Armstrong: No Free Ride for AOL

11/08/1998 7:00 PM Eastern

Washington -- AT&T Corp. chairman and CEO C. Michael
Armstrong said last week that he opposed attempts by America Online Inc. to gain a
government-imposed "free ride" on cable-broadband facilities.

In a speech to the Washington Metropolitan Cable Club,
Armstrong said AOL and other Internet-service providers were doing nothing more than
attempting to piggyback on the investments made by cable in high-speed Internet-access

"Now, some narrowband … ISPs want the government
to give them a free ride on those broadband pipes," Armstrong said. "But getting
a free ride on someone else's investment and risk is really not the way to do it. It's not
fair, and it's not right."

Armstrong repeated that AT&T's control of @Home
Network, following AT&T's merger with Tele-Communications Inc., would result in an
open broadband platform. But he insisted that high-speed cable-modem subscribers would
have to pay a fee to @Home if they wanted to navigate the Internet using AOL's service.

If AOL customers could use @Home's high-speed service
without paying a fee to @Home, Armstrong said, cable operators would have no economic
justification for making the investment to upgrade their plant for two-way communications.

"That would be a major disincentive to the kind of
risk-taking that goes with infrastructure investment," he added.

He said that if the Federal Communications Commission
adopted AOL's suggestions, the agency would damage AT&T's long-term goal of breaking
the local phone monopoly.

Armstrong used the bulk of his address to focus on the
cable-AOL dispute. At one point, he said the @Home acquisition was "strategic and
integral to AT&T's broadband vision."

AOL is asking the FCC to block AT&T's $48 billion
merger with TCI unless the commission imposes an "open-access" requirement on

"This open-access condition would ensure that
consumers would remain free to select their desired ISP on AT&T/TCI-controlled or
affiliated systems, and that they would not be forced to purchase two value-added Internet
services to obtain the one that they want," AOL said in Oct. 29 comments to the FCC
on the merger.

Armstrong said @Home subscribers could reach AOL under the
latter's "Bring Your Own Access" plan, which costs AOL subscribers $9.95 per
month, instead of $21.95.

He added that roughly 25 percent of AOL's 13 million
subscribers rely on other companies to access the Internet before linking up with AOL's

Armstrong said no AOL subscriber who accesses the Internet
via @Home will be cut off from AOL.

"There's no way that this should happen," he
said. "That wouldn't be in our best interest, or the interests of our customers, or
of the market. If you've got a service that our customers want, we want you on our

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