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The last time Time Warner decided to play hardball during a business negotiation, the cable giant cut off ABC television stations from millions of viewers, provoking a torrent of criticism that is still threatening its pending merger with America Online . Perhaps the dealmakers didn’t get it. In recent talks with Internet service providers seeking to reach customers over Time Warner’s high-speed cable lines, the company is again taking a hard line – one that is guaranteed to further embolden regulators reviewing the AOL merger. And at least one ISP last week took its complaint to the Federal Trade Commission. In one recent negotiation, Time Warner offered Earthlink a deal whereby the ISP would pay the cable operator more than two-thirds of the revenues collected from broadband subscribers. Under such an arrangement, Time Warner would also set the total price paid by the subscribers. Such a setup would make it difficult if not impossible for Earthlink to make a profit. And it would hand a competitive advantage to the ISPs affiliated with Time Warner, AOL and Road Runner, since they could still benefit from revenues flowing to the cable operator. That’s exactly the kind of anticompetitive strategy that regulators fear and that Time Warner and AOL executives have been denying they would pursue. Earthlink favors a wholesale pricing model. The ISP wants to pay the cable operator a fixed fee per subscriber, and to decide on its own what to charge the customer. Telephone companies, offering a similar high-speed pipe but working under different rules, have offered Earthlink wholesale pricing for digital subscriber line service. “Cable companies are used to acting as monopolies,” says Earthlink VP Dave Baker. The Time Warner terms make offering a broadband service “a practical impossibility,” he adds. Consumer groups favoring government-mandated access to cable broadband systems said the latest news bolstered their argument. “It underscores everything that we’ve been asking for in an open-access policy,” says Jeff Chester, executive director of the Center for Media Education. Time Warner stresses that the talks are ongoing. “Time Warner cable is committed to working creatively with Earthlink and others in the ISP community,” says spokesman Ed Adler. “Nothing in our negotiations should be taken as a final proposition.” If the talks were just between two companies in the free market, Time Warner’s stance might make sense. But with antitrust regulators at the Federal Trade Commission already questioning the company’s voluntary pledge to let competing ISPs onto its system, the tough talk comes at the worst possible time. As a result of Time Warner’s ABC cutoff in May, ABC owner Walt Disney began a massive lobbying campaign to persuade regulators to impose conditions on the AOL merger. Now, Earthlink is speaking out against the merger and took its complaint to the FTC. The lobbying efforts are paying off. The FTC’s staff wants the agency’s five commissioners to require AOL and Time Warner to share their network. If the merging companies won’t agree to do so, the staff wants the commission to block the merger. AOL and Time Warner have resisted such conditions, but playing tough in negotiations gives their critics more fodder. Related Articles from The Industry Standard: AOL/Time Warner � What’s at Stake AOL Links Instant Messenger Services AOL Gives the Gift of Time Copyright � 2000 The Industry Standard

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