[Random-bits] WSJ on AOL-TW merger

[James Love]

http://interactive.wsj.com/articles/SB971040113187516590.htm
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Understanding the Stakes In AOL-Time Warner Deal
October 9, 2000

   [snip]


Q: What exactly is "open access" for cable, and why does it matter?

A: Remember when you first signed up for a dial-up Internet account? You
had a choice of AOL, EarthLink, Prodigy and scores of other services,
all of which link to you over your phone line. That line happens to be
owned by your local phone company, which is required to carry all kinds
of services. It worked out great for consumers: Online services once
charged by the minute, but competition forced them to offer cheap
flat-rate access, which attracted legions of new users. Those users
fueled the dot-com boom. On some level, Yahoo, Amazon.com and AOL itself
owe their very existence to open access.

Now consider high-speed cable-modem services. Your cable company owns
that particular wire into your house, but the way the rules are written,
it isn't obligated to carry any Internet service but its own. Owning
Time Warner will give AOL control of a huge cable system. jamiRegulators
and consumer advocates fear that will give AOL an unbeatable edge in
high-speed services. Requiring AOL to provide open access to those cable
lines could help keep competition alive.

Q: But AOL says it is willing to open up the cable lines. Isn't that
enough?

A: Not if you want to see the kind of competition we enjoyed in the
dial-up market. So far, in exchange for access, Time Warner wants
competitors to fork over 75% of their subscription revenue and give Time
Warner veto power over what's on the welcome screen. Time Warner also
wants a permanent ad on the welcome page. (Imagine if the phone company
could have forced you to listen to an ad for its service every time you
dialed up to AOL!)

But it's even more complicated than that. Most of the open-access debate
has focused on wiring your PC to the Net over that zippy cable line, but
the PC is only part of the equation. The Net could eventually become a
big part of television viewing, too. You may wind up checking your
e-mail, chatting and doing online shopping on your TV thanks to cable
set-top boxes that combine a Net connection with a television signal.
Unless regulators figure out a way to open up those set-top boxes to AOL
Time Warner rivals, open access for your PC connection could eventually
prove meaningless.

Q: AOL's Buddy List is great. Why is the government meddling in instant
messaging?

A: AOL rules the market for these popular chats, and so far it hasn't
allowed members of competing systems, such as those offered by Yahoo and
Microsoft, to talk to its members. AOL says that isn't a problem,
because it will give anyone a free account on its system. And at some
unspecified future date, it says, it will open up the system.

In the meantime, though, AOL's instant-message window is becoming
important for a lot more than just chatting about playoff scores. The
latest version of AOL Instant Messenger turns the Buddy List into a
speed-dial directory for placing Internet phone calls. So AOL's
instant-messaging dominance could give it a leg up in the nascent market
for Internet phone calls, as well as other services we can't yet
imagine. If leveraging power in one market to gain an advantage in
another sounds familiar, it should. Microsoft used its dominance over
computer operating systems to bundle in a free Internet browser and
defeat Netscape. You know how that one turned out.

Q: Will AOL stop me from using Napster or, if it's shut down, a Napster
successor?

A: Good question. After all, AOL Time Warner would be a record company
as well as an Internet company. And AOL was embarrassed earlier this
year when Justin Frankel, who works for AOL's Nullsoft unit, wrote and
released the Gnutella file-sharing program. Traditionally, though, AOL
and all of the other Web services have been loath to block members'
access to specific sites or services.

Instead, armed with music from its record labels and technology from
Nullsoft, industry experts look for AOL Time Warner to field its own
online music services. Napster-like access to thousands of songs could
then become simply one more extra that AOL could charge you for.



-- 
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