Getting past Road Runner: Time Warner Cable may revamp deal to add ISP choice

Time Warner Cable is trying to cut short its exclusive contract with cable Internet provider Road Runner so that it can offer customers a choice of ISPs for high-speed Internet over cable.

Speaking last week after announcing the media conglomerate's second quarter financial results, Time Warner CEO Gerald Levin said the company hopes to "restructure" the Road Runner partnership now that AT&T must divest its 34% interest in the joint venture as a condition of its merger with MediaOne Group. Road Runner's current deal makes it the exclusive ISP on Time Warner Cable until the end of 2001.

"With this restructuring, we will significantly and substantially speed up the ability of customers to choose from multiple ISPs," Levin said. "We're going to ensure that our Road Runner customers receive the level of service that they have enjoyed. But our objective here is to benefit this very significant new business by advancing the time when we can have multiple ISPs."

Time Warner and AT&T have previously held that legal restrictions keep them from annulling exclusive contracts with their respective ISPs. AT&T still maintains that it will not offer multiple ISPs over its network until its Excite@Home contract runs out in mid-2002.

Time Warner and its proposed merger partner America Online plan to conduct a technical trial of multiple ISPs on Time Warner's cable system this summer, Levin said. Separate reports placed that trial in Columbus, Ohio, and said it would involve about 100 customers and three Internet services: Road Runner, AOL and CompuServ, an AOL subsidiary.

The trial will examine issues such as billing and bandwidth allotment for multiple ISPs - things Time Warner and AT&T have said complicated efforts to put more than one ISP on their hybrid fiber/coax networks. AT&T, which has an exclusivity agreement with Excite@Home, also has pledged to begin testing multiple ISPs over cable, starting with a trial in Boulder, Colo., set to begin this fall.

AOL will be one of the ISPs involved in that Colorado test, according to a 52-page letter submitted to the FCC's Cable Services Bureau on July 17, in response to the agency's second round of questions about the proposed AOL/Time Warner merger.In that letter, AOL cited a government white paper that clai med putting several ISPs on a cable system may raise quality of service problems such as latency, jitter and elevated error rates, as well as raise issues of containment, or keeping one group or service from hogging bandwidth, link privacy and content integrity.

Another issue has been the price multiple system operators will charge to access their networks. AOL and Time Warner already have made "substantial progress" toward an agreement on the cost to put AOL on the Time Warner system, Levin said, although he did not supply details.

Levin's proposed restructuring is a victory for open access advocates, who have long demanded that cable operators offer unaffiliated ISPs the same favorable terms for carriage that they give to their own ISP.

How this announcement will affect the FCC's view of the deal remains to be seen. In testimony on Capitol Hill the day after receiving the letter, FCC Chairman William Kennard said, "We've heard a lot of rhetoric and good intentions from the cable industry [about open access] - not coincidentally, probably, from companies that have major mergers pending before the government."