**FEDERAL COMMUNICATIONS COMMISSION EN BANC HEARING ON THE MERGER OF
AMERICA ONLINE, INC. AND TIME-WARNER, INC.**

**JULY 27, 2000**

**STATEMENT OF DR. BARRY ORTON, PROFESSOR OF TELECOMMUNICATIONS,
UNIVERSITY OF WISCONSIN-MADISON**

I am Dr. Barry Orton, Professor of Telecommunications, University of
Wisconsin-Madison. I am a veteran consultant to local cable television
franchising authorities, and over the last 20 years have been involved
in original franchise negotiations, renewals, rate and customer service
regulations, franchising of competitive cable systems, and transfers of
ownership procedures. I have worked on these issues for large cities
such as Milwaukee and Chicago, states such as Wisconsin and Vermont,
counties such as Alachua, Florida and Grundy, Illinois, and very small
jurisdictions such as Barron, Beaver Dam, and Brown Deer, Wisconsin.

I was an original founder of the National Association of
Telecommunications Officers and Advisors (NATOA), the professional
organization of local telecommunications regulators, and am president of
NATOA's Wisconsin chapter. I am on the Board of Contributors of the
legal newsletter [Cable TV and New Media Law and Finance]{.underline}
and the Editorial Review Board of the [Journal of Municipal
Telecommunications.]{.underline}

Today, I am primarily representing the views of cable franchise
authorities in eastern Wisconsin, having assisted the City of Milwaukee
and 28 other area municipalities of the Regional Telecommunications
Commission in the process of due diligence for local approval of the AOL
Time Warner merger. These jurisdictions represent over 250,000
subscriber households.

**STATEMENT OF DR. BARRY ORTON p.2**

After favorably reviewing the technical, financial, and legal
qualifications of AOL-Time Warner, and receiving assurances that
existing franchise obligations will remain intact, the Milwaukee-area
franchise authorities I serve all approved the transfer of control to
AOL Time Warner last month. On my recommendation, they did not consider
"open access" platform issues as part of the transfer process, and are
convinced that this is a national issue that needs a solution in
Congress or at the Commission rather than before local governing bodies.
However, they are concerned about the local impacts of broadband
"convergence" as reflected in this merger.

But first, some historical perspective on both Time Warner and America
Online is necessary.

I have been involved in the regulation of Time Warner since the cable
television franchise \"gold rush\" of the late 70\'s and early 80\'s. I
assisted the City of Milwaukee with the negotiation of the original
franchise with Warner Amex Cable in 1983 and helped plan the City\'s
oversight of initial construction of the system. In 1984, Milwaukee and
other jurisdictions renegotiated with Warner when we were told that the
two-way "QUBE" system was economically unfeasible and the franchise
negotiated a year before needed to be scaled down.

After cable grew to utility-like ubiquity in the 1990's, I assisted
Warner's Milwaukee-area municipalities with rate regulation and the
establishment of customer service standards pursuant to the Cable
Television Consumer Protection and Competition Act of 1992. I have also
been involved with the franchise renewal of a variety of Warner entities
over the years.

From most communities' perspective, Warner has always been a relatively
good cable operator and a responsible corporate citizen. They have been
at the forefront of experimentation with two-way services and in the
development of quality programming. Time Warner was one of the Social
Contract cable operators and has long been supportive of local Public,
Educational and Governmental (PEG) access activity and local educational
efforts.

**STATEMENT OF DR. BARRY ORTON p.3**

The willingness of the Milwaukee-area municipalities which I represent
to approve this merger largely stems from the fact that the Time Warner
Cable entities holding their franchises remain in place and Time Warner
has agreed to continue to abide by the provisions of the franchises.
There is a level of trust that has been created from long-term service
and from relationships with Time Warner's people. When problems have
occurred, there has been a good faith effort to find solutions and make
corrections.

America Online has a far different history, and does not enjoy the same
level of trust. AOL's repeated failure to provide adequate service
capacity to meet the demand its marketing generated is a track record
that makes local officials very nervous.

