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MAVIS SCANLON
Industry experts see other cable operators opening their systems to independent Internet service providers in the wake of Time Warner's agreement with Earthlink.
The deal, "combined with additional friendly suggestions by the government to open their cable lines, will see other operators ... follow suit," says Keith Kennebeck, an analyst at the Strategis Group.
Kennebeck sees AT&T Broadband, conducting a multiple ISP trial in Boulder, Colo., as being the next large operator to open up to ISPs.
AT&T has pumped about $20 million into its technical trial in Boulder, which began this month. Spokesman Steve Lang says AT&T is committed to getting choice into its broadband networks.
They want to "make commercial arrangements with other ISPs and let the customer decide," he says.
Other MSOs, such as Cox, which is in the process of exploring technical feasibility of opening its networks after its exclusive contract with Excite expires in June 2002, will watch closely the results of the AT&T test, a Cox spokesperson says.
In addition to pressure from regulators, operators may have strong financial incentives to open their pipes.
"Once cable operators see the benefit of a wholesale model in adopting cable for ISPs and broadband ... I think other cable companies will be prompted to get the return on investment," says Frank Gristina, an analyst following Earthlink at The Robinson-Humphrey Co.
Financial terms of the Time Warner-Earthlink deal were not disclosed, but Gristina estimates the ISP would give back at least 50% or more to the cable provider.
He says one surprise in the arrangement was the "non-discriminatory nature of the contract. Earthlink gets equal footing on Time Warner's pipes."
Time Warner and Road Runner are in an exclusive contract for Internet service through next year, but Time Warner will try to restructure that deal before then, says Time Warner spokesman Mike Luftman.
The Earthlink deal provides a "template for agreements between us and other ISPs," Luftman says, but the company is not "going to presume it's a template for others in the industry."
Time Warner also has an access agreement with Juno Online Services.
One issue affecting widespread deployment of multiple ISPs may be how well the system scales in large metropolitan areas, Lang says this is an issue AT&T will face when it begins a trial next year in Boston.
Overall, the technical hurdles in opening a cable system's network are small, says Kennebeck at Strategis Group.
"The technology has really come along in the past year and is definitely capable of handling this," he says.
Contract negotiations are likely to be a continuing sticking point, Kennebeck says, especially when it comes to nailing down the Internet access fee splits.
"The cable operator still owns the customer and the access to the customer," he says, "They can always play hardball."
Washington observers say the Earthlink deal can only help the industry as it faces calls for open access rules at the FCC and in Congress.
FTC spokesman Eric London says the commission would alter its revised Nov. 30 deadline for ruling on the merger.
* Showtime and Starz Encore are preparing to launch more themed channels into the digital universe. Viacom's Showtime Next targets the 18-24-year-old set and is flanked by Showtime Women and Showtime FamilyZone. They'll roll out in March. Meanwhile, the Liberty Media unit plans to debut Starz! Comedy and Starz! Kidz in 2002. Neither network will charge additional license fees for their upcoming entries.
* USA Networks announced plans to consolidate its entertainment ticketing operations by merging Web unit Ticketmaster Online-Citysearch with Ticketmaster Corp. in a deal valued at $653 million. The deal, expected to close early next year, reunites two divisions that were split in 1998 when USA sold the online group to CitySearch in exchange for stock.
* RCN's Starpower reportedly applied for a franchise in Fairfax County, Va., now serviced by Cox.
* DirecTV has launched its first dedicated interactive channel, "Instant Weather" from the Weather Channel. Powered by Wink, the 24-hour service offers up-to-the-minute weather updates to DirecTV subscribers.
* Pioneer Digital Technologies sued Gemstar-TV Guide International, claiming Gemstar is competing unfairly. Gemstar sued Pioneer in 1998, alleging the company infringes a Gemstar patent by selling boxes used for cable television.
* National cable television network ad revenues for the first three quarters reached $7.28 billion, up from $5.98 billion last year, the Cabletelevision Advertising Bureau estimated. Revenues for the full calendar year should top $10 billion, and total cable industry ad revenues, including local/spot and regional network dollars, may exceed $13.7 billion.
* Veteran English rocker Ozzy Osbourne and several bands that performed with him on his Ozzfest 2000 summer tour filed a $20-million lawsuit against MCY.com, DirecTV and In Demand over a PPV telecast of a concert they claim was taped for Internet play only.
* Shares of Viacom, Walt Disney and News Corp. slumped last week after Morgan Stanley Dean Witter downgraded the stocks, citing a stormy outlook for the advertising market.
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