August 1, 2000 5:00 AM PDT
Newsmaker: AOL's Schuler defends Time Warner merger as consumer-friendlySee all Newsmakers
The acerbic head of AOL's interactive services division, which includes AOLTV, bristles at criticism that the merger will hurt consumer choice by giving it a stranglehold over Time Warner's coveted cable network.
Schuler has not played as prominent a public role in the debate over the merger as his more statesman-like boss, AOL chief executive Steve Case. But his influence has been key in shaping the direction of new AOL services, including its aggressive step into non-PC devices.
His passion for those projects was on display last week at hearings before the Federal Communications Commission, where he flatly rejected arguments from rivals, including Walt Disney, that AOL won't play fair with content companies offering programming for promised interactive television.
Slated to head AOL once the merger is completed, Schuler will try to maintain the online giant's momentum. With 23 million subscribers, AOL remains the most potent weapon in the AOL Time Warner arsenal, and it is the service that will speed the traditional media giant's entry into the interactive age.
Schuler's tenure at AOL began in 1995 when his company Medior, which developed multimedia products, was acquired by AOL. Schuler also oversees AOL assets such as Netscape Communications, CompuServe and its devices group, which develops AOLTV.
In an interview with CNET News.com, Schuler explained why critics of the AOL-Time Warner merger are off base.
CNET News.com: Disney claims that the merger of AOL and Time Warner will create a bottleneck resulting in less consumer choice. What sort of assurances can you give to regulators and consumers that this won't happen?
Schuler: You have to look at this "conduit and content" issue--and portraying it as somehow or another AOL Time Warner will have this stranglehold monopoly--as just plain nonsense.
(Disney is) trying to equate that AOL...is a very large ISP and that we're...a cable monopoly. That's not true. We are not a bottleneck. No one has to buy AOL. Every one of our members is a volunteer. They have choices of thousands of ISPs. If you look at the market out there, there are discounted ISPs, there are free ISPs. Our market has grown as large as it is because we have a great product.
The point is, if we did something that is harmful to consumers or didn't give them what they want, they would leave. You can't because of the AOL-Time Warner merger categorize the AOL audience as the same thing as a Microsoft-style bottleneck or a government-authorized, enfranchised cable monopoly.
You can't have this notion where you add in the Time Warner Cable plant to the AOL assets that you somehow have a national monopoly. The fact of the matter is that Time Warner Cable only reaches 12 percent of the (cable) homes in the U.S. To be successful, we have to be on every cable plan, on every DSL service. Even they're not enough. You have to get to every other home via satellite.
You have to ask yourself, "What is their motivation?" Their motivation is very clear. They're looking for negotiating leverage. They know that an era is coming where along with carriage on cable systems for your normal content, you're going to have to negotiate for carriage for your interactive content, and they somehow want that to be given away.
Should Disney and other competitors have the right to nondiscriminatory distribution? In other words, should they have the same type of positioning and placement on future interactive TV products that AOL or Time Warner products would have?
They will have nondiscriminatory rights to negotiate a deal like anybody else. But why should they be given anything, and why should AOL and Time Warner be singled out? Time Warner is such a small percentage of the broadband market that would emerge.
Disney has described AOL as a "walled garden" and has said that cable companies can restrict what can go on their networks and what cannot. Why shouldn't this be of concern to regulators?
Well, this walled garden idea is a bunch of baloney. First of all, if you want to talk about a walled garden, talk about Disney World. I think it would be a cold day someplace warm before you can see Bugs Bunny in Disney World, right?
That's a walled garden. On AOL, we do provide unrestricted access to the Internet. We do not block competitors. People can go where they want. We also program content on the Internet. We provide it as a service to our members.
All our contract says is for people to be in our paid areas, we do not allow them to take advertisements from our competitors. We are not going to sell space on America Online and then allow our partners to go sell that to Microsoft. (This is) no different than they do on ABC. ABC does not take ads from NBC or CNN. No network takes competitors' ads.
What this comes down to is a traditional media company who is scared what the future represents. What's happening is the television business is going to open up. The entire television industry today is predicated on closeness; it's predicated on closed choice. They want to control consumer choice, and they want to control prices for programming. All of a sudden, when television opens up, when you can deliver programming over broadband infrastructure, the television industry is going to go through a dramatic change, and they're scared.