AOL and Time Warner on Slippery Slope

Funny, isn’t it, that during the same week a U.S. lawmaker told federal regulators to back off in connection with the proposed America Online (NYSE: AOL) and Time Warner (NYSE: TWX) merger, rumors that could have a serious negative impact on the deal began to surface.

AOL has been intentionally blocking its instant messaging rivals, the unconfirmed reports allege, while furtively developing a way to make its AOL Instant Messenger (AIM) service compatible with ICQ (“I Seek You”).

In the top-heavy world of instant online messaging, ICQ sits highest on the heap with a reported 70 million users. AOL claims 61 million. AOL owns ICQ. So there are those two up in the stratosphere and everyone else is far, far below.

The implication is that AOL is keeping the lid on its latest accomplishment because if word were to leak out that the company could make AIM interoperable with ICQ, then AOL would be forced to do the same for its competitors — thus leveling the instant messenger playing field. For years, the “little people” have been pleading unsuccessfully for just that.

Wink, Wink, Nod, Nod

Can AOL, the largest Internet service provider on the planet, and Time Warner, the entertainment giant with cable TV stations spread across America, be trusted to play fair?

Short answer: No.

Both have promised the regulators that, well, yeah, sure, we’ll keep our lines open. But — to their immense credit — the regulators want more.

They have good reasons. Earlier this year, Time Warner unceremoniously yanked ABC programs off the television airwaves during a dispute with ABC’s parent company, Walt Disney.

And AOL has angered its instant messaging rivals by consistently refusing to give AIM members access to competing services.

Then there is the matter of Steve Case promising me I could have any AOL technical problem answered 24 hours a day, seven days a week simply by calling a toll-free number. That was in 1998 and I’m still waiting for someone to answer the phone.

Chicken or Egg Dilemma

Both the U.S. Federal Trade Commission (FTC) and the U.S. Federal Communications Commission (FCC) are reviewing the AOL/Time Warner merger proposal. But Tom Bliley, a Republican representative from Virginia and chairman of the House Commerce Committee, sent a letter to FTC Chairman Robert Pitofsky saying that he and his agency lack the expertise to impose high-speed Internet access restrictions.

Bliley also sent a letter to FCC Chairman William Kennard saying that imposing access restrictions is outside his agency’s authority. Funny, isn’t it, how one doesn’t have the expertise and the other doesn’t have the authority? Who does that leave? The European Commission?

Bliley told both government agencies they should do nothing about the merger until a national policy on Internet access can be established. But just a couple of weeks ago, the FCC delayed launching its scheduled inquiry into that very issue — a process that could have led to establishment of a national policy — until a decision could be made on the proposed merger. Funny, isn’t it?

This is as absurd as waiting for Godot. Which comes first, the policy or the merger?

Get the Job Done

Those who want open access — and that includes consumers, consumer advocates, Ralph Nader, right-minded politicians and just about everyone except AOL, Time Warner and those in their pockets — want it because it will help keep prices down, give the public greater choice, and foster competition.

Without guaranteed access, other high-speed Internet access providers will have about the same clout as those locked-out instant messengers.

There have been some reliable reports, of late, that the FTC is close to establishing regulations that would require AOL and Time Warner to keep their open access promises. But now opponents of those regulations are saying we need a national policy — which could take up to a year to formulate — before the commission should take it upon itself to regulate.

Pitofsky should ignore the congressman’s warning and the FTC should impose appropriate open access restrictions. The FCC should go about establishing a national policy — if one is needed — in its own good time. Both agencies should continue to scrutinize the AOL/Time Warner merger plans and heed any potential warning flares sparked by the instant messenger controversy.

And Rep. Bliley should get the monkey wrench award for interfering with the inner workings of a system that’s already got too many loose nuts bouncing around.

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