Consumer Groups Plead For Open
Broadband Policy

As Senate hearings draw near, leaders of national consumer organizations are voicing concern about the implications of the pending AOL-Time Warner merger for the future of broadband.

By Patricia Fusco
of internetnews.com
[January 29, 2000]

Consumer groups are lining up to register 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.

Congressional caution
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 (CU), Consumer Federation of America (CFA), and Media Access Project (MAP) agree that the deal should be carefully scrutinized. The groups 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.

About face!
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, codirector 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."

Now you see it . . . now you don't
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 Excite@Home, 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 Excite@Home (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.

Fox guarding the henhouse?
"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.

Regulatory round-robin
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."

—End