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If you can't beat it, control it.
That seems to be the conclusion among key cable operators as the number of open access trials mount. With federally mandated open access regulations still a threat, it appears major MSOs are figuring it is better to create their own multiple ISP policies rather than have Washington do it.
The looming America Online Inc.-Time Warner Inc. megamerger - still stalled at the Federal Communications Commission at year's end -- effectively has been pushing open access into the cable industry.
Part of the Federal Trade Commission's December deal approving the merger requires the newly formed media giant to open its cable systems to rival ISPs, a step Time Warner Cable began taking via multiple ISP trials and a November broadband access deal with Earthlink. Time Warner also ended its exclusive service agreement with cable modem service Road Runner a full year before the expiration date.
Mike Lundford, CEO of Earthlink Inc., says if the AOL-Time Warner merger gains the coveted federal approval and the related Earthlink access deal remains intact, "in reality it's just a matter of going through the technical requirements."
Earthlink could begin selling service on Time Warner systems by summer. That is not only a benefit for Earthlink but also for AOL, Lundford contends. "AOL doesn't really have a broadband strategy except this one, so the longer they wait, the longer they don't have one," Lundford says. "Our contract is structured so we get on the same day as AOL."
When combined with existing digital subscriber line and two-way satellite service offerings - plus an existing cable access deal with Charter Communications -- the AOL-TW cable pipe means Earthlink can market broadband service to the entire nation.
"It's going to cut our marketing cost significantly and increase the number of opportunities available to our customers," Lundford says. "So it was critical we get this early."
Branding is a key issue. Under the contract, Earthlink either can sign up new customers referred through AOL-TW or sell directly. In the latter case, the customer will never see a Time Warner Cable logo on any of the promotional material. That is vital for Earthlink in establishing a brand claim on the customer from the beginning. In contrast, AT&T Broadband's ongoing open access trial in Boulder, Colo., doesn't allow this option, and Lundford says "that is one of the biggest problems we've had."
"This and our wireless handheld PDA markets will be our highest growth sector for the next year," he says. "And for the foreseeable future."
For Time Warner, opening up to other ISPs would allow the company to broaden its Internet access marketing, according to Jim Chiddix, chief technology officer for Time Warner Cable. "We think that giving customers a choice of ISPs under deals we have crafted with ISPs like Earthlink will continue to drive cable modem service," Chiddix says. "Earthlink has done a great job with services and product with a bit of a different twist than AOL and Road Runner. That's going to broaden the appeal of cable modem service for our customers."
What is definitely not appealing is the prospect of open access mandates industry wide, Chiddix says. "Open access as defined by some was a very bad idea, when it was going to be government mandated," Chiddix says. "I felt that would have inevitably led to a very elaborate regulatory scheme essentially picking out a common carrier service with the government determining conditions and rates and so forth. What we have instead is what we wanted all along, which are business relationships with ISPs that are not mandated by government in a laborious way."
Echoing that sentiment is Robert Sachs, the cable industry's chief lobbyist as president and CEO of the National Cable Television Association. Talking to cablers at December's Western Cable Show, Sachs admitted, "To be clear, it is in our industry's self-interest to provide cable consumers with a choice of ISPs. . . But while our industry is committed to providing customers with a choice of ISPs, we will vigorously oppose any efforts to impose government-mandated prices, terms and conditions on this still new and developing business."
Time Warner is still busy road-testing multiple ISP access with 50 CompuServe and 50 Time Warner employees in Columbus, Ohio, offering options for Road Runner, AOL, CompuServe, Juno and RMI.net among others.
The latest to join the open access crowd is Comcast Cable Communications Inc. It signed a deal in December with Juno Online Services Inc. for a multiple ISP trial in Philadelphia beginning in the first quarter. Juno, the third-largest U.S. ISP and Comcast, the third-largest cable operator in the United States, have emphasized the trial is focused on finding new business revenue from a multiple ISP system.
And AT&T Broadband is continuing its multiple ISP test in Boulder, Colo. with 500 subscribers and eight ISPs. The test will be used as a model for a second dry run in Massachusetts later this year.
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