WASHINGTON -- America Online Inc. is preparing to wage a lengthy and multifaceted regulatory war to gain access to the fat Internet pipelines controlled by cable-television companies.
In what may be the first sophisticated lobbying campaign by an Internet company, AOL is leading an effort to assemble a coalition tentatively titled "Open Net." The group will urge lawmakers and regulators to require that cable-TV lines be opened to all competitors seeking to provide high-speed Internet service via "broad-band" technology.The drive underscores the role that policy makers increasingly will play as the Internet becomes a mainstream tool for buying and trading goods and services over the World Wide Web. The rise of electronic commerce raises lots of public-policy questions involving privacy, copyright protection, taxation and -- the coalition's core issue -- who gets access to broad-band networks that can deliver Internet access as much as 100 times faster than what consumers now see.
With the help of telephone giants MCI WorldCom Inc. and U S West Inc., and its fellow Internet service provider MindSpring Enterprises Inc., AOL is recruiting financial, entertainment, retail, travel and other companies that increasingly are doing business via the Web. Among those approached recently are Yahoo! Inc., the Internet portal company, and entertainment giant Walt Disney Co. These companies haven't joined yet, and officials declined to comment.
To lead recruitment, the nascent group has hired Washington lobbyist Greg Simon, former high-technology adviser to Vice President Al Gore, and Rich Bond, former chairman of the Republican National Committee. AOL, based in Dulles, Va., also has retained Washington grassroots specialist Leslie Harris to educate consumer groups in the hope that they will reach out to their members nationwide.
Consumer groups aren't likely to align directly with Open Net, but some sympathize with AOL's position. They are working on their own effort to bring it to the public's attention and may announce plans this week. "People are just beginning to figure out that regulators are making some very, very heavy-duty decisions here," says Andrew Schwartzman of the Media Access Project, a nonprofit telecommunications law firm in Washington.
AOL's lobbyists also have encouraged municipal regulators in Los Angeles, Denver, Dallas, Seattle and Portland, Ore., to impose "open access" requirements on AT&T Corp. as the long-distance carrier seeks permission for its proposed $40.9 billion acquisition of cable giant Tele-Communications Inc. So far, only Portland has adopted such a condition, and AT&T has sued in federal court to have it declared illegal. Seattle city officials have received hundreds of e-mails from citizens demanding that the city consider such a condition. "There's a pretty strong call for ensuring in the future that we have open Internet access," says Seattle city Councilman Peter Steinbrueck.
AOL has been careful to argue that the issue potentially affects many more companies than just AOL. In a speech in the fall, AOL's chief executive officer, Steve Case, said, "Over the next five years, I believe the future of this medium will be determined more by policy choices than by technology choices."
But the issue clearly is vital to AOL's own future. With 15 million customers, the company dominates the prevailing "narrow-band" market for Internet service, funneled through telephone lines at much slower speeds. Some phone companies are souping up those lines -- and AOL has cut a deal with Bell Atlantic Corp. -- to deliver broad-band service. But that is still slower than what can be sent via cable modem.
Opponents, including cable operators, AT&T and such high-tech powerhouses as Intel Corp. and Compaq Computer Corp., say it's perilous even to think about rules for the Internet. Decker Anstrom, president of the National Cable Television Association, an industry lobbying group, says, "Either you have a view that the online marketplace is competitive and emerging, and that the government should stay out, or you have a view that the government should come in. I don't think you can just put your toe in the water here."
While cable networks currently appear to offer the fastest broad-band pipeline, companies are busy working on satellite-based and other alternatives. "It really is preposterous to talk about anybody having any market position in online data services," Mr. Anstrom says. "We're in the first inning here."
Even some Internet service providers disagree with AOL and its allies. "While we support open access, it's dangerous to start a regulatory process," says Barbara Dooley, president of a trade association that represents service providers and related companies. "We believe competition and market pressure will get better results without the regulatory costs and distortions," she says.
AOL first raised the issue in the fall in the Federal Communications Commission's consideration of AT&T's proposed acquisition of Tele-Communications. Arguing that AT&T could monopolize highspeed Internet access through TCI's affiliate, At Home, AOL urged the agency to open the cable firm's network to rivals, in return for fair compensation.
AT&T and its prospective partners say they aim to bring more competition to local phone service while investing billions of dollars to offer more convenient Internet service. The FCC isn't expected to attach an "open access" condition to approval of the AT&T-TCI deal, but commissioners are mulling whether to address the matter in a separate proceeding. So far, only Chairman William Kennard and Commissioner Susan Ness, both Democrats, have shown interest.
Lawmakers have been reluctant to write rules that might interfere with growth of the Internet. It is unclear whether current law provides for cable networks to be "unbundled" like local phone systems. And questions remain as to whether opening cable lines to unlimited rivals is technologically practical.
But AOL and its allies are betting that more policy makers will confront the issue as they learn more about it. And they think momentum is building in their favor. Entertainment companies, fearing their programs and movies could get locked out of a super-fast pipeline, have privately expressed concern in the wake of last week's announcement that At Home would acquire Excite Inc., one of the Web's busiest sites. Further fomenting concern are reports that AT&T may sell its Internet-access business, with its 1.3 million customers, to At Home. And policy makers could grow more concerned if cable rates soar after they are deregulated at the end of March.
Last week, Rep. Edward Markey of Massachusetts, ranking Democrat on a key House panel, wrote to the FCC's Mr. Kennard expressing his concern that new broad-band networks, "most notably in the cable industry," appear "designed to reintroduce bottlenecks to competition, choice and innovation." Mr. Markey urged that the FCC "move quickly to ensure that no gatekeeper channels for broad-band access are being created."
It's a delicate position for AOL, which usually echoes Web companies' insistence that regulators leave the medium alone. AOL has been telling policy makers that, because the cable network has long been effectively a regulated monopoly, forcing it open would be deregulatory.
Mr. Anstrom, the cable lobbyist, chuckles at this notion. "If anyone is a dominant provider," he says, "it's AOL."