Online Policy Group

WASHINGTON, Oct 6 (Reuters) - Consumers will face limited choices in the Internet world unless federal regulators impose conditions on America Online Inc.'s proposed purchase of Time Warner Inc., rivals of the merger partners told lawmakers on Friday.

Internet service provider AOL and cable giant Time Warner would be able to allow higher download and upload speeds for partner content than for content offered by unaffiliated providers, and would be able to control menus, navigation and displays that could put rival content at a disadvantage, Walt Disney Co. general counsel Louis Meisinger said.

"Consumers will be deprived of choice for interactive television applications because there will be no viable full-blown options to AOL/Time Warner's offering," Meisinger said in testimony prepared for delivery before the House Commerce subcommittee on telecommunications.

Time Warner has pledged to grant access to its cable pipeline to AOL competitors, and has pledged not discriminate against content providers, but competitors have complained that the terms of the deals would make it hard for them to remain in business.

The Federal Communications Commission and Federal Trade Commission are reviewing the AOL/Time Warner deal, and a top FCC official told Reuters on Thursday that open access pledges should be binding.

Meisinger said Disney was rebuffed when it tried to negotiate a deal with Time Warner that would allow consumers to interact with non-AOL/Time Warner content the same way they access AOL/Time Warner content.

"As a pure content provider, Disney's only objective is a world in which a consumer's right to choose is accompanied by the ability to choose, or not to choose, Disney interactive television offerings," Meisinger said in his testimony.

Earlier this week, George Vradenburg, AOL's vice president for global and strategic policy, said the CBS network has negotiated a deal of that sort with AOL and Time Warner.

Rivals say another area in which AOL may dominate is the growing world of instant messaging (IM), which allows people to chat in real time over the Internet. Instant messaging is being included in the developing platform of interactive television.

Rivals such as iCAST say AOL holds about 80 percent of the instant messaging market and has stalled efforts to develop a general standard for IM software that would provide "interoperability."

Unless conditions are attached to the AOL/Time Warner deal, "consumer choice will not be protected and IM, a vibrant and critical platform for future exchanges of information, particularly for interactive television, will be rendered noncompetitive and non-accessible," Margaret Heffernan, chief executive of iCAST, told the lawmakers in written testimony.

AOL, which has said privacy and security concerns must be addressed ahead of interoperability, has committed to allowing competing IM services to communicate with its instant messaging programs.

However, Heffernan said the June 2001 deadline AOL has set was soft.

"While AOL has implied a timetable close to that, it has always provided plenty of wiggle room," she said in her written testimony.

((--Reuters, 202-789-8554))