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Open-interactive-access war

With cable open-access conditions apparently secured, critics of the America Online-Time Warner merger are lobbying antitrust regulators to impose similar restrictions on the company's interactive TV business.

Emboldened by their success convincing the Federal Trade Commission to order AOL-Time Warner to open its cable broadband platform to competing Internet providers, Disney and consumer-advocacy groups are pressing for specific conditions that would prevent the merged company from interfering with interactive services offered by rival TV networks and ISPs.

The FTC so far hasn't appeared ready to go that far, although it may be ready to stick AOL-Time Warner with a general prohibition on discriminating against rival interactive services.

The merger's critics say a clear list of restrictions is necessary to prevent AOLTV from parlaying the market-dominating position of its parent company into a monopoly over interactive-TV services.

"I'm pretty confident that for most Americans, interactive TV will supplant the [PC-based] Internet," said Jeff Chester, president of the Center for Media Education. "Delivery of interactive-TV applications need to be included in an open-access policy. We have to fight to make sure AOLTV does not try to pull the old switcheroo by giving open access to a product that has a fairly short shelf life: ISPs over cable modems."

It's unclear how far the FTC is willing to go, because, unlike cable open access, there are few "smoking guns" to which AOL-Time Warner critics can point as evidence of the companies' determination to hinder competitors. For ISPs, on the other hand, Time Warner's fight to ward off multiple-carriage mandates was badly damaged by a "term sheet" that demanded high prices for carriage on the cable system's broadband network.

Still, the merger's critics are making the most of a three-week delay in the FTC's decision. The agency, which was prepared to block the deal two weeks ago, gave the company until the end of November to sign up a competing ISP on conditions the commission approves.

Chester and Disney are leading the fight for the interactive-TV conditions, while consumer groups including the Consumer Federation of America, Consumers Union and Media Access project are supportive but have made the issue a lower priority than cable open-access conditions.

"Before we can specify more details of regulation, we may have to let the problem show itself," said Mark Cooper, CFA research director. "But I do think a non-discrimination principle is going to be there."

Disney and FTC officials declined to comment. AOL's spokeswoman reiterated the company's familiar line that talks with regulators are proceeding and the deal is expected to close this fall, but would not comment on any details of the negotiations.

Broadcasters are encouraged by the prospect of interactive-TV conditions, because they would like the deal to serve as a model for industrywide interactive-TV rules that would apply to all cable systems. TV station groups have long had rocky relations with Time Warner. The National Association of Broadcasters weighed-in on the fight by asking regulators to order the cable system to stop blocking some electronic-program-guide signals. "The evidence that Time Warner will use its gateway power to discriminate against competitors is legion," said NAB counsel Jack Goodman.

The cable industry, on the other hand, is determined to keep the deal from being used as a model that could lead to industrywide open access or interactive-TV rules. "The only reason the FTC is involved at all is because AOL and Time Warner control close to half of all Internet customers and the second-largest provider of high-speed access lines," said David Beckwith, spokesman for the National Cable Television Association. "I don't know why this merger would impact other companies."