Washington-EarthLink Inc., the No. 2 U.S. Internet-service provider, complained last week that Time Warner Cable is seeking unfair terms in its negotiations for access to high-speed cable lines.
The Atlanta-based ISP claimed Time Warner's commitment to open access on a non-discriminatory basis has been undermined by lopsided financial terms.
Dave Baker, EarthLink's vice president of law and public policy, said Time Warner has insisted on receiving a majority of EarthLink's revenue from the sale of access to Time Warner customers, as well as a major chunk of its incremental revenue derived from content, e-commerce and advertising.
"It's a revenue-sharing arrangement. They set the retail price to the customer and they keep most of the money that the customer pays," Baker said.
Baker said Time Warner also insisted that EarthLink's home page include links to its Web sites.
In February, America Online Inc. and Time Warner, which want to merge, agreed to open access principles and signed a deal in July with Juno Online Services Inc., the only unaffiliated ISP with a cable deal.
But Baker said EarthLink, which has 4.5 million subscribers who pay $19.95 a month for access, walked away from the table after it read Time Warner's offer sheet.
"When we got down to talk to them to make these promises a reality, their deeds have not lived up to their words," Baker said.
A Time Warner source disputed Baker's version of Time Warner's demands. The source also said that negotiations with EarthLink were only in the early stages.
Access is a hot issue with federal regulators charged with reviewing the AOL-Time Warner merger. Merger foes have urged the Federal Trade Commission and the Federal Communications Commissions to impose open access to prevent AOL-Time Warner from dominating the high-speed-data market.
AOL and Time Warner officials, most recently at a House hearing two weeks ago, have said they want the merger approved with no strings attached, claiming the deal was well within the boundaries of antitrust law.
Though not referring specifically to EarthLink, AOL chairman and CEO Steve Case said major ISPs have told him they would not sign access deals until after the merger had been approved because they probably would receive better terms at that time.
At a House Telecommunications Subcommittee hearing last week, a Walt Disney Co. executive said EarthLink's experience showed that AOL-Time Warner's commitment to open access on reasonable terms was hollow.
"When EarthLink took up AOL-Time Warner's pledge to provide non-discriminatory access to other ISPs, it was met with commercial terms so onerous and adhesive that doing business was impossible," said Louis Meisinger, Disney's executive vice president and general counsel. "Non-binding [promises] and platitudes are one thing. Real life conduct is apparently quite another."