[Random-bits] CPT comments to July 27, 2000 FCC en banc hearing on AOL/Time Warner
merger
James Love
love@cptech.org
Thu, 27 Jul 2000 02:10:33 -0400
CPT comments to July 27, 2000 FCC en banc hearing on AOL/Time Warner
merger
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
EN BANC HEARING ON AMERICA ONLINE, INC. AND TIME WARNER, INC.
APPLICATIONS FOR TRANSFER OF CONTROL
CS DOCKET NO. 00-30
Comments of James Love
Director, Consumer Project on Technology
July 27, 2000
Dear Members of the Commission
Thank you for the opportunity to speak today about the
proposed merger between AOL and Time-Warner. The Consumer
Project on Technology (CPT) is a non-profit organization that was
created by Ralph Nader in 1995. We are funded by charitable
contributions, and receive no financial support from AOL, Time-
Warner or any of their competitors or rivals. However, I should
note that an affiliated group, Essential Information, has
received funding from the Turner Foundation, for work on
environmental issues, and my Father-in law is a former reporter
for Time Magazine. CPT's work on electronic commerce and
telecommunications issues is documented on our web page at
http://www.cptech.org.
CPT opposes the merger between AOL and Time-Warner. This is
the second time that CPT has opposed a merger involving AOL. The
first involved AOL's acquisition of Netscape. (See Appendix I).
1. Summary of CPT's opposition to the AOL/Time-Warner Merger.
CPT opposes the merger of AOL/Time-Warner. Our opposition
is based upon several considerations that I will briefly outline
here.
First, the merger will further concentrate the US media
industry. AOL has an important role in providing Internet
content and Internet navigation. Time-Warner is a giant content
company. Both companies have announced that they will use
various opportunities to cross promote each others' products, if
the merger goes through. We are generally unhappy with the
concentration of publishing and distribution of various content
industries, and we regret that the current US antitrust
guidelines do not provide an adequate framework for evaluating
the negative consequences on society of concentrations of control
of media outlets, or the importance of joint ventures and
industry collaborations on competition and diversity.
Second, and more central to our opposition to this merger is
our concern that the merger will lessen competition in the market
for broadband Internet services. AOL's primary and core business
is providing residential Internet connectivity and navigation.
For the most part, AOL currently delivers this service over
analogue telephone lines -- a technology that will be replaced by
higher bandwidth services in the not too distant future. The
cable platform technology is now the most common platform for
higher bandwidth residential Internet services, followed by DSL
services provided largely over telephone wires.
Prior to the merger, AOL was faced with the prospect of
competing against cable systems that offer ISP services over a
much faster connection. Time-Warner was the second most
important cable operator in the United States, and a direct
competitor to AOL for the higher bandwidth Internet services. In
the absence of the merger, AOL's could not realistically survive
as a US ISP without finding a way to offer a higher bandwidth
service. AOL could build its own network, lease lines for DSL
connections from the phone companies, or get the cable operators
to open up their platforms to AOL. AOL was the most aggressive
national force for open access to the cable platform, and
approached my group and many others seeking coalitions to
advocate in favor of open access to cable systems.
Before AOL announced that it would merge with Time-Warner,
there had been a series of comments from FCC Chairman William
Kennard, expressing opposition to F.C.C. regulation of the cable
Internet platform, and AOL had witnessed firsthand the difficulty
of fighting open access battles at the local government franchise
level. In our opinion, the proposed merger is a consequence of
the failure of policy makers to protect the Internet from last
mile monopolies.
Finally, CPT asks the Commission to consider the impact of
the proposed merger on privacy, and to ensure the merger will not
lead to a loss of privacy by consumers. On this topic we will
defer to Appendix II, which is resolution Ecom 17-00 by the Trans
Atlantic Consumer Dialogue (TACD, http://www.tacd.org), a group
representing 64 consumer organizations in the United States and
Europe.
2. The Open Access Issue.
For residential consumers, the next generation of Internet
will be different from what we have today. It will be faster,
with higher bandwidth connections that will make it possible to
download files faster, and receive higher quality multimedia
services. But there will also likely be important innovations in
the network architecture that could lead to profound changes in
the character of the Internet itself. AT&T, Time-Warner and
other companies are building new differentiated levels of service
for Internet content, and mechanisms to control and manage
Internet data.
