Web Users Win Big Concessions from AOL-Time Warner
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On December 14th, The Federal Trade Commission (FTC) voted 5-0 to approve the merger of America Online and Time Warner. The deal cleared the way (pending FCC approval, which is expected shortly) for the creation of the world's biggest media company, valued at $112 billion based on stock prices on December 15th.
The agreement came after 11 months of intense negotiations, lobbying, behind-the-scenes manuevering and public interest agitating, which all resulted in what officials called the "most aggressive action ever undertaken by government" to keep diverse content flowing on the Internet.
Robert Pitofsky, the chairperson of the FTC, said "In a broad sense our concern was that the merger of these two powerful companies would deny to competitors access to this amazing new broadband technology."
AlterNet interviewed Jeffrey Chester of the Center of Media Education, one of key organizers and consumer spokespersons engaged in the recent FTC process.
AlterNet: You and a few other public advocates were in the heat of negotiations involving the FTC and the biggest media merger in history -- the AOL-Time Warner merger. You won some major concessions. What were you fighting for?
Chester: We were fighting for the principle of open architecture for Internet-based telecommunications networks. The open, or "end-to-end" principle was at the heart of the Net's original design. It has allowed for the freeflowing of commerce and discourse we've seen on the Internet.
In addition to fighting for principle, we were fighting to hold these two companies accountable. They were cocky and thought they could walk over the public interest, but we didn't let them.
AlterNet: Sometimes it's hard to grasp the difference between the present Internet and the broadband future, and how the cable companies are involved. Can you explain?
Chester: As it stands now, most U.S. homes access the Internet through telephone lines. These lines are required by law to be "common carriers" -- i.e., all Internet Service Providers (ISPs) get equal, "open" access to them. But the next generation of "rich" media applications, especially video-intensive material, will depend on a "broadband" lines -- pipes capable of delivering lots of data and video very fast -- not phone lines. Cable companies have the lead, and have the better technology for delivering this new material.
AlterNet: So how are cable companies an obstacle to open access?
Chester: The cable industry has a very different regulation structure than the telephone industry. In essence, cable is a monopoly industry. The cable companies that own the physical pipelines are also allowed to control the programming that comes through those pipelines, which is why you see certain cable networks and not others on your TV. The telephone industry, in contrast, has to allow other companies, whether long distance companies or ISPs, to use their lines.
Now that cable companies are offering Internet access through their broadband pipelines, they have also created subsidiary ISPs to deliver high-speed access (Roadrunner for Time Warner, Excite@Home for AT&T). Most of the cable companies -- including Time Warner, which controls 12 percent of all cable homes -- have said they would not open their pipelines to other ISPs. They were essentially telling the nation's 6,998 other ISPs, many of them small, independent or nonprofit, that they were digital toast. Yet multiple ISP access is at the heart of the Net's open architecture, and had to be fought for.
AlterNet: Does the AOL purchase of Time Warner mean a major shift away from traditional media?
Chester: No, It was really a victory of old media values over new media. The new system will reflect the central tenets of the current one, but in a more focused way. Advertising, marketing and brand awareness are at the heart of this deal. What the next-generation of Net services mean is a fusing together of video (what you're used to on TV) with the InterNet (and all its marketing tactics). The industry calls it Internet TV, or ITV. But it's really about the brand-washing of America.
AlterNet: What will ITV be like?
Chester: If cable companies control the pipelines, their content, brands, and applications will receive preferential treatment. They will create technology-controlled "walled gardens," electronic enclosures designed to capture and keep consumer eyeballs in their content spheres. This is what the fight is about. We need to open up the system, by requiring that many more unaffiliated ISPs have access to the cable pipes, to help ensure that non-commercial voices find a way to have an impact over the new medium.
AlterNet: Who were the "good guys" in this fight?
Chester: The FTC under (Clinton appointee) Chairman Robert Pitofsky must be thanked. When our coalition of groups -- The Center for Media Education, Consumer Federation of America, Consumers Union and Media Access Project -- went to him, he understood the issues right away, as one of open access and architecture. Pitofsky is a very special person who cares about both competition and First Amendment values.
AlterNet: Why did the struggle last for 11 months and what organizing approach did you use?
Chester: The fact that the struggle lasted 11 months shows the resistance we put up: flooding the FTC with information, editorials, letters, political advocacy from small and medium ISPs -- we kept the pressure on. We dug up incriminating info about the companies, we got press, we got letters written, we got editorials, and we delivered all that information to the FTC. AOL/TW didn't make many concessions in the beginning, but we forced them to make more at the end.
It was a difficult fight. AOL/TW opposed us every step of the way with their tremendous political machine. We could have used more public interest support, though the ACLU played a vital role in this effort. Some allies like Working Assets and Tompaine.com also helped get the word out, but press analysis was minimal, with a TV blackout. Still, we kept the pressure up.
AlterNet: What was the victory? What was achieved?
Chester: The key safeguard is that multiple ISPs will be allowed to negotiate fair terms to have their own, unimpeded share of TW's cable bandwidth. AOL-TW must have at least three non-affiliated ISPs on their system almost immediately. Furthermore, TW cannot interfere with the non-affiliated ISPs' content. There will be an outside overseer for five years to ensure that ISPs have access and that AOL-TW isn't acting unfairly. We also got some new safeguards for the new field of ITV that could help public interest programmers down the line. The final rule, which came as a result of our last-minute lobbying, is that an unlimited number of ISPs can negotiate for cable bandwidth, not just the big ones.
One of the most important elements of this victory is the beginning of a change in the cable industry's regulatory status. Now the number two cable company is more of a open network, required to share its pipelines with others. What the FTC did goes far beyond what most agencies have done on media mergers, which has been to rubber stamp them.
AlterNet: What about the future? Do we have to remain vigilant?
Chester: This agreement provides an opening for content diversity. Now that we have made a positive change, we have to fight to ensure open access everywhere, not just with AOL/TW. Of course, this victory will come to nought unless alternative content providers take advantage of the new medium. And we're not just talking about non-commercial, public interest programming; content from small, independent commercial programmers and especially from people of color is also important to ensure a wide spectrum of voices.
AlterNet: When will most of us get broadband?
Chester: It will be 10 years for most people. But when it arrives it will be the most powerful force in our society -- so beware. But it could do good, if we program it.
AlterNet: What will happen under an anti-regulation Bush Administration?
Chester: Well, the FTC vote was 5-0 in favor, including two Republicans. Hopefully the outside trustee plus political pressure will keep it going. We have to be optimistic and hard nosed. The campaign for an open Net is just beginning. We will need many new supporters before this battle is finally won, but this is a very good first step.