COMCAST ISP DEAL MEETS WITH CHARGES ABOUT OPEN ACCESS STRATEGY
Comcast announced deal with Internet service provider United Online to offer its NetZero and Juno high-speed Internet services via Comcast cable modems, producing charges from public interest groups that Comcast was trying to keep Dept. of Justice (DoJ) from placing conditions on its proposed merger with AT&T Broadband. Comcast had said in earlier filings to FCC that it opposed open access requirements that would force it to open its pipes to 3rd parties. But Comcast Pres. Brian Roberts said in conference call that that had nothing to do with pending deal, which is contingent upon approvals of DoJ and FCC. “This is not done for anything but a commercial opportunity,” Roberts said. “If this was borne out of a regulatory solution, I don’t think both companies would be as excited as we are to get going.”
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This is first time Comcast Internet customers will be offered choice of ISPs and first time United Online will be able to offer broadband service to its customers. Roberts said some Comcast online customers inevitably would be lost to NetZero or Juno, but United Online offered other marketing and branding opportunities that would allow Comcast to profit by offering access to competitors. “This is a business opportunity and we want to get the maximum penetration of broadband in our company, with or without AT&T,” Roberts said. Comcast and United Online declined to release financial details of deal.
Public interest groups said they would press Justice to scrutinize Comcast’s pact with United Online to see if it stood up to open access conditions that FTC placed on AOL purchase of Time Warner. “This just provides the DoJ with some political cover” to approve deal without conditions, said Jeff Chester, exec. dir., Center for Digital Democracy. Comcast is “public enemy No. 1” on open access and “is clearly against freedom online,” he said, adding that he believed Comcast’s contract with United Online would show that latter was not really competitor, but “more of a digital serf.” Comcast “may be able to pull the wool over the eyes of the DoJ, but not the public interest groups,” Chester said. Media Access Project Pres. Andrew Schwartzman called deal “an inconsequential step in the right direction.” He said United Online used ad-based model that would enable Comcast to share in revenue stream and thus lacked fundamental components that would make this deal true open access. Consumers Union said if Comcast were opening its lines under fair terms it would consider it step in right direction. “However, we believe there should be public oversight and accountability of open access to multiple ISPs, not just deals at the whim of a cable company,” Consumers Union’s David Butler said.
Analyst Gary Arlen said there was more to deal than simply staving off DoJ examination, though. It will “smooth the way” for Comcast to integrate AT&T Broadband’s high-speed customers with its own and take some part of provisioning burden off Comcast, which has suffered from service delays and other technical problems in weeks since it began shifting its customers off of Excite@Home and onto its own network, Arlen said. Roberts admitted there had been some problems and told reporters he did expect to see some more “bugs,” but said once those were worked out, customers would find service problem-free.
Roberts stressed that, until Dec., Comcast hadn’t been free to negotiate with ISPs because it had exclusive contract with Excite@Home: “We couldn’t have gone any faster.” Excite@Home declared bankruptcy after its various cable partners said they would end their exclusive deals with it, in some instances to avoid govt. regulation. Roberts said Comcast intended to sign contracts with other ISPs as well. He told reporters that open access was “not a necessary governmental policy” because business was competitive and it behooved companies such as his to offer multiple ISPs.
Comcast’s regulatory situation can’t be compared with that of AOL or Time Warner because that deal combined nation’s largest ISP with the nation’s 2nd largest cable operator, Roberts said. Comcast’s online service nowhere near compares with AOL’s market dominance, he said. United Online CEO Mark Goldston said this wasn’t “a deal of circumstance or convenience” for Comcast. However, analysts said United Online had struggled financially in recent days and deal with Comcast would buoy United Online’s prospects.
Under the deal, United Online’s services will be available within 90 days to Comcast customers in Nashville and Indianapolis. Comcast has 467,000 cable subscribers and 77,000 high-speed Internet users in those areas. Comcast said it would announce subsequent rollouts in other places. Nationwide, Comcast has 8.4 million cable TV subscribers and 950,000 high-speed Internet customers. As of Dec. 31, Juno and NetZero had 5.6 million active dial-up users and 1.46 million billable subscribers. Those customers will be encouraged to buy Comcast high-speed Internet service and Comcast subscribers will be offered opportunity to subscribe to Juno and NetZero. Juno and NetZero currently offer limited free service, as well as what they call “value- priced” access with no banner advertising, longer surfing time and faster page loads for $9.95. United Online said it would announce its pricing schedule for Comcast-delivered services in coming days.