The cable companies are buying technology from firms like
Cisco Systems. In its 1999 White paper, "Controlling Your
Network - A Must for Cable Operators,"
(http://www.cptech.org/ecom/openaccess/cisco1.html) Cisco tells
cable operators to build a "New World network," to replace "the
Internet" as it exists today.
The ability to prioritize and control traffic levels is
a distinguishing factor and critical difference between
New World networks employing Internet Technologies, and
"the Internet."
Part of the "New World" architecture is Cisco's Quality of
Service "QoS" model. According to Cisco:
. . . traffic-type identification allows you to isolate
different traffic types in your IP network. Through
Cisco QoS, you can identify each traffic type - Web,
e-mail, voice, video. Tools such as type-of-service
(ToS) bits identification allow you to isolate network
traffic by the type of application, even down to
specific brands, by the interface used, by the user
type and individual user identification, or by the site
address.
Admission control and policing is the way you develop
and enforce traffic policies. These controls allow you
to limit the amount of traffic coming into the network
with policy-based decisions on whether the network can
support the requirements of an incoming application.
Additionally, you are able to police or monitor each
admitted application to ensure that it honors its
allocated bandwidth reservation.
Preferential queuing gives you the ability to specify
packet types - Web, e-mail, voice, video - and create
policies for the way they are prioritized and handled.
For example, although voice and video traffic are
intolerant of delays and drops, you still might want to
ensure that lower-priority residential Web browsing is
allocated enough bandwidth to deliver an acceptable
level of service during peak usage.
Among other things, Cisco points out that:
QoS can also propel you forward by giving you the
information you need to offer advanced differentiated
services at a profit. For example, time-and usage-based
billing via NetFlow measurements provide you with a
means of encouraging (or shifting) demand during
periods of light network loading by offering off-peak
discount pricing.
And, with the new levels of service:
[cable companies] can optimize service profits by
marketing "express" services to premium customers ready
to pay for superior network performance.
To appreciate the significance of this new approach to
Internet traffic, consider the Cisco discussion of its Committed
access rate (CAR) technology, and its use to enhance or diminish
the performance of content services:
Committed access rate (CAR) is an edge-focused QoS
mechanism provided by selected Cisco IOS-based network
devices. The controlled-access rate capabilities of CAR
allow you to specify the user access speed of any given
packet by allocating the bandwidth it receives,
depending on its IP address, application, precedence,
port, or even Media Access Control (MAC) address.
For example, if a "push" information service that
delivers frequent broadcasts to its subscribers is seen
as causing a high amount of undesirable network
traffic, you can direct CAR to limit subscriber-access
speed to this service. You could restrict the incoming
push broadcasts as well as subscribers' outgoing access
to the push information site to discourage its use. At
the same time, you could promote and offer your own or
partner's services with full-speed features to
encourage adoption of your services, while increasing
network efficiency.
. . .
Further, you could specify that video coming form
internal servers receives precedence and broader
bandwidth over video sourced from external servers.
With CAR, the choice is yours, and it's easy to make
constant revisions and adjustments as traffic patterns
shift.
With a plethora of new tools and mechanisms to identify,
control and discriminate the levels of quality for Internet
content, cable companies can do to Internet data traffic what
they have done for years to video content -- pick winners and
losers, charge different content providers different rates for
access and exclude rivals.
There have been repeated attempts to get the F.C.C.
interested in these issues. For example, in an April 1996 filing
in an F.C.C. proceeding on Inside Wiring for Cable Systems (CS
Docket No. 95-184), CPT described US West efforts in Omaha to
withhold important interoperability video dialtone information
and services from unaffiliated content providers. With respect
to Internet services delivered over cable, CPT told the
Commission:
In our discussions with the cable industry we have been
told of various plans for the deployment of cable
modems. Some schemes would have the cable companies
require the consumers to use proprietary software to
use the cable Internet service.. One company told us
that they did not want consumers to have the ability to
offer their own home pages from their home servers, and
that this would be a special service offered by the
cable company. There are also various proposals by the
cable operators to create special high speed servers
for information service providers, that offer superior
performance to that offered by ordinary Internet
connections. We have not seen the details of these
schemes, but we are concerned that the cable companies
may attempt to limit the functionality of cable modems
in order to favor services offered by affiliated
providers.
