AOL Time Warner will open cable lines to ISPs

The expected move means consumers will be able to subscribe to any ISP supported on Time Warner's cable lines, even if the access provider has no affiliation with AOL. Furthermore, AOL Time Warner--the new company formed by last month's multi-billion dollar merger--will not place any limits on how many ISPs can enter into agreements to offer broadband cable access on its network.

"(What) AOL is banking on (is) that they're not going to lose any money because most people will go to AOL," said Bruce Kasrel, an analyst at Forrester Research. "They're rolling the dice and saying, 'If we open access, it's going to open ourselves because we own the market.' "

AOL and Time Warner announced plans to merge last month, creating a new company worth about $350 billion. The companies did not give any specific time frame as to when the cable lines would be open to outside ISPs.

The announcement could ease the concerns of antitrust regulators and competitors about the pending merger, and ends speculation that AOL Time Warner would pull out of the open access fight.

AOL chairman Steve Case and Time Warner chief executive Gerald Levin are slated to testify in front of the Senate Judiciary Committee today to address the merger. The Senate Commerce Committee will also hold a hearing on the merger on Thursday.

Two weeks ago AOL ended its aggressive lobbying push asking for legislation to open cable lines. Case said at the time that AOL no longer favored government-mandated open access to high-speed cable lines in light of its $120 billion acquisition of cable giant Time Warner. AOL had been active in lobbying lawmakers to open cable lines owned by cable operators, namely AT&T, which was forcing users to sign up for Excite@Home as their cable ISP.

Nationwide, the battle over open access has pitted AOL, other Internet service providers and consumer groups against the cable industry in the market for high-speed Internet services. Cable companies currently offer the most popular high-speed Internet services, but the companies have forced their customers to sign up with Internet service providers also owned by cable companies, like Excite@Home. Consumers using other broadband services, or telephone connections, can choose from among many ISPs.

AOL and Time Warner outlined the plan to open the cable lines today in a "memorandum of understanding" signed by Case and Levin.

"AOL Time Warner is committed to offer consumers a choice among multiple ISPs," the memo read. "Consumers will not be required to purchase service from an ISP that is affiliated with AOL Time Warner in order to enjoy broadband Internet service over AOL Time Warner cable systems."

The memo also opened the door for outside ISPs to sell AOL Time Warner's broadband access to consumers. Furthermore, AOL Time Warner will not block ISPs from streaming video data over its network.

Despite the outline issued today by the companies, many questions remain unanswered, Forrester's Kasrel said. The memo did not provide any specific details on how AOL Time Warner will form relationships with outside ISPs that want access to its cable network.

"They could let ISPs bill people, but they didn't say what kind of prices they could charge them," Kasrel said. "They've still got the issue of what an ISP has to do to get access to their system. Are they going to kick ISPs off if they don't do a good job?"