COMCAST AGREES TO SHARE ITS HIGH-SPEED NETWORK

United Online deal may help appease regulators

By allowing United Online's Juno and NetZero services onto its high-speed broadband Internet pipes, Comcast is dressing the windows for federal regulators eyeballing its proposed merger with AT&T Broadband. But it is not providing pure “open access.”

The Comcast/United Online relationship embraces cable's pay TV business model. It also lets Comcast share networks it only recently wrested from Excite@Home.

“Open access is the wrong model,” said Michael Harris, president of Kinetic Strategies. “[Comcast] is talking about the extension of the cable programming model into the Internet space where cable operators cut deals with providers for carriage on their networks.”

That's not what the federal government forced on Time Warner when it merged with America Online. When that MSO proposed a similar deal with Juno, the government said, “‘That doesn't count; you need something with teeth,’” said Tom Andrus, vice president of products and services for EarthLink.

AOL Time Warner now has more than 20 systems that market services from other providers — including EarthLink — as well as AOL and RoadRunner. It's still talking to Juno.

“We have a lot more options,” Andrus said. “We're able to use their network or use our own.”

EarthLink is trialing a similar relationship with Comcast, though AOL Time Warner's situation doesn't fit Comcast's case, said Comcast President Brian Roberts during a recent press conference.

“AOL Time Warner was in a unique position because of the presence AOL has in the marketplace,” Roberts said. “Comcast does not have that today.”

Nor does United Online. Combined, the two hope to grow the broadband space, beginning in 90 days with Indianapolis and Nashville. It's a move that will give the companies a “template” that can be used for a national rollout, Roberts said.

Despite Roberts' assertion that it is a business opportunity, Comcast's move appears aimed at blunting government interference with its AT&T takeover. “Certainly, there is a PR benefit for doing it as antitrust regulators scrutinize the deal,” Harris said.

Roberts said the motivation for such a deal has always existed, but it was encumbered by the exclusive Excite@Home agreement that ended last week with aftershocks that continue to shake subscribers with outages and service interruptions. Comcast now has “as reliable a network as exists in the business,” Roberts said.

United Online agrees, said Chairman, President and CEO Mark Goldston, who said he isn't worried about starting without a trial. “I'd be worried about being a guinea pig if we had our own infrastructure in broadband like some of the other major ISPs,” Goldston said. “We're going out and marketing to a user, and they're going to get truck-rolled, modemed and connected by the same high-quality system that Comcast uses for their brand.”

By giving consumers a choice of ISPs, the United Online deal qualifies as open access, said The Yankee Group's Goodman.

It's “Comcast with a different name,” said Harris, who added that the agreement is a smart way for cable operators to test open access without relinquishing network control.

“The bigger issue is if or when Comcast can support more robust interconnection agreements with other ISPs,” Harris said. “Those will be far more interesting to watch.”