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Time Warner: Making An Offer They Can't Refuse?
Verteiron writes: "According to Reuters, Time Warner is requiring nearly 40 Internet companies in Texas to give up 75% of their subscriber fees and 25% of revenues from other sources such as advertising in order to gain access to its cable TV network. This seems to be an effort to weasel out of their promise to the Federal Trade Commission; in light of the AOL/TW merger, TW had said it would open its cable network for ISP access. To add insult to injury, the term sheets for ISP access also require that TW have 'approval control' (read: censoring rights) over the ISP's homepage." Maybe they're just used to having municipal monopolies ...
What I'm curious about, is why they did this so baltantly. They could have been much more subtle, for example: A local ISP (Netdoor) where I live leases bandwidth from BellSouth for DSL access. BellSouth also offers DSL access via the BellSouth ISP. Well, because they don't rape Netdoor, it's less profitable to have Netdoor provide access the DSL. So what does BellSouth do? They simply make DSL through Netdoor horrible. Periodic outages and (relative to BellSouth DSL) slow connections. Therefore Netdoor's DSL subscriber base is slowly switching to the more expensive BellSouth.
While it isn't extreemly subtle, most end users wouldn't notice, and its certainly not something that would get posted on Slashdot. So why would AOL/TimeWarner (who we assume have at least one or two smart people in their employment) opt for the heavy handed approach rather than the much more sneaky one.
After all, being sneaky is what US businesses are all about!
I'm no fan of cable companies in general, but this article doesn't exactly cast the facts of this issue in a fair light.
The reality is, that under a reseller model, 75%/25% is a somewhat better deal than that being currently offered by the Telco's for DSL service, where the split is currently about 83%/17% in many states.
Is this split unfair? Not really. Consider, that the value-added by the isp itself is pretty insignificant compared to the cost of building, maintaining, and operating the wire plant. Mail servers, DNS, docsis service, etc. are trivial costs, and the real value added by the isp is customer service - and a considerable portion of that must be provided by the hosting cable company, since a large percentage of customer problems are system based.
A fairer way of presenting this issue, would have been "Cable company offers 25% discount at wholesale to ISP's wishing to use their system."
More troubling, are the requirements about splitting advertising, and providing AOL/TW editorial control over content provided by the ISP. I doubt this will be a long-term issue, since the FCC has previously taken very negative stances towards attempts to exert too much control over reseller ISP's in the Telco arena.
In fact, this may not be an issue long at all, since the 8th Circuit recently declared that cable modem service was, in fact, a telecom service. This is an important distinction, since currently, cable modems are regulated under the much more ambiguous "cable services" umbrella by the FCC and by state PUC's. At some point soon, cable modems are going to be moved under the far more restictive telecom data services regulatory umbrella, at which time the entire "Open Access/Forced Access" issue will go away. Telecom companies are required to provide non-discriminatory access to their systems, at rates set by state PUC's.
Frankly, the whole issue doesn't turn me on at all. AOL/TW, TCI/AT&T, et al, currently are selling the service over systems based on a very old branching tree/coax design, that as never intended to provide two-way services. That it works at all is somewhat miraculous. Much more interesting, is the arrival of a new class of "Overbuilders" (or companies planning to build and deploy their own wire plant over the top of the old incumbant systems). Comapnies like Western integrated networks, Wide Open West, Rio, etc. are currently seeking franchises from cities, to construct ultra-high density fiber-optic systems, to deliver voice/video/data services on systems that are far far superior to the crapulent old coax systems.
Take a look at the system specs for Western integrated network's system, for example (http://www.winfirst.com). Note, especially, the planned data speeds they plan to deliver into homes. Yeah - that's 100baseT service. And yup, they're bringing fiber inside the house . Frankly, the prospect of a fully bi-directional ethernet connection into my home makes me erect. It also has to have the incumbant telecoms shitting in their pants, as they watch the imminent death of their cash-cow DS1 and DS3 circuit business arriving on the scene. These new systems are designed with a series of descending fiber rings, and very low node densities. wow baby. No reason at all they can't offer businesses sonet (OC3-OC48) services at very low rates.
Oddly, I've seen very little drooling about this from the geek press, who ought, rightly, to be having a feeding frenzy about it. Instead, we see silly gnashing of teeth over AOL/TW, and inappropriatly biased stories over a thing which, by comparison, is almost irrelevent.
Paper: Time Warner Sets Terms for Access
Last updated: 08 Oct 2000 12:35 GMT (Reuters)
WASHINGTON (Reuters) - Time Warner Inc TWX.N is requiring some Internet service providers to pay up to 75 percent of their revenue and relinquish some control of content to gain access to its high-speed network, the Washington Post reported.
The Post reported that unnamed sources said the Federal Trade Commission is examining the terms of many of the deals proposed to smaller Internet service providers to determine if they violate Time Warner's promise to open its high-speed cable TV lines to competitors in the wake of its $183 billion merger announcement with America Online Inc AOL.N .
Time Warner is requiring nearly 40 Internet companies in Texas to give up 75 percent of their subscriber fees and 25 percent of revenues from other sources such as advertising in order to gain access to its cable TV network, according to term sheets obtained by the Post.
In addition, the term sheets indicate Time Warner would get approval control over the Internet service providers' home pages and "prominent above-the-fold areas on the home page of the service for use."
"Totally ridiculous," said Dave Robertson, vice president and general manager of Stic.net, an Internet service provider in San Antonio with more than 10,000 subscribers. "The bottom line is, they don't have a desire to open their network."
Time Warner denied the charge, saying it and AOL are committed to open access, the Post reported Saturday.
Cable networks are one way to deliver high-speed Internet access to residential customers. Time Warner's cable network reaches 18.8 percent of all cable customers nationwide.