One of the major questions to arise from the planned merger between America Online and Time Warner is whether the new company will continue to support the position that cable companies be required to provide open access to the Internet.
Before the announcement, AOL was the outspoken leader in favor of a Federal Communications Commission (FCC) requirement that cable companies provide space on their broadband cable systems for competing Internet service providers (ISPs). AOL was concerned, of course, that it could lose its customer base if it was not able to offer such high-speed access.
Cable Companies Want Windfall Monopoly
The cable companies are strongly against being required to offer such access, as the Internet represents an incredible potential windfall that they have no desire to share.
While the cost of upgrading to two-way digital facilities is expensive, cable companies are licking their chops at the prospect of controlling access to cyberspace for millions of cable users.
While ISPs that favor open access probably have the stronger argument in terms of fairness, powerful cable companies are not likely to give up without a strong fight.
Control of Home Page Critical to E-Commerce
Cable companies want to do more than provide wholesale broadband pipelines to the Internet. They want to provide the home page that users see when they first access the Net. By controlling the initial access point, they would be able to generate millions of additional dollars in advertising revenues as well as open the doors to an entire world of e-commerce cross-marketing opportunities.
AOL Has Stronger Control Than Most ISPs
AOL, interestingly, has more control over its customers than ISPs that just provide access to the Internet. When customers log on to AOL, they do not access the Internet directly.
Instead, users access a private service that is completely controlled by AOL. Access to the Internet is one of the many options available to customers.
By contrast, most ISPs provide direct access to regular Internet services such as e-mail, chat, newsgroups and the Web. To connect to the Web, for example, users run browser programs like Netscape or Internet Explorer.
These users are able to select their entry point on the Web as an option in their browser. While most ISPs hope that they are chosen as their customers’ initial entry point to the Net, they do not control such access.
Importance to E-Commerce Cannot Be Understated
Now that AOL is acquiring a cable company with 20 million subscribers, are they still going to remain the champion of open Net access? It is a huge question because of the potential impact that AOL would have on the debate at a nationwide level.
It is even more important because of AOL’s direct control of their customers’ initial entry point. Unlike with most Internet ISPs, customers have no choice of their initial home page with AOL.
This direct control has an importance to e-commerce that cannot be understated. It gives AOL a virtual lock on the e-commerce companies that their customers see first.
Right after the merger was announced, AOL Chairman and CEO Steve Case said that AOL Time Warner would remain a champion of open Internet access. Many analysts are starting to question whether this claim can possibly be true, particularly since Case is going to be the chairman of the new company, not its CEO.
While Case may have his heart in the right place, for example, he is going to be reminded constantly that he has a fiduciary duty to shareholders to maximize revenues and earnings. He has no such duty to the cause of truth and justice.
Which scenario is better for AOL Time Warner’s shareholders? Allowing AOL competitors on its cable systems, or complete control of how Time Warner’s 20 million cable subscribers can access the Internet?
Serious Concern Already Being Raised
Serious concern is already emerging over the announcement. For example, Don Tapscott, the author of such well-known books as The Paradigm Shift and The Digital Economy, told the E-Commerce Times that he is openly skeptical of the merger.
“The AOL merger with Time Warner is a marriage made in heaven, or hell — depending on your perspective,” he said. “If you’re a shareholder, it’s cloud nine. But if you’re a consumer, consider suiting up in asbestos.”
“Until yesterday, AOL was officially incensed at the arrogance of the cable monopolies,” he continued. “Time and again company officials would appeal to municipalities that controlled the cable channel licenses that the cable architecture should be open to all content providers. Now that AOL has a hammerlock on millions of American homes, it is doubtful that they will continue to harp on this theme.”
Who Will Be the New Champion?
If AOL backs off its promise to continue supporting open access, who will be its new champion? Look for a coalition to form behind Microsoft.
Members would include large and small Internet e-tailers, independent ISPs and numerous telephone companies that want to dilute the potential competitive impact of AOL Time Warner.
Where Will the Fight Take Place?
We know where the fight is going to take place this year: At the FCC and in the halls of the U.S. Congress. The question is, how important is it?
Think of it this way. Which would you prefer: Having millions of users forced to choose between “You Have Mail” or acquiring DSL service if available, or having those same users being able to choose between AOL, [email protected], and multiple other local ISPs offering high speed service over either cable or DSL?
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