AOL Deal Will Shape Broadband Internet Access Policy
By: Kathy Brister
11/15/00 9:49:00 AM
Source: Cox News Service
The agreement being hammered out between federal antitrust officials and executives of America Online and Time Warner may affect more than one corporate merger.
It could shape public policy that will be felt by all cable companies as they expand their ability to offer customers high-speed connections to the Internet.
One of the nation's antitrust watchdog agencies, the Federal Trade Commission, is expected within days to announce what it will require of America Online and Time Warner before it agrees to the merger. One of its key requirements may force the merged company to allow several Internet service providers - not just AOL - to use Time Warner cable lines to reach subscribers wanting high-speed access.
Industry experts believe that in coming years, more people will want to get online using fast ``broadband'' cable rather than slow ``narrowband'' dial-up connections.
Right now nearly 3 million people get high-speed Internet access via cable. By year's end, cable operators are expected to have 3.6 million broadband customers. That's more than double the 1.6 million reported at the end of 1999, according to the National Cable Television Association, an industry trade group.
While most major U.S. cable companies are upgrading their networks to broadband, the FTC decision will apply only to AOL Time Warner.
To make other companies play under the same rules, the Federal Communications Commission, a separate agency, may set industry standards for ``open access.'' Or it may choose not to regulate how data travel over cable lines at all. So far, the FCC has adopted a wait-and-see stance, letting the growing broadband business take shape without heavy governmental influence.
Cable companies say an FTC decision could force the FCC's hand on the issue - pushing the agency to decide whether to apply the same requirements imposed on AOL Time Warner to all cable companies. Whether that's good news or bad news depends on just what the FTC requires, said Seth Hogan, director of business development for Atlanta-based cable company Cox Communications. Cox is majority held by the same firm that owns The Atlanta Journal-Constitution.
If the FTC determines AOL Time Warner, like the Baby Bells, must open its networks to all ISPs wanting access, it's bad news, Hogan said. If the agency simply says AOL Time Warner must be willing to negotiate agreements with ISPs - and the FCC follows the FTC's lead - it's good, he said.
``I think the industry as a whole is not opposed to open access, but the devil is in the details,'' Hogan said.
But an industry analyst said FTC requirements on AOL Time Warner actually may alleviate the need for FCC intervention. His thinking: Once Time Warner opens its networks to multiple ISPs, market forces will drive other cable companies to follow suit.
``As soon as Time Warner opens its cable lines, that puts pressure on the rest of the industry because Time Warner is the second-biggest (U.S. cable company),'' said Keith Kennebeck, analyst with Washington-based research firm Strategis Group. ``It'll create new business models, new revenue streams'' that other cable companies will want to tap into, he said.
``You're going to see AT&T Broadband, already conducting an open access trial, voluntarily opening up its systems to multiple Internet service providers. You'll see more cable overbuilders, already using multiple ISPs, carrying even more choices,'' he said. AT&T Broadband, metro Atlanta's largest cable provider, began an open access trial in Colorado at the beginning of November.
But other industry watchers question current moves toward open access.
``AT&T is taking advantage of a shift in the FCC's focus and is using this (open access) trial as a demonstration of good intention,'' said Robert Lancaster, an analyst for Boston technology research firm the Yankee Group. Lancaster, who studies Internet market strategies, said AOL's pending merger with Time Warner temporarily has taken the FCC's focus off AT&T.
``(AT&T) faced open access issues well before the Internet and media giants began playing together. Now, under less federal scrutiny, AT&T will feel less pressure than AOL Time Warner to offer competing ISPs fair terms,'' he said.
But after AOL Time Warner opens its networks to competing ISPs - which Lancaster said could take more than a year - AT&T will be back in the regulatory hot seat, he said. He predicts regulators ultimately will force AT&T to open its networks.
Lancaster disagreed with the idea that smaller cable companies will have to follow AOL Time Warner and AT&T Broadband. ``They'll only open their networks if they see a viable business model,'' he said, noting there may not be one.
Kennebeck said if the FTC doesn't force AOL Time Warner to give access to a set number of Internet service providers, the ISPs will target cable markets where they can negotiate good deals with cable providers. They'll also look for large pools of potential customers and markets with few competitors.
``It won't be an immediate gold rush for ISPs. There are now about 3 million high-speed cable modem subscribers. That's not a large enough customer base for 10 ISPs to go after.'' Still, he said, ISPs want to move now to get an ``early grab'' on the burgeoning cable broadband market.
Regulators' demands on AOL Time Warner could push cable companies to open their lines to ISPs. But the industry is likely to avoid its worst-case scenario: being regulated as intensely as telephone companies.
Just how heavy a hand the FCC might take with cable companies - which for years have avoided much government scrutiny - will be determined by who moves into the White House, Kennebeck said. ``I think if we see a political change in Washington, there might be even less regulation.'' |
