AOL's Access Saga

By Pipes, Sally C. | Chief Executive (U.S.), March 2000 | Go to article overview
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AOL's Access Saga


Pipes, Sally C., Chief Executive (U.S.)


Amid the jubilation of the announced AOL buyout of Time Warner, one group wasn't celebrating: AOL's allies in its fight to force AT&T to provide open access to its newly acquired cable empire.

"We think it sucks," James Love, director of Ralph Nader's Consumer Project on Technology, told ZDNet News. Jeff Chester, another consumer advocate, called AOL's chairman the "Benedict Arnold of the digital age." Chester explained, telling ZDNet News, "Everyone who wants to compete on the Internet-unless they're a close personal friend of Steve Case or Time Warner CEO Gerald M. Levin-should be worried."

For more than a year, Steve Case and AOL had been these folks' patron saint in their attempt to get access to the property of America's cable companies. AOL long ago figured that to remain competitive in the emerging home Internet market, it would need fast, inexpensive connections for its customers. In the future, as cable companies start to exploit their broadband capability, AOL's ability to compete might be seriously eroded.

AOL figured it had some time to develop options. It invested in Hughes Electronics Corporation, which offered the promise of high-speed wireless connections. It developed deals with local Bells for DSL packages that offer faster service over turbocharged phone lines. But in mid-1998, when AT&T announced it was buying TO and MediaOne-and therefore 60 percent of America's cable capacity-AOL felt threatened.

Case had long argued that the government should stay out of the Internet-this was certainly his position on the Communications Decency Act, which sought to regulate e-pornography. Yet, unlike Microsoft's Bill Gates, Case had always paid attention to the workings of Washington. Feeling pressed, AOL developed a multi-layered strategy to force cable companies to give AOL and other ISPs access to their fast connections.

First stop was Washington, where AOL's crew made its case to Congress and the FCC. Two Virginia congressmen sponsored legislation, but it was going nowhere. AOL struck out at the FCC as well. So the forces went to work at the local level, lobbying city councils to block cable license transfers to AT&T unless it agreed to grant open access to its lines.

"Microsoft is a predator, too, but they didn't go to Washington to try to regulate their competitor," AT&T's Milo Medlin told Regardie's Power, a DC-area business magazine that exposed AOL's strategy in its September/October 1999 issue.

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AOL's Access Saga
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