- The Washington Times - Tuesday, November 21, 2000

Time Warner Inc. said yesterday it has reached an agreement to let EarthLink Inc. use its cable network to offer high-speed Internet access. The deal could help Sterling, Va.-based America Online Corp. earn regulatory approval for its pending $129 billion purchase of Time Warner.

"This will help them. Clearly, the regulators have been hung up on the issue of open access," said Abhishek S. Gami, an analyst at Chicago investment banker William Blair and Co.

Open access or letting Internet-service providers (ISPs) lease use of cable lines so they can market high-speed access has been a topic of concern among Federal Trade Commission (FTC) regulators and consumer groups since AOL said in January it planned to buy Time Warner.

Time Warner's deal with EarthLink, which had opposed the AOL-Time Warner union, could help erode concerns by convincing ISPs and consumers that high-speed access will be made widely available.

AOL and Time Warner also said yesterday that they asked the FTC to extend the deadline for approval of their union by two weeks to give the agency more time to examine the transaction in light of the new agreement with Atlanta-based EarthLink.

The companies now expect a decision on AOL's purchase of Time Warner by late December or "the very early days of 2001," according to a joint statement.

EarthLink is the second-largest U.S. Internet-service provider with 4.6 million subscribers, a distant second to AOL's 25 million ISP customers. The deal will give EarthLink access to Time Warner's 12.6 million cable-television customers.

The deal also ended EarthLink's opposition to the AOL-Time Warner transaction. EarthLink objected because there was no assurance AOL-Time Warner would let other ISPs lease the cable lines.

"It certainly moves EarthLink to the category of having no objection to the deal," EarthLink President Michael McQuary said.

EarthLink expects to offer high-speed Internet access over Time Warner's lines in the second half of 2001.

Time Warner's agreement with EarthLink is the first one it has negotiated with competitors. Time Warner is a co-owner of Road Runner, the Herndon, Va., company that markets Internet access over Time Warner cable lines. Road Runner sells high-speed Internet access to 719,000 Time Warner cable customers.

Time Warner has an exclusive deal with Road Runner that expires next year. The contract prevents Time Warner from granting other ISPs access to its cable lines, and the agreement with EarthLink is contingent on Time Warner removing the exclusivity arrangement it has with Road Runner.

Time Warner also is negotiating with Juno Online Services, which offers free Internet access, on an agreement to let it market high-speed access over the Time Warner cable network.

A Time Warner spokesman said the company is talking to other ISPs.

To address FTC concerns, AOL and Time Warner said in April they intended to open cable lines to ISPs. But the companies said they want to open cable lines voluntarily, and they have argued that the FTC shouldn't draft an open-access mandate.

Internet-service providers want access to cable lines because they can deliver Internet content up to 100 times faster than telephone lines that dial-up subscribers use.

At a hearing in July, regulators expressed concern that without more than a promise that a combined AOL-Time Warner was willing to open its cable network to competitive ISPs, they feared the new company could squelch competition.

Consumer groups expect the FTC to demand a legally binding consent decree requiring AOL-Time Warner to provide open access to competitors.

"To me, the future of the Internet is at risk until we have a consent decree that lays out additional criteria that ensures competition," said Jeffrey Chester, executive director of the Center For Media Education, a nonprofit advisory group that works on Internet issues.

The agreement with EarthLink may be a good step toward open access, but it doesn't do enough to promote competition, said Andrew J. Schwartzman, president of the Media Access Project, a Washington public-interest law firm that opposes AOL's purchase of Time Warner unless open access and other issues are addressed.

"When we get multiple ISPs on the cable platform, then we will have open access. This is a good step along the way," Mr. Schwartzman said.

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