Dumping on AOL TW

Critics: Tougher conditions; FTC: DirectTV divestiture
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Convinced that the Federal Trade Commission will force America Online and Time Warner to open their broadband networks to at least some rival Internet providers as a condition for merging, critics of the pending deal this week will ask federal regulators to demand more concessions.

Walt Disney executives and public advocates are scheduled to meet with FTC and FCC staffers this week to push for rules requiring the merged AOL Time Warner to give equal treatment to unaffiliated content on the company's high-speed data network and interactive TV system.

"Customers should be able to interact with any channel they want," said Preston Padden, head of Disney's Washington office.

Padden and other critics of the AOL-Time Warner deal were alarmed when the two companies told the FCC last week that their pledge to give customers access to multiple ISPs will not include services offered through the AOLTV set-top box. Disney officials worried they would have to pay AOL a high fee to provide interactive services planned for popular programming and election-night returns.

"AOL and Time Warner want to drop a whole bunch of toll gates across interactive services and extract a fee for any transaction," Padden said. "Our argument is that, once the cable bill is paid and once the ISP is paid, that should be the end of it."

Similarly, public advocates warn that AOL Time Warner will unjustly use its tremendous broadband and conventional dial-up network to corral users and dictate content providers. "There has to be an explicit policy of nondiscrimination that allows all ISPs to attach to the network," said Jeffrey Chester, president of the Center for Media Education.

AOL and Time Warner officials sent mixed signals last week regarding their will to fight any merger conditions.

Before a contingent led by Time Warner President Richard Parsons faced European regulators in Brussels last week, a company spokeswoman insisted the company had not agreed to any concessions. Also, in a filing to the FCC, the companies noted several recent agency statements indicating there is no need for open-access rules.

Still, sources close to the companies said that nothing suggested by the FTC so far would derail the deal, and wire services reported Friday that the companies had made concessions to European regulators.

Besides open access, FTC staffers led by Competition Division Director Richard Parker are insisting that AOL sell its $1.5 billion stake in DirecTV, sever financial ties to the other would-be broadband behemoth AT & T and accept some restrictions on fees charged to ISPs carried on AOL Time Warner's high-speed network.

The FTC staff is expected to complete its recommendations in the next two weeks. Chairman Robert Pitofsky and the other four commissioners are expected to reach a decision by mid-October. A separate FCC ruling on the deal is expected soon after.

The FTC's commitment to open-access conditions flies in the face of earlier signals sent by FCC Chairman William Kennard and some of his colleagues. They have argued it would be wrong to saddle one company with open-access rules now because the agency plans to launch a separate inquiry into the need for industrywide rules Sept. 14.

The FTC attorneys argue that waiting for industrywide rules will give AOL Time Warner too much time to build a broadband monopoly, and a source familiar with the FCC said staffers there do not feel the FTC's effort conflicts with the industrywide rulemaking.

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