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IP: AOL/Time Warner FCC clips
From: Dave Farber <farber () cis upenn edu>
Date: Mon, 31 Jul 2000 06:38:56 -0400
Date: Sun, 30 Jul 2000 23:53:07 -0400 To: dave () farber net From: George Mannes <gmannes () thestreet com> Internet The Sound and Fury: Did the AOL-Time Warner Hearings Signify Anything? By George Mannes Senior Writer 7/28/00 12:21 PM ET URL: http://www.thestreet.com/tech/internet/1019448.html WASHINGTON -- Somebody might make it difficult for America Online(AOL:NYSE) to complete its acquisition of Time Warner(TWX:NYSE). But it's unlikely that somebody will be the Federal Communications Commission. A hearing held Thursday on issues concerning the proposed acquisition was generally thought-provoking, often contentious and occasionally hilarious. But little in the five hours of testimony -- including that of AOL Chairman Steve Case and Time Warner Chairman Gerald Levin -- appeared to convince a majority of the five commissioners that they should take action to block or modify the deal which would create media behemoth AOL Time Warner. Some of the concerns debated before the commission were longstanding media-merger issues. Would AOL Time Warner use its market power to strong-arm other media programmers, starting with merger critic Disney(DIS:NYSE), which wants access to AOL Time Warner's cable customers? Would it give owners of competing cable and satellite systems access to in-house programming like CNN? But the commission also had to deal with newer, thornier matters, such as the question of fairness in interactive TV, instant messaging and the issue known variously as "open access," "forced access" or, using a less-loaded term, "cable access" -- giving Internet service providers (ISPs) not affiliated with AOL Time Warner the opportunity to offer high-speed Internet access through its cable systems. These new lines of business concern markets that hardly exist, leaving the FCC with the question of how to ensure competition as they develop, if it indeed need bother doing anything at all. Commissioners seemed well aware of the fact that they might end up trying to regulate a market that's not really there at all; as Commissioner Michael Powell put it, "The merger's great promise and possible danger rest principally in the future." It didn't take long to get an idea of how far apart the commissioners were on some of the questions they faced, such as whether it was even appropriate for the FCC to be scrutinizing the deal at all, partly because the Federal Trade Commission is already examining whether the deal inhibits competition. Oh, Now I Remember ... Before even starting to ask questions of the assembled witnesses, two commissioners couldn't even agree whether the FCC had ever conducted a similar hearing regarding a telecommunications merger. Commissioner Harold Furchtgott-Roth insisted the FCC hadn't; Chairman William Kennard insisted that not only had the FCC done so for three prior deals, but also that Furchtgott-Roth had been there himself. Furchtgott-Roth said he didn't remember. However, by the end of the hearing, Furchtgott-Roth remembered -- he had been there, and he apologized for his mistake. But he spent most of the meeting looking awfully grumpy, insisting that the FCC didn't have any business exploring all the new-media issues it has been examining. "This hearing does not add to our knowledge," he said. "It is a public spectacle." Meanwhile, the other commissioners spent the hearing extracting various pledges from AOL and Time Warner regarding good behavior in their business practices. On the forced/open/cable access issue, Levin said he hoped that by the end of the year Time Warner would be able to extricate itself from exclusivity contracts with its high-speed Internet access operation Road Runner that otherwise wouldn't allow for open access until the end of 2001. He also said that the company would "shortly" reach its first affiliation agreement with a third-party ISP that it hoped would serve as a template for other deals. IM Elsewhere in the hearing, Case tried to soothe concerns that AOL might use its market power in instant messaging to start charging for what's been a free service. "It's highly likely it will stay free forever," Case said. Time Warner President Richard Parsons weighed in on one of the concerns related to the melding of AOL's interactive services and Time Warner's cable TV programming. AOL Time Warner would not, he said, force other cable systems to carry interactive services from AOL as a condition of access to its traditional cable channels. "Unequivocally, we will not," Parsons said. But no clear picture emerged as to whether the FCC favored regulation to address various concerns, or whether market forces, as AOL insisted, would serve as appropriate safeguards. And the regulatory picture was also clouded toward the end of the hearing by the unsettled issue of whether disagreements between, say, Disney and Time Warner over interactive TV reflected real public policy issues or whether they were simply squabbles over the terms of a business deal. "It's money! That's all it is," said Parsons. What will the FCC end up doing? Not much, said one Washington veteran. "This agency has shown no interest in really doing anything meaningful in these mergers," said Gene Kimmelman, co-director of the Washington office of Consumer Reports publisher Consumers Union. Kimmmelman predicted that the FTC will find "enormous problems" with the merger, though he declined to predict what action it might take. "They [the FTC] have shown a much stronger will to enforce the law than this agency has," he