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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