AOL Time Warner (AOLTW) petitioned the U.S. Federal Trade Commission on Tuesday to accept its plan to offer high-speed Internet service over Time Warner cable lines, presenting its deals with two competitors in order to meet the open-access requirements the commission demanded of its merger last year.
AOL Time Warner's plan calls for Juno Online Services and High Speed Access (HSA) to access the Time Warner cable network as non-affiliated Internet service providers (ISPs) in order to fulfill the consent order AOL Time Warner signed to secure approval of its merger.
Under the agreement, AOL Time Warner must open its cable system to at least two competing ISPs in each region it wishes to operate its own cable Internet services. The competitors must be approved by the FTC within 90 days of AOL offering service of its own. AOL Time Warner is required to present its competitors for approval. A 30-day public comment period follows the company's petition.
The FTC must determine the competitors are financially viable and are actually competitors without cross-ownership or common financial interests.
Juno operates one of the last remaining free Internet services, a business that has consistently lost money and the favor of the market. About 910,000 of its 4.1 million active subscribers use Juno's pay subscription service. Juno plans to merge with another former free ISP, NetZero Inc., after a round of patent infringement lawsuits that nearly destroyed both companies. NetZero received word from the Nasdaq exchange that the company had not maintained the minimum bid price and would be delisted, a move NetZero has appealed. Both companies have shown double-digit revenue growth, but both companies lose money.
In the petition to the FTC, AOL Time Warner points to the strong revenue growth as evidence of the company's financial viability. AOL Time Warner signed a deal with Juno to offer its service over Time Warner Cable in April. AOL Time Warner also has a similar deal with EarthLink Inc.
An open access advocacy group opposes the AOL Time Warner proposal.
"We will be filing a formal complaint at the end of the month encouraging the commission to reject HSA," said Jeff Chester of the Center for Digital Democracy, a wing of the Center for Media Education watchdog group in Washington D.C. Chester said HSA is funded by Microsoft co-founder Paul Allen, whose interest in the Charter Communications Inc. cable company and its relationships with AOL Time Warner create a common financial interest.
Chester also decried AOL's practice of cutting deals with national ISPs rather than local ones. "They find ISPs that are unable to compete with them, and HSA in particular is a digital pawn," he said.
AOL Time Warner said in its petition that HSA is unaffiliated under the terms of the FTC order, and that AOL Time Warner could not exert influence over HSA through its agreements with Charter.
Public versions of AOL Time Warner's proposal to the FTC did not reveal the company's timetable for rolling out new cable services.