To most professional users of the Internet, AOL has long been seen as
the "sandbox" wherein new users play with Net tools before they graduate
to a local or national ISP. AOL's policy of marketing to novice users
who do not realize they are paying for less-than-robust services and
features assures that having an AOL email address continues to be the
equivalent of driving a car with a big "Student Driver" sign on the
roof.

In some periods between 1996 and 1998, AOL\'s performance quality and
level of customer service rivaled the worst cable operator before the
cable industry's reregulation under the Cable Television Consumer
Protection and Competition Act of 1992. If AOL had been selling hundreds
of thousands of tickets to a Bruce Springsteen concert in a 5000-seat
arena, and then made it difficult for frustrated customers to get
refunds, it would have been indicted. Three successive Assurances of
Voluntary Compliance (AVC) with multiple state attorneys general
explicitly forced AOL to correct every part of its operation from the
size of its modem pool to its refund policy, telephone support system,
marketing materials, and server capacity.

**STATEMENT OF DR. BARRY ORTON p.4**

Specifically, in 1996, a 20- state AVC required AOL to refund customers
who tried and failed to cancel service after AOL abruptly switched to a
\$19.95 flat monthly rate. In 1997, 36 attorneys general required AOL to
stop advertising until it could provide reasonable modem access, allow
easy cancellation and provide significant refunds. In 1998, a 44-state
AVC forced AOL to clarify its free trial offers, disclose its premium
surcharges, communications charges, and cancellation procedures, and
reform its other business practices. As Ohio Attorney General Betty
Montgomery said announcing the 1998 AVC, \"The problem we\'re
experiencing with America Online is similar to a parking attendant that
sells too many monthly passes - when drivers show up at the garage,
it\'s already full of cars.\"

The Commission should review all three Assurances of Voluntary
Compliance and AOL\'s subsequent reports to the attorneys general on its
compliance progress to get a full picture of how badly an Internet
Service Provider can perform when left unchecked by government. The AVCs
and the compliance reports also provide a strong explanation as to why
regulatory tools are needed to prevent a repetition of AOL's history,
particularly when AOL's top executives will have control over the
multimedia colossus the FCC will be anointing with approval of this
merger.

Many cable subscribers have been looking forward to the availability of
cable modem service such as Time Warner's Roadrunner so they can work
and play at home as fast as they now work and play in the office. Local
officials from communities where cable modem service is already
available know that when outages, data slowdowns, poor telephone
response and inadequate technical support occur, consumers call village
or city hall when they get frustrated with trying the cable company.
Will franchise authorities have the regulatory tools they will need to
assure high quality service?

**STATEMENT OF DR. BARRY ORTON p.5**

Regulations established by the FCC under 47 C.F.R. Section 76.309
pursuant to the Cable Television Consumer Protection and Competition Act
of 1992 set minimum standards for telephone availability, installations,
service calls, and outages. These standards can be implemented and
enforced by local governments, and have been very effective in assuring
adequate levels of customer service where they have been adopted.

There is a strong need for similar standards for cable modem services.
Local governments will need to at least insure that subscribers don\'t
have to pay for service that they did not get and that someone answers
the phones, installs service on a timely basis, provides technical
support and fixes the wires or modems when they break. Given AOL's track
record and the growing importance of cable broadband in allowing
residential customers access to high-speed data service, the Commission
has adequate reason to extend the provisions of Section 76.309 to
include cable modem service under the protection of its customer service
standards.

While we all recognize that competition is the ultimate consumer
protection mechanism, most communities do not yet have another provider
of high-speed Internet access to residential customers. In the absence
of real competition, the Commission should take the modest, but
important step of extending its existing customer service standards for
cable television service to cable modem service and allow local
authorities the option of enforcing such standards. In addition, as with
cable service, local franchising authorities should have the option of
developing and enforcing more stringent and different standards where
appropriate.

Statement of Dr. Barry Orton

Professor of Telecommunications,

University of Wisconsin-Madison

FCC En Banc -- AOL/TW merger

July 27, 2000