AOL criticized for ISP choice

Aug 6, 2001  •  Post A Comment

A coalition of watchdog groups led by the Center for Digital Democracy last week asked the Federal Trade Commission to investigate whether a recent decision by AOL Time Warner to offer High Speed Access Corp.’s Internet-access services to its customers complied with a Federal Trade Commission consent decree.
The consent decree at issue conditioned AOL’s acquisition of Time Warner last year on the company offering its cable customers the services of at least three unaffiliated ISPs.
But according to the watchdog groups’ complaint, HSA and AOL have a variety of overlapping business arrangements through Charter Communications and Charter’s principal owner, Paul Allen.
Jeff Chester, CDD’s executive director, said the groups are concerned in particular about Charter’s role because it is a customer for AOL Time Warner programming and the two companies are linked through investments in such services as Adlink, a Los Angeles-based cable TV advertising interconnect service, and the Oxygen programming network.
“As far as I’m concerned, they’re not living up to the spirit, if not the letter, of the consent decree,” Mr. Chester said.
But Kathy McKiernan, an AOL Time Warner spokeswoman, said the deal was in accord with the FTC’s mandate.
“HSA is unaffiliated with AOL under the terms of the FTC decree,” she said.
Shortly after the watchdogs announced their challenge last Tuesday, Charter revealed that it had proposed to pay $73 million for the Internet-access service operations that HSA uses to serve the cable company’s customers.
At the same time, Charter announced that Jerry Kent, Charter president and CEO, and other company executives had resigned from HSA’s board.
In addition, Charter said that, as part of the deal, preferred stock in HSA held by Charter and Vulcan Ventures, a Charter affiliate, would be canceled.
While the HSA board resignations appear to address at least one of the concerns raised by the watchdog groups at the FTC, Andy Morgan, a Charter spokesman, said the company announcement and the challenge were not related.
Together, Charter and Vulcan, both of which are controlled by Mr. Allen, already own more than half of HSA, which does about 85 percent of its business with Charter. In addition, about 160,000 of Charter’s 420,000 broadband Internet customers are currently served by HSA.
“Basically, we want to bring these networks and equipment in-house,” Mr. Morgan said.
Juno Online Services and EarthLink are the other two ISPs AOL Time Warner has selected to meet its access obligations under the consent decree.