[Random-bits] Alec Klein: Time Warner Terms for Cable Criticized

[James Love]

http://www.washingtonpost.com/wp-dyn/articles/A28372-2000Oct6.html

Alec Klein
Time Warner Terms For Cable Criticized

October 6, 2000

Time Warner Inc. has offered nearly 40 Internet service providers in
Texas access to its cable television lines, but only under conditions
that would give the New York media giant a huge piece of their revenue
and control over crucial content.

Time Warner outlined terms of the deal Aug. 28, six months after it
joined with America Online Inc. to pledge that it would open its
high-speed cable lines to multiple Internet service providers. The
companies made the pledge to reassure federal regulators that their $183
billion merger would not harm Internet rivals seeking access to a Time
Warner system serving 18.8 percent of all cable customers
nationwide.</P>
  
Attorneys and economists for the Federal Trade Commission, which is
reviewing the AOL-Time Warner merger, have spent several hours
interviewing other Internet service providers who have received similar
term sheets in an attempt to judge whether the terms live up to the
merger partners' promises, according to sources familiar with the
meetings.
 
Under a confidential term sheet provided to the Texas companies and
obtained by The Washington Post, Time Warner would receive 75 percent of
the Internet service providers' revenue from all subscriber fees--which
are often their biggest source of sales. Time Warner also would get 25
percent of the Internet service providers' revenue from other
sources--such as advertising and other e-commerce fees--even though they
are financial transactions not directly related to Time Warner's cable
business.

"Totally ridiculous," said Dave Robertson, vice president and general
manager of Stic.net, an Internet service provider in San Antonio with
more than 10,000 subscribers. "The bottom line is, they don't have a
desire to open their network."

The terms, as they stand, "provide a barrier to entry so folks would be
scared off and not sign it," he said. "There'd be no way to reach the
break-even point."


  [snip]


Under the terms being offered to the Texas Internet firms, Time Warner
also would receive $50,000 as an upfront deposit, a sum some rivals say
would be difficult for small mom-and-pop Internet firms to pay.

In addition, Time Warner would get approval control over the Internet
service providers' home pages and "prominent above-the-fold areas on the
home page of the service for use." Those provisions would effectively
give Time Warner the ability to co-brand the Web sites and control the
content on the most important page of the Internet providers' sites,
according to some rivals.<

Moreover, if the Internet service providers offer telephone service over
the Internet or video streaming, Time Warner would not be obligated to
"provide [quality of service] support," according to the term sheet.
That means that Time Warner would not be responsible should the service
not respond fast or clearly enough.

Scott McCollough, the attorney representing the Texas Internet firms,
said they are "all unhappy with the terms. No way is this open access.
This is a death sentence."

   [snip]

-- 
James Love  mailto:love@cptech.org http://www.cptech.org
Consumer Project on Technology, P.O. Box 19367, Washington, DC 20036
voice 1.202.387.8030  fax  1.202.234.5176