AOL Time Warner's Anti-Competitive Ad Stance Toward ISPs—continued

Same Old-same Old

How can AOL Time Warner get away with this blatant anti-competitive media tactic? Apparently the verbiage of the merger approval signed off by the FCC and the FTC allows autocrats to block advertisements, according to a telecommunications lawyer who's been monitoring AOL Time Warner's activities.

W. Scott McCollough said AOL Time Warner's anti-competitive policies are nothing new for the media giant and that similar denials have been happening since the merger was first announced.

"[AOL Time Warner lawyers] will say the FCC merger order did require TW to allow those ISPs that are on the system to advertise," McCollough said. "But if you'll notice, there's no ISPs on the system yet. I would argue that the spirit of the FCC order was they accept independent ISP advertisements on their network, but I'd have to admit that it could be read either way."

However, the order also requires that AOL Time Warner act in good faith in its negotiations with independent ISPs, something that hasn't happened where advertising sales are concerned.

McCollough said AOL Time Warner officials won't speak with small and regional ISPs until August—right before AOL, EarthLink and Juno Online Services start offering Internet service over AOL Time Warner's cable network. By then, he said, "ISPs will be picking up the crumbs from the three national ISPs."

AOL Time Warner's policy also seems to stand in violation of Paragraph 53 of the FCC order, which states:

"We are convinced that a decision by AOL Time Warner to withdraw support from DSL—even if it were limited to Time Warner cable service areas, and even if its ultimate effect were only to slow DSL's continued growth—would amount to a public interest harm."

It's déjà vu all over again for ISPs in New York, who last year were told they could advertise on Time Warner's network only until Road Runner service became available in the area. Other potential blackout markets include Los Angeles, Kansas City, and Memphis (left). Challe, who said he has moved onward to advertising Infinity's DSL services through local newspapers and radio, was disappointed by Time Warner's decision to refuse its ads. But he is also comparing notes with Stephen Heins, a local and vocal critic of the media giant's merger. Heins is the Marketing Director for Northnet, an ISP operating out of Oshkosh, Wisconsin. In a statement made earlier this week, Heins called AOL Time Warner's actions particularity damaging in light of competitive challenges DSL providers already face from incumbent local exchange carriers (ILECs).

"As has been oft-reported, DSL providers have fallen on hard times over the last year, so restraint on the ability to highlight DSLs positive features is devastating to ISPs and broadband deployment in general," Heins said.

What is to be done?
It's unclear what steps federal regulators could take to remedy the situation. McCollough said that beyond filing online complaints, many independent ISP owners, operators and advocates question the weight such allegations carry with lifelong bureaucrats.

"I'm not throwing rocks at either commission, but it's my experience that informal complaints of that nature go into a black hole and are never touched," McCollough said.

Lawyers, McCollough admitted, are another alternative to an ISP having to cross its fingers and hope filling out a complaint form works. But its unlikely many ISPs would go that far, since independent owners and operators are typically better technicians than politicians.

"The problem is that they have to find someone like me to prepare a case and prosecute it, that takes money," McCollough said. "A lot of small ISPs don't have a bunch of money to spend of lawyers. They need it for things like advertising and new equipment so they can get access to cable networks."

So this is business?
In February 2000, Time Warner and AOL signed a Memorandum of Understanding (MOU), setting the framework for Time Warner Cable to offer consumers a choice of multiple ISPs, including AOL, on its broadband cable systems.

Consistent with the MOU, Time Warner entered into an agreement with EarthLink, the nation's second-largest ISP, to enable it to offer high-speed Internet access, content, applications and functionality over Time Warner Cable's broadband cable systems. It is still said to be hammering out the terms of its deal with Juno Online Services.

Legally, AOL Time Warner legally must share its cable network with others in order to provide its branded cable modem access. But AOL Time Warner does not have to allow EarthLink or Juno to buy air time and advertise their respective cable offerings.

Earlier this year, Time Warner turned down a $100,000 ad campaign from Southwestern Bell for the same reason independent ISPs ads are getting black listed—the RBOC wanted to advertise its DSL services. It's ironic that ISPs and RBOCs are in the same boat on this issue.

Don't you wish your business could turn down money the way AOL Time Warner does? Do you suppose its shareholders would like to know why AOL Time Warner officials are turning money away? If you though the economy was tough, just try marketing your broadband ISP business in Road Runner territory.

— End

< Back to page 1: AOL Retains Time Warner's
Anti-Competitive Ad Policy Toward ISPs