If the F.C.C. fails to act now on the policy issues of open and
non-discriminatory access to different levels of services, the
cable companies will later claim to have invested billions of
dollars with the expectation of bottleneck controls, and the
telephone companies will continue to press for de-regulatory
parity for DSL services (another area where the FCC has failed to
curb anticompetitive conduct) -- leading to a potential duopoly
run by giant cable and telephone phone companies who will have
the power to decide which Internet traffic gets on the fast pipe,
and which Internet traffic moves at a crawl.
3. The FCC needs to protect the Internet.
There is ample evidence that the cable industry has the
economic incentive and the culture to impose highly
discriminatory access to next generation platforms for Internet
content. What is unclear is what if anything the Commission will
do to protect the public. This is a case where policy should
lead. Engineers at Cisco or its competitors can design networks
that do many things. The Commission should do its job and make
sure that the "New World" Internet of the future is as open as
"the Internet" that we know today.
Thank you for the opportunity to appear today.
James Love
Director
Consumer Project on Technology
http://www.cptech.org
APPENDIX I
CPT's opposition to AOL/Netscape Merger
In 1998, CPT opposed AOL's acquisition of Netscape. CPT's
opposition to the AOL acquisition in 1998 concerned the
importance of the Netscape browser to the competitive Internet
Service Provider (ISP) community. AOL and Microsoft (MSN) both
offer online services that include Internet connectivity, but
also feature proprietary content and services, including services
that use proprietary software. The most important competition
for AOL is from ISPs that offer generic connectivity to the
Internet over standard open protocols. At the present there are
two primary software programs, Netscape and Microsoft's Internet
Explorer (MSIE), that are used to browse the Web. These are not
the only software programs that can browse the web, but they are
the most popular and have the most features. Once AOL purchased
Netscape, the two firms that offered proprietary network services
(AOL and Microsoft) would control the primary software used by
the customers of the generic ISPs. CPT expressed concern that
AOL and Microsoft would have an incentive to migrate network
intelligence to their own proprietary platforms, noting that in
the past, AOL had entered into agreements with Microsoft that
limited competition, when AOL's own interests were served. For
example, AOL earlier had switched from Netscape to MSIE, in
return for favorable placement of an AOL icon on the Windows
desktop.
In the discussions on the AOL/Netscape merger, CPT met with
AOL, and asked for a commitment to continue, for 5 years, the
Netscape level of financial support for the Mozilla project. The
Mozilla project was created by Netscape to support the creation
of an open source browser. There were complex and controversial
issues in the Mozilla project regarding the licensing of the
original Netscape code, and the new code developed by Mozilla,
but in general, the Mozilla project was considered an important
safety valve for the openness of the Internet. AOL gave numerous
public interviews expressing support for the Mozilla project, but
specifically refused to make any binding legal commitments.
AOL told us, "why would we want to make such a commitment?"
To its credit, AOL has continued to support the Mozilla
project, although it is unclear how the project will be managed
over time. There were key resignations from the Mozilla team,
such as Jamie Zawinski, which raised some eyebrows in the open
source community, and it is unclear how the next commercial
version of Netscape be licensed, and to what degree Netscape will
be engineered as a portal to AOL's content. Already it is the
case that the new version of Netscape for Windows is designed so
that its mail program opens up with an advertisement for the
Netscape portal, for example.
Appendix 2
TACD Resolution Ecom 17-00
Merger of America Online and Time Warner and Privacy Protection
see: http://www.tacd.org/ecommercef.html#aolmerge
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James Love, Director | http://www.cptech.org
Consumer Project on Technology | mailto:love@cptech.org
P.O. Box 19367 | voice: 1.202.387.8030
Washington, DC 20036 | fax: 1.202.234.5176
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