband Internet
service on a national, regional or local basis. However, the company
said that, in an effort to prevent "redlining," it will not allow ISPs
to offer service to only a portion of an AOL Time Warner cable system
that can provide broadband service.

Another feature of the MOU is that, not only AOL Time Warner, but also
other ISPs, would be able to directly sell their services to - and
directly bill - consumers.

"Obviously would expect them to change Road Runner contracts so that
they would be offering access this year," Simon said. "We're going to
be keeping an eye on the arrangements to see they are indeed
non-discriminatory. AT&T did not go nearly as far as these principles
in providing non-discriminatory access in its half-a-loaf agreement
with Excite At Home."

AOL's Web site is at

Time Warner's Web site is at

Washington Bureau Chief Robert MacMillan contributed to this article.

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