AOL, AT&T; Dismiss Rivals' Complaints

ASSOCIATED PRESS

The head of media giant AOL Time Warner brushed off complaints that his cable company won't run TV ads from Internet rivals.

"I don't get anybody even making an issue out of this," said Gerald Levin, the company's chief executive, on Wednesday at the cable industry's convention. "Any advertising medium can choose and select its ads."

Cable TV is no different, said Levin, who heads the nation's second-largest cable provider.

Phone companies that deliver high-speed Web service over digital subscriber lines--or DSL--have complained that they cannot get cable operators such as AOL Time Warner and AT&T; Corp. to accept and carry their commercials. Many of those cable companies offer their own competing fast Internet access over their cable lines.

AOL Time Warner particularly has come under attack by consumer groups, which argue that the company is violating government conditions it agreed to in getting approval for the merger between America Online and Time Warner. Company executives agreed to allow competing Internet providers--besides AOL--on their cable Web service so customers could have a variety of choices. They also pledged not to discriminate against those rivals.

Consumer advocates assert that the company's refusal to carry competing ads runs afoul of its deal with the Federal Trade Commission and is anti-competitive.

"It is hard to understand how the commission could have intended anything but the prevention of exactly the kind of behavior in which AOL Time Warner is engaging," public interest groups wrote to the FTC this week.

Levin sought to deflate the issue by asserting that many types of media outlets can decline rival ads. For example, certain network TV channels won't take commercials for his HBO cable channel, he said.

"This has been going on for years," Levin said.

AT&T; also disputes that declining competitors' ads is an unfair practice and says that DSL companies have any number of ways to promote their service besides cable.

"We are not put on this planet to make life for our competitors easy," said Steve Lang of AT&T; Broadband, the company's cable division. Local markets make those decisions, he added, and in Dallas, the company has opted to run DSL ads.

Levin suggested that rivals are looking for ways to turn up the heat because cable has been so successful in selling its high-speed Web access.

Also Wednesday, industry sources said that AOL Time Warner and Sony Corp. are back in talks about selling their jointly owned music and video direct-marketing club, Columbia House, to Bertelsmann. Bertelsmann is owner of BMG Direct, Columbia House's main rival. Bertelsmann, Sony and AOL declined to comment on the talks.

The negotiations mark the latest in a series of attempts by Sony and AOL Time Warner to sell Columbia House to Bertelsmann over the last 18 months, sources said. Several hurdles remain clouding the potential for any deal.

Antitrust issues appear to be one stumbling block, given that any transaction would combine the No. 1 and No. 2 music clubs in the United States.

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