AOL Seeks Cable Pact With MSN; Microsoft Would Use Time Warner LinesBy Alec Klein
Washington Post Staff Writer
Saturday, November 18, 2000; Page E01
America Online Inc. is negotiating a deal to give its long-standing nemesis Microsoft Corp. access to Time Warner Inc.'s cable-television lines in a push to meet government demands over AOL's pending takeover of the media company, according to sources familiar with the matter.
The rapprochement between AOL and MSN, Microsoft's online service, is a startling reversal of form for two fierce competitors offering rival online services and instant-messaging systems.
Microsoft, the giant software maker based in Redmond, Wash., has been one of the leading opponents of AOL's $183 billion acquisition of Time Warner. But if it reaches a cable-access deal with AOL, Microsoft may end up playing a key role in helping AOL win regulatory approval of its merger.
The Federal Trade Commission last week gave AOL and Time Warner up to the end of the month to satisfy its concerns about competition in the marketplace. The FTC wants the companies to sign a cable-access deal with a competitor before the merger is approved, sources have said. This would allow the agency to review the deal to ensure the terms are fair and nondiscriminatory. Time Warner is the nation's second-largest cable provider, serving about 20 percent of the market.
In the event that negotiations fall through, FTC attorneys have been taking depositions from potential witnesses to prepare to block the deal in federal court.
Dulles-based AOL and Time Warner of New York are hoping to reach agreement with MSN before Thanksgiving, in time to submit the contract to the FTC for its review, sources said. MSN is the nation's fourth-largest Internet service provider, with about 3.5 million subscribers.
AOL, the biggest ISP in the world, with about 28 million subscribers, and Time Warner also are trying to clinch a separate deal by Wednesday with EarthLink Inc., the nation's No. 2 ISP, sources said. And they are close to finalizing a contract with Juno Online Services Inc., the No. 3 ISP.
Each of the deals with the three competing ISPs may include different financial terms, sources said. AOL and Time Warner only need to present one contract to the FTC, but the companies hope more deals will improve their chances of winning approval from the antitrust enforcers.
AOL, Time Warner and Microsoft officials declined to comment.
AOL and Microsoft have been duking it out lately over their competing instant-messaging systems, which allow Internet users to send notes promptly to each other. Microsoft has attempted to link its instant-messaging system with AOL's dominant version, but AOL has repeatedly blocked it, accusing Microsoft of hacking into its system. Microsoft has been part of a coalition that has accused AOL of dragging its feet on making its instant-messaging system interoperable with others.
But the cable-access negotiations between the two sides illustrate that business, like politics, makes strange bedfellows: AOL and Time Warner need a cable-access deal with a rival ISP, and MSN is a pragmatic option. For MSN, Time Warner's high-speed cable access represents another choice to market to its customers.
Time Warner and Microsoft already are partners in a separate venture. Microsoft owns about 10 percent of Road Runner LLC, a high-speed ISP of which Time Warner is the single biggest shareholder, with about a 36 percent stake. Other partners in Road Runner include AT&T Corp., Compaq Corp. and Advance/Newhouse.
Time Warner has said it is working to end its exclusive agreement with Road Runner before the deal expires at the end of 2001.
Meanwhile, Time Warner officials confirmed that MSN will participate in its trial run in Columbus, Ohio, to open its cable network to rival ISPs. Other participants will include Juno and RMI.Net, a regional ISP based in Denver.
These providers are in the process of arranging rental terms with telecommunications firms to get high-capacity telephone service to the test site in downtown Columbus. The test so far has included Road Runner, AOL and CompuServe, AOL's discount subsidiary. |
