IP: AOL/Time Warner FCC clips

[Dave Farber <farber@cis.upenn.edu>]

>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."
>
>
>
>
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