AOL's About-Face on Open Access

Never one to let details stand in the way of a major transaction, AOL’s dealmakers are suddenly singing a new tune in the open-access debate. The one-time champions of competitive access to broadband networks—"an open playing field," as they liked to call it—and advocates of a federal role in ensuring those open conditions, have abruptly changed their position. Let the market decide, AOL's Steve Case and his new Time Warner colleagues declared in the process of announcing the merger of the two companies, in which the world's largest Internet service provider acquired the world's largest media conglomerate, which just happens to be the second largest cable operator in the country, too. With the potential of offering broadband Internet access to some 13 million captive cable households, the new partners wasted little time in dismissing the need for a federal policy on open access. "Essentially," explained Time Warner CEO Gerald Levin, "…we're going to take the open access issue out of Washington and out of City Hall, and put it into the marketplace and into the commercial arrangements that should occur to provide the kind of access for...multiple ISPs."

With a little luck and some shrewd bargaining, in other words, some small fraction of the nation's more than 6,000 ISPs might be able to deal their way into the new high-speed networks. But the open-access regulatory policy that Case had lobbied for over the past year was suddenly out of the question. Or, to put it more bluntly, Case has a new message to deliver: "Pull up the ladder, Jack, I'm aboard." Seemingly overnight, one of the leading proponents of open access, a member of the Open Net Coalition and a supporter of "NoGateKeepers.com," had cast his lot with the opposition. "I think you will see AOL go away as an agitator in the regulatory arena against us," predicted George Bell, chief executive of Excite@Home, which, as the exclusive provider of Internet service to AT&T's TCI cable customers, had been the target of Case's wrath. What a difference a $165 billion merger makes.

Before he joined the ranks of the cable industry titans, Case had been determined to break the stranglehold that AT&T (having netted the TCI and MediaOne cable systems in its own multi-billion-dollar shopping spree) threatened to impose on the emerging broadband system. "Government," as he told the National Press Club in October 1998, "has a responsibility to preserve an open playing field—to preserve the openness, innovation and competition that are at the heart of the Internet…." Nor did Case shrink from suggesting that regulation was the key to untangling the broadband puzzle. "Significant challenges currently face regulators in the communications realm," he conceded. "There is currently one set of policies that governs telecommunications, and another governing cable. These legal, policy and regulatory frameworks have little to do with each other…." Thus it was the government's responsibility, Case concluded, to see that the cable broadband environment conformed to the "openness, competition and rapid innovation" that is the very "DNA" of the Internet. "The bottom line," Case insisted, "is that competition in all 'last mile facilities' should remain open so that consumers have the same kind of choices in broadband that they do in narrowband."

Four months later, at the Commonwealth Club in San Francisco, Case again made clear his opposition to the closed cable model. "The cable industry's message to consumers," Case declared, "is simple: if you want high-speed Internet access over cable, you must buy the Internet service we own before you can buy the Internet service of your choice. In this cable industry model, any other service provider would be classified as a 'premium' service and it would be available to the consumer at an extra cost. That would be bad for consumers, bad for the medium, and bad for business investment and innovation."

Case and AOL, despite their protestations to the contrary, appear to be beating a different drum these days, as the new landlords of Time Warner's extensive cable holdings. Vague promises to find "market solutions" to the open-access puzzle mean little in the face of Time Warner's 36 percent stake in Road Runner—its exclusive ISP—and now AOL appears poised to flex its considerable muscles in the new cable broadband environment. That, too, will be "bad for consumers, bad for the medium," and ultimately bad for the reputation of Steve Case, the one-time advocate of open access.