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America Online Inc. appears ready to accept open access requirements for its cable systems that will not apply to the rest of the industry in order to secure Federal Trade Commission support for its acquisition of Time Warner Inc. A source Monday said a draft consent decree developed by the companies would remain in effect even if the Federal Communications Commission adopted open access regulations for all cable operators. The FCC issued a notice in October asking if open access requirements would encourage rollout of broadband services. A decision could come later this year. Some lawmakers have argued that the FTC should not impose an open access requirement on AOL because the rules would not apply to other cable providers. They would prefer that the FCC set a unified policy for the entire industry. Sources said the companies have drafted a proposed decree that would bar AOL from selling broadband service over Time Warner cable lines until it signs another Internet service provider to offer competing service on the lines. AOL would be allowed to require the competing Internet service provider to share a percentage of its revenue as a condition for using the Time Warner cable lines. The Wall Street Journal first reported these details Monday. A source said negotiations were continuing on how to best insure that other providers of interactive television get fair access to Time Warner subscribers. Sources said both sides support nondiscriminatory access, but as of mid-Monday they had been unable to agree on language for the consent decree. Instant messaging is no longer under discussion, sources said. The consent decree will not contain any provisions on this service, which has been a sore spot for other IM vendors who charge that AOL refuses to provide universal access to its members. Talks have begun with the FCC, but negotiations are in the preliminary stages. The FCC is not expected to impose significant conditions on the deal beyond what the FTC requires. Consumer advocates complained Monday that the draft consent decree would not do enough to protect competition. Andy Schwartzman, president of the Media Access Project, said the FTC should insist that at least three companies other than AOL have access to Time Warner cable systems. He also criticized the agency for apparently agreeing to let AOL require competing providers to turn over a percent of their revenue as a condition of using the Time Warner system. “This is very problematic for us,” Schwartzman said. It is essentially a tax on innovation because the firm that builds a better way of serving the customer only gets to keep a small share of the increased revenue, he said. Consumer advocates prefer a flat, per-customer toll. Schwartzman said his group will ask the FCC to remedy those two deficiencies in the draft consent decree. The FCC has a broader public interest standard that permits it more latitude to impose conditions on deals, he said. Officials from America Online and Time Warner met Monday with the FTC staff in a final effort to resolve antitrust objections to their mega-merger. It was unclear late Monday whether AOL and Time Warner made enough concessions to secure FTC support for their merger. Sources said FTC competition director Richard Parker expects to issue his recommendation this week on whether to accept or reject a proposed consent decree. The recommendation would go to the five FTC commissioners, who could decide next week whether the agency will accept the deal or fight it in court. The antitrust laws technically require the FTC to make a decision on the deal by Monday. AOL and Time Warner, however, have granted numerous extensions of the Hart-Scott-Rodino Act deadline and are expected to give the agency more time rather than risk forcing regulators to go to court. A source noted that the FTC was preparing for battle in case negotiations falter. It was widely reported Monday that the agency has been interviewing potential witnesses from competing ISPs in case it must go to trial. Any litigation would be led by Parker, who runs the competition bureau. Copyright (c)2000 TDD, LLC. All rights reserved.

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