AOL, Time Warner Detail Plans for Cable Network

SAN MATEO (03/03/2000) - FOLLOWING THROUGH on a promise made when they announced their decision to merge, America Online Inc. and Time Warner Inc.

(TW) this week said they welcomed giving competing ISPs access to TW's cable infrastructure.

However, sources said the move was designed largely to fend off some of the flack AOL has gotten for seeming to waffle on the issue. A new MOU (memorandum of understanding) between the two -- detailing new "open-access business practices" -- also coincided with meetings to discuss the merger on Capitol Hill and at the Federal Communications Commission.

Until it merged with TW, AOL lobbied to have government bodies regulate broadband cable access. But AOL Chairman and CEO Steve Case said at the merger's unveiling that market forces should prevail.

Some industry watchers speculated that the move was a small concession for AOL, however.

"This probably isn't that big a deal for them, because AOL controls so much of the market," said Steven Harris, an analyst at International Data Corp., in Framingham, Mass.

In building its open-access framework through the MOU, AOL and TW also left themselves some room on sticky issues such as customer control, said Harris. On broadband platforms, the question of ISPs having direct relationships with end-users can be thorny.

AOL-TW also made no promises to offer the same prices to competing ISPs that AOL enjoys, said Harris.Those pricing issues will likely come up as companies such as GTE -- which runs ISP GTE.net -- begin negotiating for access to TW cable properties.

"The MOU references nondiscriminatory access for multiple ISPs. But there is some ambiguity as to what that means precisely for the purposes of negotiation," said John Raposa, associate general counsel for Irving, Texas-based GTE.

GTE, however, applauded AOL's move. "From our perspective, we view this as a clearly positive development we hope will [prompt] the rest of the cable industry to do the same thing," Raposa said.

Exclusive deals between cable operators and ISPs such as the one binding AT&T to Excite@Home have irked competing ISPs. AT&T has vowed to break its pattern of exclusivity but not until its contract with Excite runs out in 2002.

The AOL-TW memo also raised some eyebrows by mentioning "marketing commitments" in its list of criteria for pricing ISP access.

"This could mean they give ISPs an easier time if they [do] a certain level of marketing for them," said Sue Ashdown, director of Washington, D.C.-based U.S.

Internet Service Providers Association.

Time Warner Inc., in New York, can be reached at www.timewarner.com. America Online Inc., in Dulles, Va., can be reached at www.aol.com.

Open access for all

AOL and Time Warner's MOU gives some details on the plan to let ISPs use Time Warner's cable network.

* Consumers would not be required to buy service from AOL.

* AOL-TW would not limit the number of ISPs providing access.

* AOL-TW will factor in speed, marketing agreements, and the type of service when deciding how much to charge other ISPs.

AOL HIT WITH MORE LAWSUITS

America Online has been slapped with two more class-action lawsuits. The lawsuits allege that the latest version of AOL's Internet software makes changes to customers' PCs that make it hard, if not impossible, for them to connect to alternative ISPs.

The most recent lawsuits were filed this week in New Jersey and Oregon. They seek class-action status on behalf of all users in those states who installed AOL Version 5.0. They follow similar lawsuits filed earlier this year in Washington, Arizona, Virginia, Colorado, and Ohio.

The claims made in all of the lawsuits are similar and relate to the most recent version of AOL's Internet software -- AOL Version 5.0 -- released in October of last year.

AOL failed to inform customers that installing the AOL 5.0 upgrade would make "dramatic changes" to their operating systems and would interfere with their ability to connect to other ISPs, according to a statement issued this week by Hagens Berman, a law firm handling four of the lawsuits, including the two most recent filings.

AOL did not return a call about the latest lawsuits. AOL previously said, however, that users must grant permission before any changes are made to their computer settings and can find instructions in the AOL help area about how to change them back. The company maintains that users can use multiple ISPs with AOL Version 5.0.

America Online Inc., in Dulles, Va., is at www.aol.com.

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