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Don't Rush to Regulate Net Access
The consolidation of cable and media companies raises the specter of a handful of vertically integrated conglomerates dominating Internet access into people's homes. U.S. and European antitrust regulators are rightly raising questions about the proposed America Online Inc./Time Warner Inc. merger's impact on competition and innovation. Yet it's not clear what the solutions may be. No one really knows what can and will work on the Net, as the recent shakeout in the dot-com world shows. With one or two exceptions, no one knows how to make profits. Any regulatory incursion into the still-evolving Net, however well-intentioned in terms of trying to promote competition, must take this into account.
Federal Trade Commission staff members are recommending that the AOL-Time Warner merger be blocked unless the companies agree to open their high-speed cable lines to competing Internet service and content providers. They also want AOL to sell its $1.5 billion stake in Hughes Electronics, one of the biggest satellite direct-broadcast providers. They have reason to be concerned. Time Warner recently bounced ABC programming from its cable system in a contract dispute.
AOL and Time Warner promise they will provide open access when they merge. Given the public uproar over the ABC move and Time Warner's quick reversal of policy, it is clear that customer pressure can be effective in keeping access open.
Technology is in a tremendous state of flux. Three competing systems strive to provide broadband Internet "pipes" into the home--cable, high-speed DSL telephone lines, and direct satellite broadcast. Regulators are right in asking AOL to sell its stake in direct broadcast because this will enhance competition among different broadband delivery systems. But on the issue of open access, regulators should simply hold Time Warner to its word.