Seidenberg: AOL Will Need DSL, Too

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Washington-The Federal Trade Commission may be worried about the future plans of America Online Inc. and Time Warner Inc. with respect to digital subscriber line service, but Verizon Communications Inc., one of AOL's DSL partners, apparently is not.

Verizon president and co-chief operating officer Ivan Seidenberg said last week that he expects the online-services provider to honor the DSL deal it struck with his company after it merges with Time Warner.

"AOL, I believe, has an enormous customer base," Seidenberg told reporters after a speech at the National Press Club here. "Cable modems can't serve all of that, even in the locations where Time Warner has cable systems-that's only 20 percent of the country."

Cable operators like Time Warner are competing to sign up high-speed Internet subscribers against DSL providers like Verizon, battling it out in key markets such as New York City.

The FTC, which is reviewing the AOL-Time Warner merger, is reportedly concerned that AOL will abandon DSL deals after the merger in those markets where Time Warner offers high-speed cable-modem service.

Based on that concern and others, the FTC is prepared to block the deal unless the combined AOL-Time Warner agrees to open its plant to competing Internet-service providers.

Paradoxically, the FTC is also reportedly troubled by AOL's pursuit of a DSL strategy in markets where Time Warner Cable offers high-speed Internet access. The theory is that AOL-Time Warner would dominate in those areas, because AOL would be available over cable and telephone lines.

Seidenberg's comments indicated that some of the FTC's concerns might be misplaced. He said AOL had an incentive to serve high-speed platforms besides Time Warner's cable facilities. AOL and Time Warner officials have said that limiting high-speed AOL services to Time Warner Cable systems would shut them out of 80 percent of U.S. homes, defeating the "AOL Anywhere" strategy.

"AOL will need DSL connections in order to make sure their portal is distributed across the country," Seidenberg said. "I think they are going to need both."

In his speech, he predicted that Verizon would have 500,000 DSL customers by the end of this year.

In January 1999, AOL and Bell Atlantic Corp. (which became Verizon after a merger with GTE Corp.) announced a strategic alliance through which AOL would offer high-speed, always-on Internet service to Verizon DSL customers. The deal required the telco to make 14 million homes DSL-capable by the end of this year. Two months later, AOL struck a similar deal with SBC Communications Inc.

In other comments, Seidenberg issued a mixed message on government regulation, asking the government to remove line-of-business restrictions on his company and its fellow Baby Bells but calling for the imposition of open access on cable operators.

"Some regulation is OK," he said.

Seidenberg applauded efforts by some in Congress to allow the Bells to provide data services across local-calling boundaries before the companies open their voice markets to competitors. It's only fair that all providers compete under the same rules, he said.

"The problem is that we are playing this game by two sets of rules," he said. "We've seen the competition and they're swimming in shark-skin body suits, while we're in Speedos."

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