Conditions expected for AOL-Time Warner merger

Under pressure from critics who say the America Online Inc. -Time Warner Inc. merger has huge implications for the evolution of broadband, federal regulators later this month will likely hand down “open access” safeguards for the deal.

Since the US$350 billion merger was announced earlier this year, ISPs large and small have wanted to know what AOL-Time Warner means by “open access” to its massive cable infrastructure for competing ISPs, as was pledged in a March Memorandum of Understanding.

Now consumer groups, in a rare alliance with media giants such as Walt Disney Co. and National Broadcasting Co. (NBC), are also calling on the government to make sure the two don’t use their massive platform to discriminate against application or content providers.

Collectively, the groups have asked both the U.S. Federal Trade Commission and the U.S. Federal Communications Commission to spell out the parameters of open access.

“My sense is that the companies will capitulate once the requirements are known, but they are waiting for the final documents to determine exactly what open access entails and whether [it] is going to be acceptable,” said Rob Enderle, an analyst at Santa Clara, Calif.-based Giga Information Group.

The merger’s most vocal critics will not be satisfied until those details are set in stone, said Jeffrey Chester, executive director of Washington-based Center for Media Education. “We are insisting that a voluntary commitment is not good enough. Let’s remember that AOL did the greatest flip-flop ever on this issue,” Chester said.

Formerly an outspoken critic of AT&T Corp.’s exclusive deal with Excite@Home Inc., AOL took heat after the merger’s announcement for seeming to change its stance on government involvement in open access.

Keeping the Internet’s broadband infrastructures open is vital, especially as the Internet becomes more like television through the advent of broadband content and applications, Chester said.

“The explosion of economic growth and content diversity is directly related to the fact that the Internet is an open network,” Chester said.

Cable TV operators also looked for the two federal agencies to put restrictions on the deal because they did not want to be forced to carry AOL products, such as AOLTV.

“We have removed our opposition based on a firm commitment from the companies that we will not be forced to carry it. But we expect that will end up somewhere in the final docket from FCC in its merger conditions,” said Steve Weed, vice chairman of the American Cable Association, in Pittsburgh.

The Center for Media Education and others have called for the following constraints on the AOL-Time Warner merger.

– Competing ISPs should be allowed to interconnect in a “nondiscriminatory manner.”

– Competing content providers should be treated fairly.

– AOL-Time Warner’s cross-ownership interests with AT&T should be severed.

Pushing ahead with its strategy to bring its Internet content to a variety of client platforms, Dulles, Va.-based America Online this week struck a deal with OmniSky Corp. to deliver AOL Wireless content and services to OmniSky-powered handheld devices.

Palo Alto, Calif.-based OmniSky’s Wireless Internet service offers Internet access and e-mail via handheld mobile devices. Through the multi-year agreement with AOL, OmniSky users can access AOL features such as instant messaging, e-mail, news, weather, and stocks, AOL officials said.

An AOL-customized version of OmniSky’s wireless service, including quick links to AOL services on OmniSky’s home page, will be available for AOL members. In addition to the content agreement, AOL announced last week it wiould make a minority investment in OmniSky.

AOL carved out a similar deal with AT&T Wireless in July to put AOL content on AT&T’s Digital PocketNet service. As part of that arrangement, which came into effect last week, AOL said its content would have top placement in the portals menu of AT&T’s PocketNet service.

Later this fall, AOL members will be able to check movie locations and purchase tickets wirelessly with AOL MovieFone services.