said, in a conversation before the hearing began. So what was the purpose of Thursday's hearing? Kimmelman, who is on the opposite end of the intervention spectrum from Commissioner Furchtgott-Roth, agreed with him about showmanship in the proceedings. "I think this is just a public spectacle that will lead to no action," Kimmelman said. Well, what action the FCC will take is still unknown. But he was certainly right about the spectacle part. 2000 TheStreet.com, All Rights Reserved. ========== Internet AOL Taking Slow Boat to Instant-Messaging Compatibility With Rivals By George Mannes Senior Writer 7/28/00 2:02 PM ET URL: http://www.thestreet.com/tech/internet/1019673.html The current wrangle over instant messaging can't be solved in an instant, says America Online (AOL:NYSE). In fact, it will take a year to set up appropriate compatibility, a company executive told the Federal Communications Commission on Thursday. And testing the system could apparently take even longer, all of which could simply give AOL time to tighten its grip on the market. AOL's disclosure, which came at an FCC hearing examining its planned acquisition of Time Warner (TWX:NYSE), means no quick happy ending for companies such as Yahoo! (YHOO:Nasdaq), Microsoft (MSFT:Nasdaq) and CMGI (CMGI:Nasdaq). These firms want users of their instant-messaging software to be able to freely exchange messages with users of AOL's widely used AOL Instant Messenger (AIM). (TSC wrote a story earlier Friday about the hearing.) AOL's rivals predict the nascent instant-messaging market will become as ubiquitous as email, but they say they have no chance of competing unless their users can communicate with AIM users. AOL says it's in favor of this exchange, known as interoperability, but says it's waiting for appropriate standards to be set and has repeatedly blocked attempts by other IM companies to unilaterally hook up their users with AIM users. Push Here Instant messaging is one of the hot buttons that rivals of AOL and Time Warner are pushing as the two media giants seek regulatory approval for their merger. AOL's competitors in the IM business allege that the company is stalling on compatibility in an attempt to cement its dominance of IM -- where AOL has a total of 131 million registered users for its separate AIM and ICQ instant-messaging services. AOL insists that it is proceeding expeditiously to make AIM work with other systems, but it's simply being cautious in an effort to preserve its users' security and privacy. In response to an attempt by FCC chairman William Kennard to pin down AOL's timetable for making AIM work with other systems, AOL Interactive Services Group President Barry Schuler said it would take 12 months for the company to develop the appropriate hardware and software to work with its rivals. But Schuler took pains to make clear it would require an additional period of testing and quality assurance to "bulletproof" such a system so that it would be protected from intrusions by hackers and spammers. Comparing the possible threat of IM spam to the reality of email spam, Schuler said, "It's like Pandora's box. ... If the door is open, you can't take it back." Kennard didn't ask Schuler how long the bulletproofing would take. After the hearing, Schuler referred questions on the subject to an AOL spokeswoman, who declined comment. But Will Anyone Do Anything? Whether the FCC or Federal Trade Commission, which also is looking at the AOL/Time Warner deal, will intervene on the IM dispute is unknown. At the hearing Thursday, it wasn't a good sign for AOL's rivals that Gloria Tristani, the FCC commissioner who started out strongest in their corner, clearly had little understanding of the instant-messaging conflict, or even instant messaging itself. In fact, she ended up asking Schuler where she could find AOL Instant Messenger software, which already has 61 million registered users. (Schuler directed her to www.aol.com.) "It sounds marvelous," Tristani says. "I've got to check it out." In fact, Schuler scored some points for AOL at the hearing when he suggested that AOL's deliberate speed reflected a higher standard for customer service than that held by CMGI unit Tribal Voice, which appeared before the commission Thursday to complain about AOL Instant Messenger's lack of accessibility for other systems. If someone sends an AOL subscriber an objectionable IM, Schuler said, that subscriber can click on a button and send the notification to AOL, where a "real live human being" can investigate and throw the offender off the system, if necessary. "That's what people pay us for," he said. Schuler contrasted that with what he said was the procedure that Tribal Voice detailed on its Web site for what its users should do if they were being harassed online by someone using the company's PowWow software. That involved figuring out the sender's Internet address, using an Internet database to look up the contact information for the party associated with that address and complaining to the relevant Internet service provider. On Friday morning, these instructions couldn't be found on Tribal Voice's Web site; Web pages that might have contained the information weren't working. But Tribal Voice CEO Ross Bagully, who was on the same panel as Schuler, didn't dispute Schuler's characterization of the procedure. AOL, which lays claim to creating the instant-messaging market, clearly thinks it has done more good than harm to IM. As AOL Chairman Steve Case said amid IM criticism Thursday, "I think we should be applauded for what we've done." 2000 TheStreet.com, All Rights Reserved.
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